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E-commerce For Manufacturing: Emerging Trends For 2016

A look at five expected developments in e-commerce for the manufacturing industry over the next year.

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Manufacturing technology rarely makes headline news. It’s too dull, or simply too obscure to be of interest. However, this belies the huge potential of technology to disrupt manufacturing practices.

One increasingly sophisticated area of modern manufacturing encompasses the alphabet soup of enterprise software required to operate a worldwide supply chain, from ERP and EAM to PDM and PLM. The least developed segment of many manufacturers’ supply chains is the after-sale service and support network, partly due to the complexity of delivering high quality service to the “last mile.”

Existing enterprise software generally does not extend e-commerce functionality to manufacturers’ end users or distribution channels, and this presents great opportunity for forward-thinking companies to differentiate their offerings and significantly increase ongoing revenues from current owners of their products. Based on extensive market research and discussions with manufacturing executives, we’re predicting the following developments in e-commerce for manufacturing over the next year.

#1 - Manufacturers will seek to increase their share of aftermarket parts sales.

The Aberdeen Group research firm pegs the sale of spare parts and after-sales services in the United States at 8 percent of annual gross domestic product (GDP). That means American businesses and consumers spend approximately $1 trillion every year on maintaining assets that they already own.

Most equipment manufacturers are, at best, currently tapping into only 50 percent of the market for parts for the equipment that they sell. In the “new normal” of moderate global growth, more and more manufacturing companies are looking to garner more revenue from their existing customers, and high-margin parts sales are a promising area of opportunity.

#2 – Manufacturers will seek custom (or specifically tailored) e-commerce solutions.

If traditional e-commerce systems could do the job for equipment manufacturers, those companies would already be selling parts online. They are not, and for good reason. Equipment parts are bought for completely different reasons than are consumer items, and therefore the information that is needed by the buyer is very different.

Even mid-sized equipment manufacturers stock hundreds or thousands of parts for their equipment, sourced from a myriad of suppliers. The number of models, sub-models, and versions of equipment, exacerbated by serial number breaks during the manufacturing process, make it difficult and time-consuming to identify a needed part.

The data required to answer the question, “what is the part number of the part I need to fix this piece of equipment?” is stored in silos (e.g., CAD, PLM), and the parts availability/location information is often contained in an ERP system.

Common e-commerce platforms are designed for selling widgets, not parts for complex equipment. They often assume things like: a) a part is in stock; and b) it can be shipped via FedEx or USPS. Existing platforms typically don’t allow multi-tiered pricing for different end users, either.

#3 – Manufacturers will integrate e-commerce systems with IoT (Internet of Things) initiatives.

Downtime is expensive. This is reflected in the popularity of SaaS-based service products for managing the repair and maintenance of heavy equipment assets. Also, “smart” pieces of equipment now have sensors and other technology to provide real time diagnostics.

The next logical step will be to provide the customer with a ”one click” method for ordering the parts needed to get equipment back into service, or even for the e-commerce system to place an order based on data received directly from the machine, without human intervention.

#4 – Equipment manufacturers will require dealers to adopt modern parts management systems, and to integrate those systems with their own.

Buyers today have high expectations. They are used to the “Best Buy” experience, where they can order something online and have the item shipped either directly to them, or to a convenient location for pickup. Manufacturers know what parts their dealers have ordered, but not what they actually have in stock, or what is within the distribution channel. This can result in parts delivery delays, and higher costs to the end user.

#5 – Manufacturers will sell more parts directly to consumers, even if it’s still through their dealer channel.

A recent report by Frost & Sullivan, “The Future of Parts and Service Retailing in the Automotive Aftermarket” , predicts that by 2025, 10 to 15 percent of all global parts sales will be made online. This trend will be seen in the Equipment Manufacturing sector as well, especially in international markets.

Manufacturers are not looking to exclude their existing distribution and dealers from parts sales. However, in order to include them, they will require dealers to use modern inventory systems, and to make their data available online. Dealers who resist this initiative, and continue to use legacy systems installed locally, will miss out on the growth in parts sales and diminish their relevancy.

As you can see, the after-sale market is one of the last, best places for manufacturing companies to gain substantial market share and revenues. However, the software available in the past hadn’t matured to the level that manufacturers could be confident in a stable, long-term e-commerce solution that would mesh with their previous investments in enterprise systems. Now that time is here.

Alan Sage is the co-founder and CEO of Digabit, Inc.

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