Servitization within manufacturing

TLDR

The debate on services‑led competitive strategies has intensified, focusing on the differences between production and servitized operations and the need to understand the underlying rationale for successful servitization. This paper investigates how manufacturers who successfully adopt servitization practice micro‑vertical integration, aiming to contribute to the debate and guide practitioners. The authors examined a cross‑section of four companies delivering advanced services, reporting their practices, exploring the rationale, and proposing a hypothesis on the impact of servitization on vertical integration. Manufacturers embracing servitization retain design and production capabilities, which improves speed, effectiveness, and reduces supporting‑asset costs for advanced service contracts. These preliminary findings are part of a longer‑term research programme.

Abstract

Purpose The debate about services‐led competitive strategies continues to grow, with much interest emerging around the differing practices between production and servitized operations. The purpose of this paper is to contribute to this discussion by investigating the vertical integration practice (in particular the micro‐vertical integration, otherwise known as the supply chain position) of manufacturers who are successful in their adoption of servitization. Design/methodology/approach To achieve this the authors have investigated a cross‐section of four companies which are successfully delivering advanced services coupled to their products. Findings Manufacturers who have embraced the servitization trend tend to retain capabilities in design and production, and do so because this benefits their speed, effectiveness and costs of supporting assets on advanced services contracts. Research limitations/implications These are preliminary findings from a longer term research programme. Practical implications Through this research note the authors seek to simultaneously contribute to the debate in the research community and offer guidance to practitioners exploring the consequences of servitization. Originality/value Successful servitization demands that manufacturers adopt new and alternative practices and technologies to those traditionally associated with production operations. A prevailing challenge is to understand these differences and their underpinning rationale. Therefore, in this research note, the authors report on the practices of four case companies, explore the rationale underpinning these, and propose an hypothesis for the impact on vertical integration of successful servitization.