The Uptime Blog
All good things must come to an end, and so it is with the Enigma website and Uptime Blog. At the end of December, we’ll be retiring the website and blog so we can fully integrate into PTC’s Service Lifecycle Management segment.
The Enigma website was the core of our online presence, illustrating the breadth of our knowledge, experience, innovation and leadership. We were able to address specific industries with both our InService MRO (now called PTC Servigistics InService MRO) and InService EPC (now called PTC Servigistics InService Technical Content) parts and service catalog software.
The Uptime Blog was where we shared our insights, opinions and expertise. Throughout the years we’ve covered some interesting parts and service related topics, followed industry trends and shared helpful InService product knowledge. Along the way we’ve been able to keep our customers and readers in-the-know. While some of our blog posts have been purely informational, others have sparked serious MRO discussions that leap frogged to other media (LinkedIn discussion groups) and that lasted long after the post was published.
Enigma blog subscribers needn’t worry about losing a valuable parts and service information resource though. PTC has an even more robust compilation of resources and communities that are equally as useful and informative, and are adding more knowledge every day.
Stay connected to parts and service expertise
Here’s a brief list of how you can stay connected with industry news, insight and product knowledge that will support your parts, service and aftermarket intelligence.
- On the web. PTC Service Lifecycle Management segment Get the most up-to-date information on service lifecycle management solutions at the website. Visit often as product information from Enigma gets woven into the larger SLM offerings and updates to the website are made.
- On our blog. PTC Product Lifecycle Stories (Blog) Stay informed on Product Lifecycle Management topics as well as service related topics. Look for a dedicated Service blog coming in January 2014 for all kinds of service specific stories and posts.
- On Twitter. Follow our PTC corporate account at @PTC or our Service Lifecycle Management account at @PTC_SLM to say connected with all the PTC and service related happenings. Also check out @PTC_FIRST where we partner with future engineers, @PTC_University for training or @PTC_Support for information on newest product releases and technical support.
- On Facebook. PTC’s Facebook page boasts an active online community where you can learn about PTC events, the latest research, innovation, guest lectures and products.
- On LinkedIn. Learn about PTC on LinkedIn where you’ll find company insights, career opportunities and the chance to connect with the individuals behind the service and product lifecycle management success.
Explore, follow and join
We encourage you to visit and participate in these information rich communities and come back often to discover even more information as PTCs influence in the Service Lifecycle Management segment continues to expand and grow. PTC’s web and online communities are where you can stay connected to the Enigma parts and service expertise you’ve come to know and respect.
Global manufacturers of complex equipment know their products well. They know how to manage their products from concept to design, through production, distribution and sale. They know how to bring their products to market. They are experts in commanding the resources to produce highly complicated, highly valued equipment to meet specific and exacting demands and customer preferences.
Although manufacturers take great pride in the craftsmanship of the product itself, they have often left the servicing of that aircraft, medical equipment, car, or piece of construction equipment to others. That paradigm is changing. Manufacturers are now looking to ‘service after the sale’ as the next logical place to uncover hidden pockets of revenue that are proving to be lucrative.
What’s motivating them?
Earnings and stiff competition. Aberdeen Research, in their State of Service Management, Outlook for 2013, reports that “margins on service are 10.7% higher than those on products”. So while all other manufacturers squeeze earnings from low product profit margins, best-in-class manufacturers are realigning their business structures to include service as part of their revenue stream.
External competitive market conditions are also pushing manufacturers toward service. Aberdeen points out that in tight economic conditions, improved service and support can serve as a strategic differentiator. “Fifty-four percent (54%) of organizations see service as a means to fend off competitive pressures from other manufacturing or service organizations”.
Who are some of these product and service giants?
Recognizing that service plays a vital role in the total customer solution, many global manufacturing firms are re-examining the value of service revenue and are including service as part of the entire customer experience rather than just providing a product. Others have understood the value of service for a long while.
BMW – the ultimate driving machine. BMW is introducing a new electric vehicle for urban mobility, the i3. Designed with eco sleek design, great gas millage and BMW’s trademark driving comfort, the car introduces the BMW i Remote App, an iPhone application that continues the drivers experience outside the car. Using the app, drivers get direction to their destination on foot, bike or public transit, encouraging the use of alternative modes of transportation. Millennials will love this feature.
In a recent Popular Mechanics article, BMWi's Manuel Sattig was quoted as saying:
"We used to say we wanted to be the most successful manufacturer of premium cars," Sattig says. "That was our strategy, and we changed it to say we want to be the most successful provider of premium products and premium services, which means you put the product and the services on the same level." That's a pretty big statement from the maker of "the ultimate driving machine."
BMW has made a decision to rewrite their definition of premium to include not just the ‘driving machine’ but the service surrounding the experience of the drive.
Rolls Royce – Trusted to Deliver Excellence. Enigma customer Rolls Royce has long known what others are just learning – that service is part of the overall product experience, provides solid value, and is a powerful revenue generator.
Last year they celebrated 50 years of one of their most successful programs – “Power-by-the-Hour”. According to their website, “Power-by-the-Hour” is a complete engine and accessory replacement service offered on a fixed-cost-per-flying-hour basis. This aligns the interests of the manufacturer with the operator, who only pays for engines that perform well. It is core to their CorporateCare® program that also includes engine health monitoring and a global network of authorized maintenance centers to ensure that world-class support is readily available to customers.
As a global power systems company their pioneering approach to engine maintenance has become common industry practice with many others following suit.
Despite opportunities for manufacturers to reap service revenue by providing service throughout the life cycle of their products (or service lifecycle), shifting to a service for revenue model is a daunting challenge that not everyone can master, nor is willing to try. A study by Xerox and Aston University revealed that servitization – the process of adding services to a product – has a low adoption rate among manufacturers. For those best-in-class-organizations that are able to make the leap however, there is a lucrative reward, with early adopters achieving an annual growth rate of up to 10 percent.
As many know, PTC acquired Enigma in July of this year, expanding its level and depth of Service Lifecycle Management offerings. PTC is a leading provider of technology solutions that transforms how products are created and serviced.
Since the announcement, we’re pleased to say that the entire integration process has been unfolding smoothly, with PTC and Enigma staff continuing to focus on the continuity of service and ongoing support of Enigma’s loyal customer base. We’ve gotten favorable customer feedback so far and are working hard to make the remainder of the transition just as seamless.
Rest assured though, that although offices have moved, we can still be contacted for customer support or product information.
Customer support remains the same. Just as it has operated in the past, the Enigma customer support portal is still available for customers to submit, view, edit and resolve technical service requests online.
Our Corporate Headquarters is now PTC
Our Burlington, MA USA headquarters has been relocated to the PTC Corporate Campus in Needham, MA. All calls are now being routed through that office. If you have administrative questions or would like to speak to someone in sales or marketing, please contact 781-370-5000 to be directed to the appropriate person.
The Airline & Aerospace MRO & Operations IT Conference APAC, organized by Aircraft Commerce, took place in Bangkok, Thailand this week. If I’m not mistaken, this is the fifth time this conference has taken place in Asia. Aircraft Commerce holds similar conferences in the US and Europe every year.
In previous years, this conference attracted around 20 vendors and a good turnout of most of the airlines in the region (except for the Chinese, who never turn up). This year the number of vendors soared to over 30, while the number of airline delegates seems to have decreased, both in number and in seniority of participants. There were probably no more than 100 delegates, more than 50 of which were from two local airlines: Thai Airways and Bangkok Airways. This led to “thin traffic” throughout the two days of the show – fewer delegates spread over more booths.
The conference itself was very “hands on” in nature, with many of the sessions dealing with mobility. Apparently iPads are still deemed as “sexy” gadgets by many in this conservative and slow-moving industry, even if there isn’t much adoption of this new technology yet.
One interesting session dealt with “IT integration”, with panelists from Airbus, MRO system vendors and airline IT executives. It very quickly turned into an “OEM bashing” session, with the Airbus guy naturally taking the brunt of the bashing. The main complaint was that OEMs do not provide all the data the airlines need and charge too much for the little data they do provide. The cost is especially prohibitive for smaller airlines. Furthermore, the same OEM provides different formats on different, non-integrated, systems for different fleets. The Airbus answer for this was to recommend airlines pay separately to an integration company (not a surprising answer, given the recent Airbus-IBM partnership).
Oddly enough, the panelists concentrated on the symptom: not enough data and lack of integration. They did not speak about the root cause of the problem: the fact that OEMs have no interest and no incentive to give airlines too much control over the data.
Aircarft Commerce was successful in making this conference the main IT event of the industry, taking customers away from the Aviation Week conferences. But it seems that it is also becoming a victim of its own success. Many IT vendors have recognized the success and signed up to exhibit and sponsor, but Aircraft Commerce was not as successful in growing the number and quality of participants. Many airlines did not show up, or sent one junior delegate. To continue being successful, Aircraft Commerce must find a way to increase the ratio of delegates to exhibitors.
Still, the PTC/Enigma team was able to have some interesting discussions with delegates around InService MRO and the concept of PTC’s Service Lifecycle Management.
What Millennials want, Millennials get – and transportation is no exception.
Who are Millenials and why do we care?
The Millennial Generation (or Millennials) refers to a demographic segment of the U.S. population born roughly between 1980 and 2000. Also known as “Generation Y” or “Echo Boomers” these individuals are the children of the post-WWII baby boomer generation, and represent the largest generation in U.S. History.
The sheer number of Millenials is staggering – population estimates range depending on the interpretation of the actual start and end dates of the generation, but regardless, it’s impressive. It is estimated that there are approximately 80 million Millennials in the United States, about 4% more than the Baby Boom generation. As we learned from the Boomers, any demographic group with numbers that large can significantly impact every aspect of our culture – politics, economy, and especially transportation policy and expenditures. And that is exactly what is happening. The very structure and use of transportation is changing based on the preferences and desires of this very influential segment of our population.
What do they want?
Without a doubt, Millennials are clear in expressing their preferences when it comes to transit,
Millennials want multi-modal transportation. According to the American Public Transportation Association (APTA), “nearly 70 percent of Millennials use multiple ways of getting around a city or suburb”.
As the National Resource Defense Council points out in a recent blog post, “Millennials (those Americans who came into adulthood in the new century) want more access to public transportation and support local governments in expanding and improving public transportation options”.
Millennials no longer view cars as the first option for transportation. “The Driving Boom—a six decade-long period of steady increases in per-capita driving in the United States—is over” says Public Interest Research Group (PRIG). Fewer Millennials are getting their licenses. According to Tony Dutzik, senior policy analyst with Frontier Group, “In 2011, the percentage of 16-to-24 year olds with driver’s licenses dipped to another new low. Just over two-thirds of these young Americans (67 percent) were licensed to drive in 2011, based on the latest licensing data from the Federal Highway Administration (FHWA) and population estimates from the Census Bureau. That’s the lowest percentage since at least 1963.”
Millennials are driving fewer miles. In a recent press release U.S. PIRG reports that “[t]he Millennial generation is leading the change in transportation trends. 16 to 34-year-olds drove a whopping 23 percent fewer miles on average in 2009 than in 2001— the greatest decline in driving of any age group”. Car ownership is down in the Millennial age group. University of Michigan Transportation Research Institute results show that Boomers are far more likely to purchase new cars than their Echo Boomer children.
What does this mean for transportation?
Public transit ridership is up, bicycle sharing/rentals are up, ride sharing is up, as is the oldest form of transportation, walking (especially in urban areas). Millennials are shaping these trends. According to a recent APTA report Millennials and Mobility: Understanding the Millennial Mindset, this group is on the move, but doing so quite differently than previous generations. They say that:
“Millennials would like to see in the next ten years: 1) 61% more reliable systems, 2) 55% real-time updates, 3) 55% Wi-Fi or 3G/4G wherever they go, 4) 44% a more user-friendly and intuitive travel experience. Fully leveraging technology, through real-time transit applications that connect users with community amenities, through smartphone fare payment, and the provision of WiFi and 3G/4G, will allow transit users to be more spontaneous, thus addressing the key competitive advantage of the car.”
With so many Echo Boomers making different transportation choices than their Boomer parents, alternative methods of transit are becoming more important. And as more Echo Boomers take on leadership positions in our communities and government, their influence will steer where funds are allocated in support of these transit options.
What does this mean for the servicing of transportation equipment?
The increased interest in public transit places new and more exacting demands on the country’s existing yet frail public transit infrastructure. In their 2013 Report Card for America’s Infrastructure, the American Society for Civil Engineers (ASCE) tell us that “Americans who do have access [to public transit] have increased their ridership 9.1% in the past decade, and that trend is expected to continue. Although investment in transit has also increased, deficient and deteriorating transit systems cost the U.S. economy $90 billion in 2010, as many transit agencies are struggling to maintain aging and obsolete fleets and facilities amid an economic downturn that has reduced their funding, forcing service cuts and fare increases”. On a standard scholastic grading scale of A through F, the ASCE gave America’s transit system a D+.
This clear cut divide between growing expectations for our transit systems and the state of our current infrastructure reality is concerning. It puts tremendous strain on the service structures of the transit operations to keep the systems and people moving. With demand rising, transit service organizations will be called upon to reduce service operations expenses by focusing on a service lifecycle management model or by outsourcing maintenance and service all together thus transitioning the liability of performance to service vendors who are paid to ensure equipment uptime.
Transit service groups would be wise to consider restructuring service operations with the aim of reducing costs, streamlining parts management, and sharing service updates and information in order to optimize the maintenance process. Any effort toward simplifying the support of the complex transit equipment with parts and service information will go a long way toward meeting the growing expectations and demands of Millennials for dependable multi-modal transit.
Enigma (now a part of PTC) is gearing up for the 2013 Airline & Aerospace MRO & Operations IT Conference - APAC. The conference is slated for October 16th and 17th and will be held at the Amari Watergate Hotel, Bangkok, Thailand. It’s the world's leading aviation IT conference/exhibition for MRO and Flight Operations software solutions and one that Enigma has attended for many years. It is hosted by Aviation Maintenance Magazine, touted as the most cost effective, independent, commercial aircraft research tool on the web today.
The two day event includes presentations, case studies and interactive workshops led by industry experts as well as airline and MRO IT users who contribute first-hand insight and expertise. It is the ideal place to learn about new topics and discover the latest trends in aviation and aerospace maintenance repair and overhaul.
Enigma/PTC staff will be on hand to share some exciting information. First is the announcement that Enigma has been acquired by PTC and what that means in terms of being able to provide a broader based MRO solution. With Enigma now an active part of the PTC Service Lifecycle Management group, we’re able to add agility in sensing and responding to service parts demand on a global scale. Tools like service resource forecasting, planning, sourcing, and provisioning truly complement Enigma’s existing InService MRO. That, combined with service network planning, and a global sense and respond capability make our robust system even more powerful.
We’ll also be there to share information about our InService MRO software, with our InService Job Card Generator and InService Revision Manager with airlines, aircraft operators and MRO providers. Find us at booth E36.
In July of this year, Enigma shared some exciting news that we had made a strategic decision to join PTC (NASDAQ: PMTC), a leading provider of technology solutions that transforms how products are created and serviced.
As you might expect, we’re starting to make some changes as we become part of the PTC family. But, during the integration, we want to be sure we keep our customers, partners, and other connections informed on the topics and issues that are important.
Contacting Enigma Corporate Headquarters
You may have noticed some changes to the Enigma website. Most notably, Our Burlington, MA USA headquarters has been relocated to the PTC Corporate Campus in Needham, MA. All calls are now being routed through that office. If you have administrative questions or would like to speak to someone in sales or marketing, please contact 781-370-5000 to be directed to the appropriate person.
140 Kendrick Street
Needham, MA 02494
Contacting Enigma Support
Customer support remains the same. Just as it has operated in the past, the Enigma customer support portal is still available for customers to submit, view, edit and resolve technical service requests online. Please click on the link to access the portal and sign in to access.
We will continue to keep you informed of our integration efforts and hope you’ll be as pleased as we are with the results. We believe Enigma customers will benefit from the combined resources of Enigma and PTC – two global organizations with the common goal of delivering more value across the full service lifecycle of complex equipment.
Tags: parts and service, service information, InService EPC, Enigma, diane vautier, construction, equipment, construction equipment, fleet maintenance, PTC, service lifecycle management, SLM
Everything is up when it comes to Construction Equipment today. Take a look.
Construction is up. After taking a sharp fall in late 2007, tumbling for three years and finally bottoming out in the beginning of 2011, construction spending is showing a solid upward trend. In July of 2013 the U.S. Census Bureau reported construction spending topped $900,824 million dollars – not equal to pre-recession spending levels, but solid and steady recovery that is helping rebuild the industry.
Construction employment is up. According to the U.S. Bureau of Labor Statistics, “[E]employment in construction is expected to rise 33 percent by 2020, adding about 1.8 million jobs”. Much like construction spending mentioned above, the growth won’t bring employment in the industry back to prerecession levels by 2020, but the rapid growth is helping the industry regain its footing after the sharp and damaging decline.
Construction equipment is up. Research and Markets, in their “Heavy Construction Equipment Market - Global Trends & Forecast To 2018” report that “[T]the heavy construction equipment market is estimated to witness 8.5% CAGR within the forecast period for infrastructure development purposes. The BRIC countries and emerging economies of Asia-pacific including South Korea, and Australia are leading the growth for this market.” Confidence in the upward construction spend is picking up and companies are investing in equipment to meet their upcoming contracts.
Construction Equipment Leasing is up. According to the online construction publication ForConstructionPros.com, the equipment leasing industry continues in an upward trend. They report that “[T] the Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $725 billion equipment finance sector, showed the overall new business volume for June was $8.6 billion, up 8 percent compared to volume in June 2012. Month-over-month, new business volume was up 15 percent from May. Year to date, cumulative new business volume increased 10 percent compared to 2012”. Funding for equipment is loosening up, making more options available for contractors to expand fleets.
Construction equipment rentals are up. Construction News Tracker reports that “[T]the latest forecast from the American Rental Association Market Monitor shows the equipment rental business continues to outpace the U.S. GDP by four times. Construction rental and consumer spending are driving the market with construction equipment rental forecast to grow over 8 percent this year and more in 2014.” Wells Fargo Equipment Finance, in their 2013 Construction Industry Forecast says that more than half (50.5%) of equipment distributors expect to increase the size of their rental fleet in 2013.
Increasingly contractors are including rental options to supplement their in-house fleets. They are tapping into a new service paradigm, paying for the equipment only when they need it, and allowing the rental house to take on the responsibility to maintain, service and repair the machines. In essence, they are paying for performance (hours used) and not the equipment itself.
Construction Equipment Rental Rates are up. The increase in rental demand is allowing construction equipment companies to increase rental rates. Rental Equipment Register reported that equipment rental rates increased 7 percent in December 2012 compared to December 2011. Rental Equipment Register also reports that in March of 2013, rental rates rose 6.2 percent compared to the same month last year for the rental companies participating in Rouse’s Rental Metrics Benchmark Service.
Construction Equipment Fleet Age is up. Engineering News Record reports that “[M]meanwhile, as rental rates have increased, the age of rental machines has, too. Rental fleets weathered the worst parts of the 2009-10 downturn by letting their machines get older, and fleets reached their high point at about 54 months”. The Rental Report, a monthly state-of-the-rental-industry newsletter by Rouse Services, tracks the age of the construction equipment fleet. In their most recent August 2013 Rental Report the average rental fleet age has come down to about 45 months – considerably less than at the peak of the economic downturn, yet still far above the average of around 36 months that was common a decade earlier.
Even contractors who own their own equipment are extending the life of their company fleets to accommodate tight equipment budgets. Associated General Contractors’ Constructor Magazine cites EquipmentWatch data that shows the average age of resold equipment is between four and eight years, with most equipment sold after five to seven years of use, outlasting the rental fleets considerably.
Construction Equipment Service and Parts Opportunity are up. What does it all mean in terms of equipment parts and service? Opportunity. With construction and construction equipment trends pointing toward growth, equipment OEMs, distributors and rental companies should be gearing up to support a growing global equipment fleet with warranty work, parts sales and performance contracts. Older equipment still in service will need ongoing maintenance, repair and service support, and will be looking for extended warranty contracts or cost plus service agreements. Good fleet managers know that there is money to be made in the operational details of equipment ‘uptime’.
Savvy equipment OEMs and service providers are aligning their service organizations for growth, formulating a consolidated service approach to streamline and optimize aftermarket service and parts operations. This service lifecycle management approach outperforms service teams managed functionally that address individual service processes separately. It brings all functions together – considering all aspects of aftermarket service, service parts, warranty and maintenance to realize true cross-functional benefits. A single system for service optimizes product and service performance, organizing service strategy and delivery around maximizing product performance to yield the greatest customer value and service performance.
Biomedical equipment technicians (BMETs) are important to today’s medical equipment uptime. They are the men and women who are relied on to keep all sorts of expensive, highly specialized, highly sensitive complex equipment maintained, properly configured and safely functional.
But the medical equipment and devices industry is in a flux with technological, political, and economic forces exerting pressure on every aspect of its existence. Will these forces prove too powerful? Will the biomedical equipment technician survive or become extinct in a world of mobile medical apps, self-diagnostic equipment monitoring and connected networking?
The Mobile Medical App explosion
The rise in mobile medical application development has experienced meteoric growth. According to the medical markets research firm Kalorama Information, “T [t]he market for healthcare-related software apps for use in mobile devices has grown and will continue to grow quickly.”
How quickly? They report that the market for mobile medical apps was worth about $150 million following a 100 percent annual growth rate between 2009 and 2010, and an almost 80 percent growth between 2020 and 2011. They go on to say that the expected 25 percent annual growth from 2012 to 2106. Although slower from the initial surge, it is still considered solid growth, competing with other large and popular app categories such as gaming, entertainment, social networking, and navigation.
Doctors prescribe iPads for digital connectivity
The influx of portable technology in hospitals has hit a tipping point. MobiHealthNews reports that in a 2012 ON24 and MedData Group survey, 45 percent of doctors reported that they now have and use iPads at work. Another 29% said they planned on purchasing an iPad within the next 6 months. Physicians use their mobile devices to check drug prescribing and safety information, review medical research findings, and share medical images with colleagues.
Personal and pocketsize medical devices
While physicians are using Medical Apps designed for them specifically, patients too are using apps on their mobile devices to better manage their own individual health care. Personal medical apps are helping patients improve healthcare recordkeeping, better track their health indicators and be more informed on health and lifestyle options and choices.
The increasing comfort level of physicians and patients with mobile devices and health related apps has led to their increased use. Activities formerly associated with an office visit check-up are being replaced with at home monitoring and a more collaborative relationship between doctor and patient. Patients are using their mobile devices as pocket size medical devices – medical devices that never need a BMET to keep them serviced and working.
The good news for BMETs
Despite the personalization and shrinking size of medical devices, there is good news for BMETs. Technology in healthcare is adding new devices every day that have not yet found their way to an iPad or iPhone screen.
Additionally, access to healthcare and medical devices is more globally obtainable now than ever before, allowing more countries world-wide to take advantage of the diagnostic tools previously unavailable to them. Market researcher Lucintel reports that “T[t]he global medical device industry has experienced significant growth over the last five years and is expected to continue, reaching approximately US $302 billion in 2017 with a CAGR of 6.1%during next six years (2011-2017).
Employment estimates support the optimistic future of the BMET. United States Department of Labor, Bureau of Labor Statistics projects that “[e]mployment of medical equipment repairers is expected to grow 31 percent from 2010 to 2020, much faster than the average for all occupations.”
The bad news for BMETs
The bad news is that the life of a BMET, as he/she knows it, is unlikely to stay the same. The medical device industry is undergoing rapid change with frequent mergers and acquisitions that are wholly reshaping the landscape. Changing and tightening regulatory controls as well as financial pressures associated with the Medical Device Tax are exerting influential forces leading to increased competition.
Fierce competition will incent corporations to look for innovative tactics that make marked, leap-frog advancements rather than incremental gains against their competitors. The service sector offers just such opportunity. Just as product lifecycle management (PLM) and enterprise resource planning (ERP) helped launch manufacturers ahead of competition in the past, service lifecycle management (SLM) presents a similar potential for paradigm shifting change today.
BMETs and their namesake equivalent Biomedical Equipment/Engineering Specialist (BES or BMES) are employed by three main medical equipment service providers:
• Original equipment manufacturers
• Clinical Engineering (typically in-house hospital departments)
• Third-party service providers
As these three entities volley for position and service revenue, BMETs may find it beneficial to realign themselves with the most forward thinking party that is redefining the service experience. BMETs not focused on the end service game may be left behind.
Every year Polk Automotive analyzes the trends in U.S. car and light truck registrations to gauge the age of vehicles on the roads. This year, like every year since 2002, they reported that the average age of all light vehicles on the road has risen. Today, the average age of America’s auto fleet is an impressive 11.4 years of age, up from 11.2 last year.
This is great news for the automotive aftermarket whose livelihood relies on the sale of replacement parts and service repair. Older cars mean more work and more profits. But while it is certainly notable that the age continues to climb and drivers are keeping their cars and light trucks longer, we wondered what other telling trends were behind the numbers. We learned a few interesting facts.
Baby Boomers are Still Setting Trends
According to a study by the University of Michigan’s Transportation Research Institute, Baby Boomers may be aging along with their cars. As a group, they still drive significant changes in all sorts of demographics, including vehicle purchases.
The study reports that older drivers are more likely to buy new vehicles. Even though auto dealers continue to court the Gen X, Gen Y and Millennial market, it’s the graying baby boomers that have the desire and means to purchase new vehicles. It turns out that nostalgia for the era of the car is a powerful influence.
What about younger drivers? In another study University of Michigan researchers found that younger individuals – those same Millenials that auto makers are targeting for advertising, actually purchase fewer new vehicles than expected. They found that a higher proportion of internet users (the digital natives) were associated with a lower licensure rate. Fewer younger registered drivers mean less reason to purchase.
Are Auto Makers Making Better Cars?
In an age of disposable everything, it looks like automobile manufacturers may be doing the unthinkable – making better, longer-lasting cars.
M. Simon, technical contributor for Manufacturing.net contents that “Engineers Killed Detroit”.
“Cars that are engineered to last longer require that you buy fewer of them in a lifetime. Remember when a car that ran for 100,000 miles was a good car? I do. Now a 200,000 mile or 250,000 mile life is considered a good car. Engineers (aided by competition) did that. And not just American engineers. Engineers all over the world.”
John Tammy at Forbes suggests that “The Unions Didn't Bankrupt Detroit, But Great American Cars Did”. He suggests that today all cars are engineered well. They are built to last. They are reliable, affordable and don’t break down that often like they did in the 1970’s era. Tammy says “In short, cars are simple, prosaic, and easy in a modern sense to manufacture well”. If you believe his position, reliable automobiles have become a commodity, contributing to the longer life of cars and trucks.
Aftermarket Vendors Vying for Parts and Service Business
No matter what the reason for the continued aging of American’s vehicles, one thing is certain. Automotive aftermarket vendors should be prepared to capitalize on the revenue opportunity that is presently available, even though there will be competition from other providers and strong economic obstacles.
Ratchet and Wrench reports that the auto service industry is actually experiencing a downward revenue trend. “In the last five years, overall industry revenue has declined at an annual rate of 2 percent to $30.3 billion. This decline was largely due to declines in the overall economy, which caused a decline in disposable income and corporate profit, effectively stifling the use of vehicles and the need to repair them”.
With tight competition, savvy aftermarket parts and service providers eager to tap into potential revenue streams are searching for the best path to take and have discovered that service operations hold the best opportunities. In Aberdeen’s recent State of Service Management: Outlook for 2013 report, sampled organizations stated that on average service margins were 10.7% higher than those from products.
Where the Opportunity Lives
As product profit margins shrink and service profit margins grow, more companies are placing higher value on the service model and transforming their service centers into profit centers. PTC’s Service Lifecycle Management approach is leading the adoption of service related attitudes with products like Enigma’s InService EPC which helps execute those service management strategies that lead to profitability.
Aftermarket parts and service providers not focusing on service profitability run the risk of being left behind. As Ali Pinder, Research Analyst for Aberdeen Groups says in a recent blog post “This ability for service operations to produce profitable growth has raised the importance of service in the eyes of the executive team, from a cost containment tool to a growth engine for many businesses”.
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