The Development Trend of Servitization in Manufacturing
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The Development Trend of Servitization in Manufacturing

Through the assistance and support of the service industry, we can add value to the manufacturing industry, enhance the international competitiveness of the manufacturing industry, and create greater comparative advantage and profit space.
Published: Apr 08, 2022
The Development Trend of Servitization in Manufacturing

Servitization in manufacturing:

With the advent of the era of globalization and knowledge economy, the deepening and specialization of the international division of labor have led to great changes and impacts on the global overall environment.

Since the 1980s, the production of industrial products has integrated more and more services as intermediate input elements, and the product consumption process includes many complementary services, and the industry has gradually developed into a service; in addition, services have been integrated into more industrial production methods, and the service industry has become Standardized development of industrialization. From the production practice of enterprises, it is also found that traditional manufacturing enterprises continue to expand into the service industry, making it difficult to distinguish between manufacturing enterprises and service enterprises. Overall statistics also show that manufacturing and service industries are each other's input sources of production factors, market sales, and service industries. There is an increasingly obvious fusion phenomenon with manufacturing. If viewed from a country-by-country basis, the United States is a country with earlier embedded services for manufactured goods. In the 1970s, the service industry accounted for as high as 20% of the intermediate input of manufacturing; while Japan’s manufacturing embedded service industry expanded the most. The dependence of the manufacturing industry on the service industry has increased from 16% in the 1970s to 27% in the early 2000s, and the OECD (Organization for Economic Cooperation and Development) has a significant trend of servitization of the manufacturing industry. In addition, using the changes in the service industry's dependence on manufacturing to observe the development of the service industry's integration with manufacturing, it is found that the service industry's dependence on manufacturing in the main 9 OECD member countries shows a downward trend. With the continuous transition of economic development to the service industry, the situation that the service industry in OECD countries relies on manufacturing as an intermediate input has decreased, that is, it has become more and more obvious that it relies on the input of the service industry itself.

Manufacturing and service industries are factors of production for each other. Investment in manufacturing can drive investment in service industries, and service industries have auxiliary and support functions for manufacturing production. The dependence of the manufacturing industry on the service industry has a positive relationship with the level of national economic development. Global manufacturers are developing towards service-oriented development. The customer-oriented operation mode of innovative high-value manufacturing services has significantly increased the added value of the industry and served the economy. become the development trend of the global industry. Although there is still a gap in Taiwan's manufacturing industry's emphasis on servitization, Taiwan is also changing and adjusting the development of its industrial structure.

Manufacturing service development model:

The servitization of manufacturing means that product-centric manufacturing turns to service value-added extension. Manufacturers are no longer just a single product supplier, but provide a series of services to meet customer needs, and highlight product differentiation through services. And then create higher added value.

  1. Services to expand the value chain
    Expanding services to the upstream and downstream of the value chain is an extension of producer responsibility. Manufacturing companies consider the entire life cycle of products, and services before, when and after the customer's product purchase must be included in the services they provide to customers.
    • Product extension services:
      Product ownership is in the hands of customers, and manufacturing companies extend their original manufacturing activities to the upstream of R&D, procurement, and customized production. The purpose is to respond to customer needs, strengthen relationships with customers, increase customer value, or the downstream extension of downstream distribution, marketing, after-sales service, etc., aims to increase the value of the enterprise and expand the service customer base. Usually, this type of manufacturing company will provide upstream joint design or R&D or customized production services to make product functions more in line with customer needs or provide downstream after-sales services.
    • Product function services:
      Product ownership is in the hands of manufacturing companies. Manufacturing companies provide a combination of products and services or functions. Customers buy the functions of the product rather than the product itself. Customers only pay for the functions provided by the product, not the product. Pay itself. This type of product is the ownership of the product by the manufacturing enterprise and the right to use the product by the customer, such as machinery leasing, car leasing, elevator maintenance, etc.
    • Integrated Solutions:
      Manufacturing enterprises provide customers with a complete set of solutions (including products, services, and systems), manufacturing enterprises integrate multiple services or functions involved in products, and provide customers with innovative combinations of technology, products, and services to meet customers' demand for high-value products demand.
  2. Derivative external services
    Enterprises use their advantages and functions to create business services independently. This service not only provides peers but also expands to non-peers (new customer groups) to maximize corporate value, this service is a manufacturing enterprise specializing in the same value activity. A certain section of service behavior in the industry is provided to peers and non-peers through modular design.
  3. Service-led product manufacturing
    Manufacturing companies provide service-oriented products that directly build customer needs into their products.

The key elements of the development of manufacturing servitization:

  • Effectively provide tangible products and intangible services to meet the new needs of customers due to changes in the external environment; manufacturers adjust their business content to meet the needs of customers.
  • The service culture atmosphere within the enterprise, coupled with the high-level management's high focus on service investment, regards the service department as one of the important departments, which will help to improve the efforts of service development within the enterprise. From top to bottom, creating a service atmosphere within an enterprise is an important factor in promoting the successful development of service-oriented manufacturing.
  • The development of the product extension service model in the value chain expansion service in Taiwan's manufacturing industry has been quite effective. In contrast, foreign manufacturers tend to favor the integrated solution model in the value chain expansion service model. This is mainly because Taiwan's manufacturing industry has been product-oriented for a long time, and the transformation of manufacturing services is mostly on the manufacturing and R&D design side. If the service-oriented thinking of foreign companies is beyond the production stage, that is, foreign companies develop from the fu life cycle of products. Manufacturing servitization will develop into a service type of "integrated solutions".
  • The industry has a high degree of mastery of its professional technology and experience and adapts to the market demand to provide its competitive service projects. It is derived from the form of an independent business unit or department, and it has successfully developed a service type derived from the outside world.
  • The type of service-led product manufacturing, that is, the relevant service market has been planned simultaneously, and the manufacturing and service markets have been cut at the same time.
Outlook:

Service digital transformation is based on information and communication technology and emerging digital technologies. Through process optimization and product and service innovation, it helps companies develop more competitive operations and business models so that companies can continue to grow and develop.

After the US-China trade war and the outbreak of the COVID-19 outbreak, not only business operations but also global economic development is affected. Although the advent of a vaccine has made the market optimistic about the prospects for economic recovery, the trend of the epidemic will still affect economic activities and cause uncertainty as the new normal, companies must accelerate the pace of digital transformation. Digital transformation enables companies to demonstrate sufficient resilience to withstand external shocks when faced with uncertainty, while also enhancing their competitiveness. For the manufacturing industry. In addition to the trade war and the epidemic, challenges such as insufficient labor force, rising raw materials, energy-saving, and carbon reduction, as well as the trend of small, diverse, and customized production, etc. will still be faced in the future. Therefore, digital transformation will have become an important topic and direction for the development of the future manufacturing industry. After the manufacturing industry is transformed into service, it is necessary to create better niches and more flexible service models through digital tools to cope with different challenges in the market.

Published: Apr 08, 2022 Source :ndc

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