By Jukka Hemilä
We published a journal article aiming to increase the understanding of service business development for manufacturing SMEs by further developing previous conceptual frameworks for service supply chain management, based on the current scientific literature and empirical cases. The main result of the study is a simple, but comprehensive step-by-step model for the development of the service business and service supply chain.
The previous literature includes many New Service Development (NSD) programs and models, but the methods are not described in such detail that SMEs can strictly follow them. A formalized process from strategy to implementation, with the usage of the best available resources, can ensure the success of the NSD program. The development models described in literature include typically four main phases: 1. strategic targets, 2. corporate environment, 3. service offering design and development, and 4. Implementation.
Based on empirical SME cases we noticed a need for a more detailed and simple, but comprehensive step-by-step model for the development of the service business and service supply chain. We created a step-by-step model with service development phases (SDPs), to define the required steps in the service business development:
SDP1 – Company present state and strategy
SDP2 – Products and their features
SDP3 – Customers, segments, needs
SDP4 – Product life-cycle
SDP5 – Services along product life-cycle
SDP6 – Service offering, service modules
SDP7 – Service organization, service processes
SDP8 – Earning logic, service pricing models, service value
SDP9 – Service sales and marketing models
SDP10 – Service launch to markets
SDP11 – Follow-up and improvements
For successful NSD in SME, project managers should involve all business functions and competent resources from the organization. When setting up a development project, sales, ICT, and R&D functions should be heavily involved. These functions have core knowledge and ideas required in the development of service business in manufacturing firms. The process should start with a strategic discussion of whether the firm’s future is based only on the product offerings, or whether there should be a services offering and what is its role. The most challenging part of the development turned out to be technology and the product itself, which is quite surprising. There were many people involved in product development, because they introduced new sensors, ICT, and structures to the final product. We had two empirical case studies in which we tested and validated our developed step-by-step model (see Table below). Case 1 was Chiller Oy, a cooling and heating equipment manufacturer. Case 2 was Oy M. Haloila Ab, a manufacturer of automatic wrapping machines.
|Product offerings||Turnover||Employees||Workshops||Involved employees||Involved positions|
|CASE 1||cooling and heating equipment||20 M€||50||26||11||CEO, CFO, CTO, ICT and Logistics Director, Sales Director, employees from IT, Production and Service departments|
|CASE 2||wrapping machines||30 M€||55||27||14||CEO, CTO, CFO, Production and Logistics Director, Sales Director, employees from R&D, IT, Production and Service departments|
The implications of the study are beneficial from both the scientific and practical perspectives, which help to understand better the process and related factors in multi-actor service business development. The practical findings of the study give insights from manufacturing firms’ new service developments, and from the roles and resources required in the process. It was valuable for case companies to have a structured and formal process for the development. Companies with limited resources need external expertise, consultants or researchers, to support the development process.
The digitalisation brings entire new opportunities for the service businesses. Our SDP model can be used for the digitalisation of service business as well. Just contact us and let’s make your business even more competitive with the service offerings and digitalisation.
Hemilä, J. & Vilko, J. (2015): The Development of the Service Supply Chain for a Manufacturing SME. International Journal of Logistics Management, Vol. 26 Iss: 3.
Entire article can be found from here: http://www.emeraldinsight.com/doi/full/10.1108/IJLM-01-2014-0001