After-market profits key to survival for manufacturers

Research by Capgemini, in partnership with DHL Exel Supply Chain, reveals that aftermarket service revenues, as a percentage of total company revenue, are set to rise by 50% over the next five years.

Service and spare parts operations are critical to business success.

They offer a profit margin up to 10 times greater than that of the initial sale.

On average, post-sale service accounts for 20% to 30% of revenue and as much as 40% of profits.

In addition, service can be key to securing customer loyalty, fostering a manufacturer’s brand name and maintaining competitive differentiation.

Improving its Service and Parts Management (SPM) strategy can bring significant business benefits to automotive companies.

On average, manufacturing companies are already harvesting 25% of their profits from this area.

Putting the aftermarket service at the heart of the company’s product strategy has resulted in considerable investments in optimising the aftermarket supply chain.

But what comes next? What is the strategic direction companies take in the global aftermarket?

The research unveils today’s challenges, the perceived spearhead of aftermarket strategies and the direction engineering and manufacturing (E&M) companies take and the major trends against the high-tech industry.

The research into service logistics surveyed more than 100 supply chain and service management executives within the engineering and manufacturing, and high-tech industries.

Fortune 500 E&M conglomerates like ABB and Honeywell, took part in this research and the results were benchmarked against leaders in the hi-tech industry.

The large majority of E&M companies today are already experiencing profit margins between 10 and 50% in Service Management. However, E&M companies are expecting even larger profit margins in the next five years.

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