Field Service Cost to profit
  • 29/11/2022

How do you transform your field service department from a cost center to a profit center?

The customer may be king, but for many manufacturing companies, customer service was until recently an underserved child. This has been changing in recent years. Customer service, and by extension field service, are increasingly shifting from cost center to profit center. And rightly so. Technological innovations today make it possible to offer the ultimate service to customers, just as we are used to from our own B2C buying experience. But to generate a real revenue stream with your field service requires more than technology alone.

For years, companies viewed customer service solely as a cost center. The goal of the service department was to complete the list of problems as quickly and efficiently as possible, preferably at the lowest possible cost. Service was often cut back and human interaction with customers was reduced by technological means. Witness the often long queues on the phone and the sometimes impenetrable self-service options. That may have worked, but for the customer experience, such a service model, focusing on the lowest possible cost, was often very pernicious.

Service as profit center

Today, there is growing awareness that substandard service costs money. More than that, the risk of losing customers is real after a bad experience with customer service or field service. Companies are also recognizing that field service personnel, not necessarily the sales team, are often the only point of contact with a customer. They are there at the critical moments when the customer needs help, is looking for knowledge, or even looking for a new product.

Services are also taking on an increasingly important role in the business model of manufacturing companies. According to a recent study by ABN Amro, large machine builders such as ASML (high-tech), Marel (food), Philips (medical) and Vestas (wind energy) now derive 20 to 40 percent of their turnover from services. Some organizations take this even further and turn to servitization, offering additional services to complement the product. Sometimes customers simply buy a result instead of a product. One example is Philips, which offers LED lighting as a service to retail customers.

The benefits of servitization can be great. Service contracts (in addition to traditional product and machine sales) provide a stable and predictable source of revenue and create a natural long-term relationship with the customer. A report by enterprising bank NIBC shows that many companies' average EBIT profitability (operating profit after depreciation and amortization) of services is a factor of 2 to 5 higher than that of their products. Small note: our recent survey on Digital Maturity among manufacturing and supply chain companies did find that only nearly a fifth of those surveyed intensively embrace the "as-as-service" model. So there is still some growth to come.

But how do you make a service department profitable? A first way is to make your service more efficient, including by using new technologies. In addition, service professionals also need to take on a different role.

Technology improves customer experience

Technology that makes service more efficient? That seems like the former low-cost model we described above. However, there is a big difference. Technology today serves not (only) to handle interventions faster, but more importantly to thoroughly improve the customer experience.

Some examples:

  • IoT sensors continuously transmit critical operational parameters via the cloud, allowing technicians to anticipate when maintenance is needed.
  • Augmented Reality (AR) allows product specialists to guide and instruct technicians remotely via an AR headset. This helps them arrive at a solution faster.
  • Field Service Management software allows organizations not only to digitize work orders, but also to schedule resources so that the right expert and parts are immediately available for intervention.
  • Online or mobile access to machine histories and other supporting documents enables field technicians to find the right solution to a problem faster.

In practice, a better customer experience often goes hand in hand with cost savings. Remote collaboration tools, for example, not only allow an expert to provide remote advice to a customer faster. It can also mean that you don't have to have the only expert on the subject in your company fly around the world (and thus incur high travel costs) to help a customer out of trouble on the spot.

A new role for service professionals

Technology alone will not turn your service department into a profit center. As long as the focus remains on putting out fires, checking off lists and emptying the inbox as quickly as possible, there's no immediate big payoff. But if you start seeing service professionals as consultants who help customers get more value out of their product or installation, you're on the right track. More than that, such a mindset is indispensable for turning your service into a profit center.

Field service is thus given a more central role in the company. For example, service engineers can partly take over the role of sales, because they are best placed to spot opportunities or to cross-sell. In addition, field service fulfills an important role toward product development. After all, they receive crucial feedback from the customer that is invaluable for further product development: what are the biggest problems with a machine? Which features are used the most? Which ones are actually redundant?

The new role for service has quite an impact on IT and the overall organization. In particular, it means that field service systems must be integrated with the rest of the company, including the ERP, inventory management, invoicing, CRM, and so much more.

Creating value with field service

Technology and a new role for service professionals: they are two necessary pillars that can reinforce each other. IoT, the cloud, AR... The possibilities and applications for field service are numerous. With the help of new technology, field technicians can work more efficiently and more often reach a solution at the first contact.

But technology does more. By working more efficiently and faster, service teams can also free up more and more time to take on the broader role of advisor and create value for the customer.

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