Technically Speaking

 

According to estimates that Il Sole 24 Ore has taken from Federmacchine on February 25th, the national sector of capital goods now has 3,300 companies operating in the territory for an annual turnover

of 28 billion Euros. Among its strong points there are solutions for packaging and machine tools. In 2012 these have reached 5 billion turnover with 12% increase on international markets and by placing area builders in second place in Europe and third in the world. Even more important is that our producers were able to pinch part of the market share from German cutthroat competition and especially to gain a small but significant 2% of their workforce. At the end of February Federmacchine hosted the Awareness study held by the Agency for the promotion abroad of Italian firms (Ice) and their internationalization within the framework of Machines Italia project. Focused on the appreciation that Italian machinery enjoys in the Nations of Nafta (North American free trade agreement), and in particular in the United States and Canada, the report has revealed that in both countries Italy is in fourth and third place respectively in terms of supplies. 47% of the approximately 600 North American managers questioned for the survey are convinced that “made in Italy” has allowed them carrying out otherwise unthinkable processes. But no matter how crucial quality and versatility are, they may not be enough to compete with their overseas rivals: Germans and Japanese. The survey has showed the superiority of the latter in terms of technical support and customer orientation as well as after-sale assistance. For the Italian capital goods industry and machine tools the way towards further growth passes through more attention to services. The topic has been recently debated, and with a view to a forthcoming investigation by the Machinery sector of ASAP Service Management Forum which is part of the research center in Supply chain & service management at the University of Brescia. The password is servitization. Researchers Federico Adrodegari and Andrea Alghisi have tried to expand it in the language of our tooling overview, indicating valid strategies for skillful applications.

 

Potentially unlimited overview

The range of services that the protagonists of manufacturing can provide to end-users is potentially unlimited; it’s the starting point drawn from the statements by Jack Welch Ceo at General Electric in 1998, as well as academic and practical experiences. How to identify the right action and how to implement in order to win, however, is another story. Primarily you need consistency with respect to the offer: «It’s a decisive factor,” said Mr. Alghisi and Mr.  Adrodegari to Machine Tools,” because services and products must go together and two possible variables are identified as essential by specific literature: products’ complexity and machinery customization level. Some of the services have both cross-aspects and the typical example is that of spare parts whose presence is constant, regardless of the operation sectors of a factory: «Other services» instead, said the researchers “are complex. It’s the case of training that may be unnecessary for common goods but on machine tools and especially on some models for assembly and molding it can provide an important added value».

Elsewhere, namely for those machinery areas that are more subject to the adaptations and modifications requested by customers, the winning intuition can coincide with a four-handed design: “the so-called co-design which is undoubtedly a very felt issue” said our interviewees, “and can be carried out since the early stages of implementation or conception of a specific machine. It may be particularly important for Italian companies that point to different industry segments and are traditionally adept in meeting the needs of niche markets”. Once some of the possible strategies to be adopted have been outlined, it is difficult to calculate the economic value of the services supplied with the machine tools produced in Italy but Asap’s opinion is that they can generate substantial earnings when competing on prices is losing and the quality is no longer enough. It is shown by the experiences of sectors such as household appliances or automotive where service has long been a recognized source of marginalization. «National vendors often have a fleet of hundreds of pieces, “said Mr. Adrodegari and Mr. Alghisi,” and they must develop policies designed to capitalize their products’ useful life, ensuring continuous long-term gains”. Annually typical sales volumes of machine tools are relatively low; but against a large installed base and long life of products.

 A strong differential for the Italian product

Up to this moment however there have only been weak approaches based on pure conservation where service is considered a “necessary evil” that must be guaranteed but is often far from being considered the source of lasting and constant economic flows. “Focus on the product itself is still strong”, is the opinion of academics, “but if we observe realities such as Asian ones that are now able to compete for quality/price ratio not only on low-costs, the conception of an efficient proposal capable of differentiating made in Italy on the market becomes a vital factor”.

In this sense training is not enough, while for an export industry, globalization of on-board assistance may be more effective: «Still now», have continued Mr. Adrodegari and Mr.  Alghisi, «problem-solving is often managed by Italian techniques sent anywhere on the site. But many problems can be overcome at a distance and we must point out that among the companies participating in Asap investigations, remote diagnostics turned out to be quite widespread”. On the other hand even distrust and resistance by the customers don’t lack. Clients look suspiciously on remote monitoring because they fear it may lead to intrusions that could jeopardize their skills on processes and know-how. “And conversely” have observed Asap managers, “sometimes suppliers don’t interpret correctly the information collected at a distance. To this purpose, we need precise knowledge within the companies and awareness of technology as enabling factor”. But precisely technology is among the raw nerves of Italian machine tools supply since the reports by the University of Brescia showed that the management of installed fleet is entrusted to applications based on spreadsheets and products like Excel and Access in 81% of cases. Only 33% would use also Erp platforms while Product data management and Product lifecycle management remain the prerogative of 16% and 11% of interviewed suppliers. «On a sample of about 80 companies where there are multinationals and foreign brands” said the researchers, “mostly inadequate computing equipment has been noticed. But a three-years survey that we are conducting on companies operating by single order, also points out that often the business they deal with doesn’t fit the most popular software on the market, or vice versa. Elsewhere strategic applications are considered too expensive and this also ensures information systems to remain on basic levels. To make the most of information, we need to move forward”.

 A future based on pay per use

Perhaps due also to some communication difficulties between customers and suppliers, Italian machine tools are moving towards servitization seen as extreme offer of services, but are struggling to gain upon the advanced ones. 97% of the sample group offer training and 78% offer remote monitoring operations. Undoubtedly important is that 59% of respondents willing to look after «process optimization»; against 58% who offer warranty extensions. What in the near future will probably create more values, however, remains anchored at the bottom of the ranking. Only 16, 15 and 14% of interviewees offers pay-per-use contracts on delivered machines; rental products; finally the assumption of operational responsibility. «Another ongoing investigation”, said Mr. Adrodegari and Mr. Alghisi “investigates what Italian manufacturers of machine tools may offer starting from a list of services already available at the most advanced companies. Rental is in fact considered a possible tool and can increase its popularity. Similarly, solutions such as web- and software-based monitoring can extend their range of applications; control totems or integrated measuring systems of equipment performance”. As Welch teaches, the list is virtually limitless. If the customer’s participation in design is now common to many manufacturers; we may think of supply contracts based on the machines’ actual operating hours and on processing quality. “We could take a cue from different sectors such as beverage», is the opinion of the two academics, “where for the benefit of premium customers, suppliers pay for the operational burden on the good performance of the sold equipment; or from the air force”.

In the first case emphasis is on efficiency and energy saving in order to certify that a remarkable initial expense heralds significant savings in the future. In the second case, the model is that of Rolls-Royce that guarantees clients a certain number of flight hours for each of its engines but appealing to precise calculations and paradigms resulting from computer elaborations. «Among the manufacturers of machine tools» reflected Mr. Alghisi and Mr. Adrodegari, “there is already someone trying to ensure the ability of its machinery to ensure a certain number of high quality pieces per hour in a predefined period of time. It is a vision that combines quality of service and overall management costs of equipment, beating competition based only on prices. ”

 How to cash out the service

Once again it is crucial to know the market with which one communicates, to know oneself and how customers use supplied products, because as Rolls Royce teaches, there are values that can be calculated only in the light of a strategy of product lifecycle management. And still many efforts are made to properly communicate to customers the real value of extremely essential service elements such as maintenance contracts. «Lets think», said the researchers, «of the development of models that measure the costs of goods and services according to the total costs of lifecycle and ownership. They could value and justify service charges by transferring emphasis on minimization and optimization of total ownership costs of a machine or a production plant. They would facilitate the service cash out showing users how to amortize them avoiding others in the future. The topic is also object of an imminent financing project of the European Union, with the participation of the University of Brescia together with important research centers and Italian and foreign manufacturers”.

 Italian manufacturers of machine tools have wide improvement opportunities, starting from unique assignment of precise roles of service manager to figures within the companies, so to develop authentic servitization strategies and exploitation of services. «In the context of Italian SMEs that are often traditionalist and family-run», in the opinion of the two researchers, “these professionals clash with commercial strategies primarily based on products and where service is purely seen as a cost item, not as a source of revenue”. Yet, they move. “70% of the surveyed companies have these figures”, said Mr. Adrodegari and Mr. Alghisi, “even if sometimes their job is not formalized and interferes with the prerogatives of maintenance supervisors or machines’ commissioning. However, they have the feeling for confrontation and for autonomous initiatives. Also because if at the beginning the benefits they bring are not very clear to managers, certainly also owners pursue the same objectives of marginality and turnover. The key concept is the transition from service seen as expense item to service as source of profit”.

Potentially unlimited overview

The range of services that the protagonists of manufacturing can provide to end-users is potentially unlimited; it’s the starting point drawn from the statements by Jack Welch Ceo at General Electric in 1998, as well as academic and practical experiences. How to identify the right action and how to implement in order to win, however, is another story. Primarily you need consistency with respect to the offer: «It’s a decisive factor,” said Mr. Alghisi and Mr.  Adrodegari to Machine Tools,” because services and products must go together and two possible variables are identified as essential by specific literature: products’ complexity and machinery customization level. Some of the services have both cross-aspects and the typical example is that of spare parts whose presence is constant, regardless of the operation sectors of a factory: «Other services» instead, said the researchers “are complex. It’s the case of training that may be unnecessary for common goods but on machine tools and especially on some models for assembly and molding it can provide an important added value».

Elsewhere, namely for those machinery areas that are more subject to the adaptations and modifications requested by customers, the winning intuition can coincide with a four-handed design: “the so-called co-design which is undoubtedly a very felt issue” said our interviewees, “and can be carried out since the early stages of implementation or conception of a specific machine. It may be particularly important for Italian companies that point to different industry segments and are traditionally adept in meeting the needs of niche markets”. Once some of the possible strategies to be adopted have been outlined, it is difficult to calculate the economic value of the services supplied with the machine tools produced in Italy but Asap’s opinion is that they can generate substantial earnings when competing on prices is losing and the quality is no longer enough. It is shown by the experiences of sectors such as household appliances or automotive where service has long been a recognized source of marginalization. «National vendors often have a fleet of hundreds of pieces, “said Mr. Adrodegari and Mr. Alghisi,” and they must develop policies designed to capitalize their products’ useful life, ensuring continuous long-term gains”. Annually typical sales volumes of machine tools are relatively low; but against a large installed base and long life of products.

 

A strong differential for the Italian product

Up to this moment however there have only been weak approaches based on pure conservation where service is considered a “necessary evil” that must be guaranteed but is often far from being considered the source of lasting and constant economic flows. “Focus on the product itself is still strong”, is the opinion of academics, “but if we observe realities such as Asian ones that are  now able to compete for quality/price ratio not only on low-costs, the conception of an efficient proposal capable of differentiating made in Italy on the market becomes a vital factor”.

In this sense training is not enough, while for an export industry, globalization of on-board assistance may be more effective: «Still now», have continued Mr. Adrodegari and Mr.  Alghisi, «problem-solving is often managed by Italian techniques sent anywhere on the site. But many problems can be overcome at a distance and we must point out that among the companies participating in Asap investigations, remote diagnostics turned out to be quite widespread”. On the other hand even distrust and resistance by the customers don’t lack. Clients look suspiciously on remote monitoring because they fear it may lead to intrusions that could jeopardize their skills on processes and know-how. “And conversely” have observed Asap managers, “sometimes suppliers don’t interpret correctly the information collected at a distance. To this purpose, we need precise knowledge within the companies and awareness of technology as enabling factor”. But precisely technology is among the raw nerves of Italian machine tools supply since the reports by the University of Brescia showed that the management of installed fleet is entrusted to applications based on spreadsheets and products like Excel and Access in 81% of cases. Only 33% would use also Erp platforms while Product data management and Product lifecycle management remain the prerogative of 16% and 11% of interviewed suppliers. «On a sample of about 80 companies where there are multinationals and foreign brands” said the researchers, “mostly inadequate computing equipment has been noticed. But a three-years survey that we are conducting on companies operating by single order, also points out that often the business they deal with doesn’t fit the most popular software on the market, or vice versa. Elsewhere strategic applications are considered too expensive and this also ensures information systems to remain on basic levels. To make the most of information, we need to move forward”.

 

A future based on pay per use

Perhaps due also to some communication difficulties between customers and suppliers, Italian machine tools are moving towards servitization seen as extreme offer of services, but are struggling to gain upon the advanced ones. 97% of the sample group offer training and 78% offer remote monitoring operations. Undoubtedly important is that 59% of respondents willing to look after «process optimization»; against 58% who offer warranty extensions. What in the near future will probably create more values, however, remains anchored at the bottom of the ranking. Only 16, 15 and 14% of interviewees offers pay-per-use contracts on delivered machines; rental products; finally the assumption of operational responsibility. «Another ongoing investigation”, said Mr.  Adrodegari and Mr. Alghisi “investigates what Italian manufacturers of machine tools may offer starting from a list of services already available at the most advanced companies. Rental is in fact considered a possible tool and can increase its popularity. Similarly, solutions such as web- and software-based monitoring can extend their range of applications; control totems or integrated measuring systems of equipment performance”. As Welch teaches, the list is virtually limitless. If the customer’s participation in design is now common to many manufacturers; we may think of supply contracts based on the machines’ actual operating hours and on processing quality. “We could take a cue from different sectors such as beverage», is the opinion of the two academics, “where for the benefit of premium customers, suppliers pay for the operational burden on the good performance of the sold equipment; or from the air force”.

In the first case emphasis is on efficiency and energy saving in order to certify that a remarkable initial expense heralds significant savings in the future. In the second case, the model is that of Rolls-Royce that guarantees clients a certain number of flight hours for each of its engines but appealing to precise calculations and paradigms resulting from computer elaborations. «Among the manufacturers of machine tools» reflected Mr. Alghisi and Mr. Adrodegari, “there is already someone trying to ensure the ability of its machinery to ensure a certain number of high quality pieces per hour in a predefined period of time. It is a vision that combines quality of service and overall management costs of equipment, beating competition based only on prices. “

 

How to cash out the service

Once again it is crucial to know the market with which one communicates, to know oneself and how customers use supplied products, because as Rolls Royce teaches, there are values that can be calculated only in the light of a strategy of product lifecycle management. And still many efforts are made to properly communicate to customers the real value of extremely essential service elements such as maintenance contracts. «Lets think», said the researchers, «of the development of models that measure the costs of goods and services according to the total costs of lifecycle and ownership. They could value and justify service charges by transferring emphasis on minimization and optimization of total ownership costs of a machine or a production plant. They would facilitate the service cash out showing users how to amortize them avoiding others in the future. The topic is also object of an imminent financing project of the European Union, with the participation of the University of Brescia together with important research centers and Italian and foreign manufacturers”.

Italian manufacturers of machine tools have wide improvement opportunities, starting from unique assignment of precise roles of service manager to figures within the companies, so to develop authentic servitization strategies and exploitation of services. «In the context of Italian SMEs that are often traditionalist and family-run», in the opinion of the two researchers, “these professionals clash with commercial strategies primarily based on products and where service is purely seen as a cost item, not as a source of revenue”. Yet, they move. “70% of the surveyed companies have these figures”, said Mr. Adrodegari and Mr. Alghisi, “even if sometimes their job is not formalized and interferes with the prerogatives of maintenance supervisors or machines’ commissioning. However, they have the feeling for confrontation and for autonomous initiatives. Also because if at the beginning the benefits they bring are not very clear to managers, certainly also owners pursue the same objectives of marginality and turnover. The key concept is the transition from service seen as expense item to service as source of profit”.