The Uptime Blog
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.
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 parts supplier or service department with a parts counter has a system for managing their replacement parts. So why then do some companies have us singing their praises while others make us curse the experience?
It’s the system, silly
Surprisingly, some parts management systems are still pretty basic with a manual means of receiving, storing, retrieving and reordering parts. This is slow, inaccurate and prone to mistakes. So unless you have a superstar parts guy with a photographic memory who is personally overseeing your interaction, your experience is likely to be much like the system itself, slow and inaccurate.
Other parts management systems may be partially automated, or managed through personal spreadsheets of parts and service information that gets manually updated on an irregular schedule. These semi-automated systems help, but lack the consistency of data and the scalability to adapt to growing businesses. They also lack the capacity to be integrated system-wide on an enterprise level and fail to provide the immediacy of parts and service information needed to make timely repairs.
The parts management systems that are the most effective are those that are integrated on an enterprise level across the entire business unit and tied into the company’s ERP system so that mechanics, service technicians and parts managers can easily identify parts, see recommendations on related assembly parts, and have updates available to help improve service which ultimately improves equipment performance and uptime. These systems help service technicians quickly and accurately find, order, and install the right part for the piece of equipment.
Inefficient systems contribute to cost and complexity
Parts and Service managers relying on manual or semi-automated systems of parts management however are less efficient or accurate, adding to the complexity of the experience and costing more. Consider these points.
- Parts carrying costs: There is a cost associated with having a part in inventory. If too many of the same part are on the shelves, they increase warehouse costs. If too few are available, repair time is extended while parts are ordered, received and distributed. The trick is to accurately estimate the necessary parts to keep the fleet (or customers fleet) up and running without overstocking.
- Parts ordering costs: There is a cost associated with ordering parts. The less sophisticated the parts management system, the higher the per order cost of parts including finding the correct part, calling for availability, issuing a purchase order, shipping (or delivery), receiving, stocking, and order delivery. The fewer the steps or the more automated and accurate the system for delivering the information, the more cost efficient parts identification and ordering can be.
- Service update costs: There is a cost to keeping multiple service locations or multiple mobile service technicians up to date on the newest parts, part numbers, service bulletins, or service training information. Outdated service information causes the wrong parts to be ordered, extends repair times, and unhappy customers.
- Information distribution costs: There is a cost of keeping field technicians, service departments, mechanics and parts managers informed on critical parts and service information. Parts catalog production, printing (or even electronic media preparation like parts catalog CD’s), and distribution can be a costly endeavor. Especially when multiple locations, dealer networks or field service crews are involved.
- Parts mis-order costs: There is a cost to parts mis-orders, which are due in large part to information being inaccurate or outdated (see 4. Information distribution costs). Returns, reorders, and delayed time to repair are costly contributors to equipment repair or maintenance.
Whether you’re the OEM operating your own in-house service department, a dealership working with your OEM or an end user of a piece of complex equipment, running a less than optimum parts catalog system yields the same results. It takes more time, effort and money to keep the equipment running. You, your dealers or your customers pay inflated costs and get an unsatisfactory service experience.
Moving toward a new model
While some parts management teams try to implement one or more single point solutions (like adding more frequent parts catalog distributions, an easier ordering processes, or warehouse inventory improvements) to make parts and service management more organized and keep the high cost of parts management in check, a more holistic approach produces a better result.
A complete service management system is a new approach that is finding support in the service community. Just as Enterprise Resources Planning (ERP) consolidated the concept of business integration into a product lifecycle management type of structure, service lifecycle management (SLM) is now helping to bring together individually run yet related service units inside a service organization. It’s a cross-functional system that supports the service eco-system of a business that enables a full lifecycle approach to customer service and product performance. It optimizes the total value of the customer experience. And it’s how companies will learn to earn more service profitability.
InService EPC, Enigma’s electronic parts catalog is one of several service related software components that integrate together to form a stronger, more holistic service approach. We’re part of the burgeoning SLM concept designed, developed and now coming together under the PTC service lifecycle management approach.