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Material on this website is © Deloitte Global Services Limited, or a member firm of Deloitte Touche Tohmatsu Limited, or one of their affiliates. See Legal for copyright and other legal information.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Service operations are more profitable than manufacturing |
Contact: Sonja Ludvig
Deloitte Bosnia and Herzegovina
Corporate communications senior coordinator
+385 (1) 23 51 900
Service operations typically generate higher profitability than “core” product manufacturing activities, and they offer a much stronger growth potential. Protecting the business through service excellence is one way of keeping out the competition, according to Deloitte’s study “ The Service Revolution. Manufacturing’s Missing Crown Jewel”.
The business models of many global manufacturers are under assault as customer demands change. In developed markets, products are becoming commodities as pricing pressures increase, particularly as a result of low-cost country sourcing. In emerging markets such as China and India, service and parts operations are facing fierce price wars as well as counterfeit parts, situations that damage long-term brand reputation as much as they hurt profits. Protecting the business through service excellence is one way of keeping out the competition while improving customer service and loyalty.
Customers keep raising the bar for service excellence by requesting shorter lead times, higher service levels, lower cost and better customer service support. Yet most manufacturers are still unable to provide customers with excellent and cost-effective service. Overall, Deloitte’s analysis suggests that customers are likely to get exactly the items that they want, at the right time and place, less than 75 percent of the time. That is a dismal performance in a global economy where customers have more options and more information than ever before to tempt tme to swithc to competitors’ offerings.
Deloitte’s research found that the average profitability of the service operations is more than 75 percent higher than overall business unit profitability. The service matters more than ever, since it creates the new basis of competition, ensures better product proliferation, minimizes quality issues with parts, and in times of economic downturn ensures resilience, since service and parts sales are far more robust than the main business.
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