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How Technology Innovation Can Transform Physical Assets into Value-Added Services

Shift the players – and the playing field


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Abstract

A major global manufacturer of industrial equipment faced a critical lack of visibility into its sprawling product line. Without instant access to even the most basic product information, important business capabilities were being diminished, undermining the company’s strategic intent.

This company manages operations in more than 50 countries with tens of thousands of products and other assets requiring frequent updates and maintenance. To generate real business value by harnessing the information wrapped up in these products, from inventory and product performance data, to peripherals associated with the asset-like technical specifications and more, required innovation far beyond traditional product improvements.

To break through the challenge of managing mountains of information, the company decided to focus on the assets themselves. Using pervasive technologies embedded in their products, the company established an intelligent information network that delivers deep insights into many aspects of their product lines and customer needs. That investment enabled the company to create new service offerings – exploiting their ability to monitor product performance on behalf of their customers. Simply put, physical assets were transformed into drivers of value-added services – making them the core of the company’s value proposition.

The Challenge

Information challenges threatened this company’s efforts in some of the most important areas of its business. With thousands of products created in various company silos, the company had no practical way to keep track of its own product lines and harness the real value inherent in their assets. They frequently relied on outdated manual processes that led to systemic breakdowns in customer service. In some cases, their business model was reactive, depending on customers to inform them of problems, rather than diagnosing the issues and proactively communicating with customers about them.

When a customer inquired about a product, it could take days or even weeks to identify its Bill of Materials (BOM), which could just as easily have been in an obscure database as under an engineer’s desk. The result? Lost sales and major service delays.

This problem extended even further into vital financial processes. To close the books at the end of the year, members of the finance team had to visit every plant, each of which used its own separate legacy financial systems. This process routinely took two to three months, valuable time that could be better applied to other pressing areas.

Deloitte was asked to provide services in support of the company’s efforts to address these challenges.

How We Helped

Innovation was essential. Deloitte first helped the company develop a strategy for proactive asset management, remote product monitoring and preventative maintenance. The strategy relied on giving the assets themselves the ability to act and communicate as an active part of the business ecosystem. The company effectively created an entirely new services-based platform, opening the door to a fundamental shift from product-based to service-based offerings.

Specifically, we helped the company implement new pervasive technologies that allowed the company’s most important physical assets, including products and machinery, to self-report important data to business decision makers, as well as diagnose and self-correct problems in a preventative or planned manner. For example, a single piece of equipment can now track design changes, report on its own operation, and even communicate its existence to a central database of product information. This allows the company to track the entire lifecycle of its products, everything from inventory levels to mean time to repair, associated revenues, uptime, and supply chain issues. In the case of a critical, time-sensitive problem, the equipment can self-diagnose and suspend operations until a technician arrives, or simply downgrade operations to conserve energy or prevent further damage.

These new technologies give physical assets the ability to join a collaborative network of people and systems. The result is more value for customers and sustainable competitive advantage for the company. This “community” of assets, people and information engages an unparalleled range of participants throughout the value chain, from the CEO to retired engineers, and provides a technology-neutral platform for further expansion.

As part of this effort, we helped the company create a business case and business plan that focused on hot-button issues such as energy management, operating in accordance with product specifications, sales force effectiveness, and even the possibility of a new, tax-optimized service entity. After the technical proof of concept was established and a detailed execution plan was developed, we helped the company identify and evaluate technology vendors to assist with, and guide all aspects of implementation.

We also helped the company:

  • Implement a neutral operating system allowing devices and assets to function in tandem with one another at different levels of complexity to deliver timely, useful information to the enterprise
  • Develop a complete road map to implementation, including timelines and priorities specified in the business case
  • Develop a flexible interface hardware design methodology and comprehensive application requirements to allow the solution to be expanded smoothly as it gained wider adoption

Finally, we helped the company perform a tax evaluation focused on spinning off a tax-optimized entity created as part of the solution.

This company has a complex range of disparate systems and processes in place to support its operations around the world. The assets themselves include a daunting variety of products, systems, and machinery designed to operate with one another in many different ways. Engaging these assets in a global intelligent platform requires that they operate in an environment that is technology-neutral – not just for current operations, but for future expansion. We helped the company conduct strategy sessions and workshops and provide demonstrations across business lines to create a holistic point of view of the business imperatives. All of these efforts were conducted with the goal of creating a LIVE Intelligence Platform™ designed to enable a universal community of assets, people, and information, accommodating future growth regardless of business need or location.

Solution

Breakthrough innovation gave this company the ability to create unparalleled visibility into its operations around the world and to contemplate new and disruptive business models to differentiate from their competition.

Benefits included:

  • More efficient inventory management and distribution capabilities
  • Better customer relationships and retention
  • New framework for energy management
  • Improved order management and win rates
  • A neutral technology environment offering complete flexibility in hardware and software selection
  • The ability to establish progressive relationships among all assets, from products and machinery to technology systems and human stakeholders
  • Reduced SG&A and COGS

This company is in the early stages of companywide implementation and expects to reap considerable organizational efficiencies and cost savings between $20-80 million from this initiative.

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