The line used to be pretty clear-cut. On one side you had manufacturers, making things. On the other side there were service companies, banks, retailers and so on, not making things. If you were a company, you were probably one thing or the other.
But now you might very well be both. Rolls-Royce, UK manufacturing industry par excellence, now gets 50% of its revenues from service activities, working on behalf of customers to look after the aeroengines and other power systems that it previously sold to those same customers. Instead of buying engines, those customers are often now buying engine availability. Variants of this model are being used in other industries too.
This trend is called servitization, and it currently affects mostly big companies – for example, the founder members of the Cambridge Service Alliance, set up as part of Cambridge University to research the phenomenon and devise best practice, are names such as IBM, BAE Systems and Caterpillar.
But, says Jim Heppelmann, president of PTC, servitization is a shift in emphasis that applies across the board in manufacturing. It changes the whole business process, he says: “It’s companies not just having a transactional relationship where you sell something but it’s about realising you can have an ongoing relationship with your customer.”
So how does this affect PTC, whose business has long been in providing design and product management software to manufacturers? Heppelmann says: “The consensus of our customers has been that to improve service you need to bring it all back into product development.” Which is why service and servitization were key words at the annual PTC Live convention in the US last month. Plus the latest in the line of three-letter abbreviations to come from this sector: SLM, service lifecycle management.
SLM moves the in-service life of a product centre-stage, so that elements such as design and manufacture take into account maintenance, parts replacement, end-of-life recycling and other factors that tend to come after the point of sale where manufacturers’ responsibilities normally end.
You might argue that the “lifecycle” part of other three-letter abbreviations, such as PLM (product lifecycle management), should cover everything from cradle to grave, and you wouldn’t be wrong. But there are new aspects here that make this all just a bit different: service aspects such as maintenance and spares management weren’t previously accorded much importance.
Servitization is the business aspect pushing this development, and there are sound economic reasons why this appeals to firms facing sluggish markets for products. It’s a new revenue stream which was formerly often handed over to someone else when the product was sold, or just left to the customer. It ties customers in through service and spares to a longer relationship than the mere transaction.
But SLM is also bringing in new software components to the overall package that groups such as PTC can sell to manufacturers. Customers and users haven’t been entirely ignored in previous offerings by the big vendors, but much of the emphasis has been on re-presenting information from the product creation and design process in snapshot formats that can be used by other people.
So CAD data is repurposed for marketing people as photo-realistic artwork. And other programs are aimed at operational people in terms of sophisticated manuals and training aids that show how to operate, disassemble or maintain using illustrations or animations.
Service is an important angle for many firms, says PTC vice-president Tom Sears. Companies dealing with diverse systems might take a month or two to train technicians on each variant, and there simply isn’t time to do that for everything. “What we’re opening up is the idea of on-demand learning where there’s a core foundation of knowledge and then the detail is learned on demand when something crops up,” he says.
In addition, information on important elements such as engineering changes, which are diligently captured in design and PLM systems, rarely make it through to the person doing the repair on an item. “Typically a technician working for a manufacturer has to access three to five different systems just to get to a service event,” says Sears.
“There might be a work order system, a technical publishing system, a parts system, maybe a warranty system. There’s a huge amount of inconsistency in these various systems, and people have to jot things down from one system and then try to find them in other systems. It’s very error prone.”
Last year, PTC bought the Servigistics company, a supplier of integrated service and maintenance systems in which all of these elements and more hang off a single core database. Sears says the purchase of Servigistics has introduced an interesting mix of customers, including manufacturers with their own service operations and those operating through dealers and service agents. Many of them, he says, hadn’t been PTC customers before, and there’s no bother with that, although he adds quickly that “of course” the SLM package works better when it interfaces with Windchill, PTC’s PLM system.
That’s because the aim now with SLM is to align the engineering and the service information through single datasets of product information and bills of materials. Single, but live datasets: so when there’s an update in design at the front end it filters through to the spares management system at the back end. The simple benefit is that the service technician gets the right part off the shelf. More intelligent use of the data, however, might mean that the spares department doesn’t over-stock itself with items that are about to be redesigned or phased out. “We call it a decision support application: it’s about helping to make better decisions,” says Sears.
Throughout, the aim is for this not to be just one-way. In integrating SLM into the CAD and PLM mainstream, there is potential to send real information about operational experience back around the loop to inform design and manufacture. Some of this is likely to be qualitative information that manufacturers don’t always get from their customers, and some of it will also link into other work that PTC has been doing since its acquisition of the embedded software design and management company MKS, which has been beefing up the requirements capturing aspects as the precursor to product design.
But some benefit should also feed through to service operations. “For example, we already have predictive maintenance built in through Windchill and FMEA (failure mode and effects analysis),” says Sears. “But what you predict isn’t necessarily what happens.”
SLM, coupled with active condition monitoring systems that are being developed with wireless sensors and other “smart product” technologies, provides a new set of data about product performance and customer use of products. PTC is talking to companies in these technologies about how to gather this data and analyse it so that it provides useful information. Again, this is intended as a two-way process: Sears says that through PLM and SLM manufacturers have better views as to what data is worth collecting and analysing.
All of this seems an order of magnitude up from the digital representation of geometry which is where the CAD-derived manufacturing software groups came from. But the manufacturing business has changed, the technology components are there to handle the new business norms, and it’s someone’s job to get it all to join up and work. PTC wants to be that someone.
To the core of the problem
“I love Philips. I love your service engineers. I love your innovation. But your service parts business is going to kill you and it’s going to force us out of working with you.” John Schlanger, vice-president of global service parts supply chain at Philips Healthcare, relays one customer’s ultimatum, which was part of a pattern that forced the medical device company to review its core service activities.
“It was a pretty bloody situation for us,” he says. “We were fragmented in systems, in geography and in history, and people were leaving us.”
Philips redesigned its parts service based on three key principles: “designing systems from the customer inwards”; a strict definition of what was core and what was non-core; and determination to contract out to best-in-class companies items identified as non-core. “We broke down our whole supply chain: the processes, the IT infrastructure and organisations. And then it was a case of how do we build it back up,” says Schlanger.
The decision was that parts planning was the core activity, while other aspects such as distribution, purchasing and master data could be outsourced. Philips brought in a unified parts planning system, replacing ad hoc, spreadsheet and individual systems dotted around its sites. “We put in a global system and interfaced to the backbone of SAP,” he says.
The results have been what he terms a “revolution”: fill rates are up 8%, inventory is down 3% and costs down 2%. And because the parts planning system is part of a wider SLM package, it will link to other areas of the services infrastructure, and into product origination and manufacture.