From Manufacturer to Service Provider

Change for Manufacturing Companies

The circular economy is the plan to reduce emissions. The goal is to use only 50% of the primary raw materials we currently use by 2030. By 2050, all primary raw materials will be used in a circular manner.

The government is taking responsibility for this issue, but it cannot achieve these goals without the cooperation of manufacturing companies. So something will have to change. Is it just about giving, or are there also opportunities that the circular economy brings?

What can service sector providers learn?

The circular economy is already being implemented by a number of manufacturers; instead of selling the product itself, they sell the service that the product provides. For example, customers pay for a service—such as lighting—rather than for the product (the light bulbs). This is already happening on a large scale at Schiphol. Philips has a program called ‘Circular Lighting’ and is responsible for the lighting in Lounge 2, one of the terminals, at the airport. Schiphol purchases lighting services based on a service and performance contract with Cofely and Philips. Philips therefore remains the owner of the light bulbs and installations and, together with Cofely, is responsible for the performance and lifespan of the lighting.

Providing Services Alongside Your Products

As a manufacturer, there are countless ways to create added value as a service provider as well. In addition to selling products as a service, companies are increasingly offering services alongside product sales to generate more revenue from a product. For example, household appliances can be serviced regularly for a fixed fee or through a subscription. Consider, for instance, a printer manufacturer that automatically sends its customers an ink cartridge as soon as the old one is running low, or a consultation when selecting a mattress.

Services in the Manufacturing Industry

More and more companies are considering new business models; the new manufacturing industry, for example, requires the optimization of current workflows and internal logistics.

“Manufacturing industry: the totality of economic activities in which materials are processed on a large scale using machinery to create new products; a sector of the industrial sector whose activity involves the manufacture of new products from materials; an industry that manufactures new products from materials.”

The manufacturing industry, also known as Industry 4.0, focuses on the entire life cycle and value addition of products. For example, consumer preferences are becoming increasingly individualized, and production lines are becoming shorter and more flexible. In addition, attention is paid to delivery to the end customer, the associated services, and product recycling.

Service is an opportunity, not an expense

For many companies, the warranty and necessary service provided after a product is sold are primarily seen as a necessary expense. But it is precisely through service that added value is created. Service helps build long-term customer relationships, gives you better insight into your customers’ needs, and significantly increases the likelihood that their next purchase will be made from your company rather than a competitor. It will therefore become increasingly important to allocate more of your budget to service.

Contribute to the circular economy

In addition to presenting opportunities, implementing a circular economy in your organization is also a good way to make a positive contribution to the environment. Among other things, recycling raw materials, reusing materials, and manufacturing products with a longer lifespan ensure that production becomes more sustainable. With these developments, sustainable production becomes profitable—and ultimately, we all benefit from it!