March 31, 2009 — Large industrial companies have historically regarded aftermarket as a low, value-add support function. The range of services offered has tended to be reactive-based rather than focused on innovation to enhance long-term client relationships and, hence, the bottom line. Traditionally, aftermarket services have been homogenous, and — beyond hi-tech and automotive industries — firms have rarely viewed them as a key differentiator. Despite potentially attractive margins, the trend has been for organizations to under invest in the aftermarket, demonstrating a failure to understand the service line's long-term contribution to profits, especially in weak trading conditions. Given the current focus on reducing capital expenditures, after-sales service will be key as the need for critical parts goes up. While progressive organizations recognize this phenomenon, they have been slow to dedicate the requisite talent to the sector, and there is often a disconnect between product sales teams and their aftermarket colleagues.
Recent market turmoil has led to a shift in mindset; employers in the Engineering and Manufacturing sector are starting to proactively seek a new breed of talent to capitalize upon potential opportunities in service management. Clients across different industries — such as capital equipment, aerospace and electronics — are vocalizing common themes, including:
- The dramatic fall in hardware sales having forced organizations to turn to value-added services for new revenue opportunities;
- Customers becoming increasingly sophisticated and demanding improved service levels at lower costs enforced through exacting metrics and service-level agreements;
- Technological innovation having afforded real-time visibility across the extended supply chain, resulting in improved parts availability and lower inventory levels.
About the Author: Russell Reynolds Associates www.russellreynolds.com