Time for OEMs to shift their Aftermarket Business model in Construction Equipment
The global pandemic situation has been challenging every OEM and Distributor worldwide. Daily we hear that positions have been redundant inside organizations when it’s not the full department which is shut down. This is certainly not easy decision for OEMs and their Distributors to take with the risk of losing some of high skilled and talented people.
The shift of the industry has surprised all of us, and we are only at the beginning. What was unconceivable some years ago, has become totally acceptable today, and things like home-working, e-meetings and webinars are becoming international norms. Traditional Dealer Conference usually taken weeks of organization, with its bunch of constraints such as international flights, hotel bookings, absence from the office, are done today in an hour e-meeting from the comfort of your office or home and getting the same quality content and information. We can imaging next Bauma or Intermat editions totally online with direct interactions with OEMs and a 360 degree visit of each equipment…
Time has come for Original Equipment Manufacturers (OEMs) to re-think their business model and plans according to these new norms proving at the same time that drastic costs reductions and savings can be done in terms of office space, reducing rent cost, travelling cost, consolidation of production plants, sickness absences, etc.
Agility, flexibility and proximity to the end-users are the next factors to be taken in consideration.
According to the *European Construction Survey 2018, the most important criterions of the future for OEMs are:
1- Expand outside of their local market
2- Increase the Aftermarket Business
3- Deep understanding of how customers create value and being on the technological forefront: a clear shift in industry mindset – from operations focused to customer centric!
Technology deployment in the heavy equipment industry has been growing at a fast pace over the last decade; from the Haulage systems in the mining, the electrical mini-excavator or the hydrogen engine excavators, to the Up-Time systems centers, and the new law regulations have constantly pressurized OEMs to be on the technological forefront and win the race against competition.
This situation where R&D and production are ‘driving’ the strategy could leave the Aftermarket business on the side of the road with low dedicated investments and ultimately generate low revenue. We know too well that during recessions and critical times, Aftermarket has always been the profit center for most of OEMs generating more margin and profit than the equipment sale.
Therefore, sub-contracting some service (aftermarket, logistic, marketing…) to specialized third-party companies could be the next Innovation in the CE market and help tremendously OEMs reduce their huge operating costs, enhance their operation efficiency, as well as revenue and profit of their entire distribution network.
Actually, we can seriously question the ROI and the efficiency of the OEMs Aftermarket department most of the time decentralized to the regions, where the high rotation of people is making things difficult for Distributors to strengthen their relationship with their principals and play their role of end-users intermediates.
Sub-contracting partially or entirely the Aftermarket Business to specialized third-party companies, with a minimum back-office support from the OEMs, will definitely create Innovation and a new business model in the market, with more responsibilities and obligations of results leading to a win-win-win situation.
At SINTRA we already took steps toward this transformation of the aftermarket business by understanding the elements of aftermarket lifetime value which is not promoted yet by all OEMs and created a tool to measure them. But that is just one part of a successful aftermarket transformation.
At the organizational level, SINTRA helps OEMs establish and measure key performance indicators for aftermarket sales, a tailor-made strategy for each particular product, and cooperate with the back-office support which should be the min support offered by OEMs.
Finally, we focus on execution and implementation, since even the best strategies may falter without a careful plan to implement changes, monitor impact, and achieve high growth. Together, these tactics will turn aftermarket services into a major source of value and surely the best vaccine against any pandemic or recession.
To learn more about SINTRA Solutions, call: +971 4 380 5789 / +971 50 995 40 24 – email: [email protected] or visit: https://www.sintramea.com