Close this search box.
Close this search box.

Aftermarket Services Are Generating New Revenue Opps for Discrete Manufacturers

Tough competition in the manufacturing industry and the struggle for market share has shined the light on aftermarket services as a competitive differentiator. As a result, the category, as a whole, is getting more attention from C-level executives.

Many “discrete manufacturers”—those that produce distinct items such as cars or smartphones, as opposed to “process manufacturers” that produce undifferentiated items such as oil or salt—can expect to capture upwards of 30% of their revenue from service and service-based product strategies in the future, according to a recent IDC report. In fact, the study’s authors predict that, by 2020, onboard service revenue will outpace product-related revenue by a factor of two.

“Aftermarket service management programs provide higher margins and profitability, as well as garner multi-year, subscription-based revenue streams,” the authors wrote. “For industries such as automotive, consumer products and industrial equipment—where products typically incur a multi-year product life cycle—aftermarket spare parts or maintenance repair parts remain profitable businesses.”

They caution, however, that manufacturers need to recognize that service parts planning (SPP) technology is different than supply chain planning technology (SCP), as SPP applications base demand for service parts on product reliability, warranty management, planned maintenance, and timetables within specific customer service-level agreements. For SPP, equipment uptime optimization and the management of inventory risk trade-offs are the prime considerations.

Cloud-based and Internet of Things technologies will create a competitive advantage for these new revenue opportunities. “Applying this to service innovation will provide meaningful impacts in the automatic sensing of spare and consumable parts demand, the monitoring of equipment performance, and the tracking and managing of service parts inventory,” the authors wrote.

Netherlands-based Teleplan International, an after-sales services partner for communications, computer and consumer electronics companies, wrote in a report that, to be successful, manufacturers should integrate aftermarket services programs into their overall customer engagement strategy.

“In the past, many companies focused simply on getting a product repaired or replaced” as a way to keep customers happy, Teleplan’s authors said in their report. They also recommended that manufacturers locate their aftermarket operations close to their end-customers, which may not necessarily be near their manufacturing facilities in low-cost countries.

As a result, it might make sense for manufacturers to outsource their aftermarket services to specialists who have already invested in multichannel, reverse logistics capabilities in regions close to end-users, and as such, can likely be much more efficient than manufacturers conducting aftermarket services in-house.

IDC: Business Strategy: Spare Parts Planning for Service Excellence

Teleplan: Reverse Logistics: Changing the Game in Aftermarket Service Strategies



  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events


    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)


    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.