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Manufacturing’s next disruptor: the share economy

Organisations that don’t adopt rental models could get left in the dust, and those that do adopt rental models without improving the efficiency of their after-sales service functions will face challenges.

By Tom Ball

The rise of the share economy – a wave of “non-ownership” spurred by companies like Uber and Airbnb – has been climbing for years, and it certainly has a hold on the millennial generation. Things that used to be considered status symbols, like home ownership and multi-car garages, have gone by the wayside in today’s society.

What’s causing this shift? In short: technology. Thanks to smartphones, peer-to-peer business is easier and faster than ever. Fancy going for a walk tomorrow but don’t have a dog? There’s an app for that. Need somewhere to leave your car but the spaces are all Residents Only? There’s an app for that. Want your preloved items to go to an appreciative new home? There’s an app for that. For just about any need (or want) you may have, there’s a piece of technology within reach allowing the community to be your new source of pseudo-ownership.

Manufacturing’s next disruptor: the share economy

The longer answer to what’s causing this shift, however, is the desire to live a more sustainable lifestyle in a resource-conscious environment. And the rent-over-own mentality resonates heavily with the generation interested in only spending what’s needed, rather than investing in a depreciating product.

But what does the share economy mean for manufacturers?

Original equipment manufacturers (OEMs) – especially those with dealer networks – need to consider a shift in thinking that reflects the shift their customers are making. This is happening in the automotive industry with the introduction of subscription models that substitute owning or leasing a car. Clutch Technologies is a USA-based software platform that allows dealers and OEMs to sell vehicle subscriptions and related services. Monthly or daily car subscription includes insurance, maintenance, cleaning and taxes and a concierge service that delivers the vehicle of choice.

The Clutch software enables OEMs and dealers to offer these services efficiently and at scale. At the core of the platform sits a level of intelligence that understands consumer needs and matches them to vehicles, taking both the customer and the dealer experience to a whole new level. Porsche Cars North America has recently partnered with Clutch to pilot a sports car and SUV subscription program in Atlanta. Customers can fulfil the aspiration to drive a sports car for the commute and a people carrier for the weekend, for example.

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Ensuring vehicles are in full working condition is critical to customer satisfaction and ultimately, profits. With a system rooted in keeping maintenance and supplemental costs at an all-time low for end-customers, Clutch, along with its competitors, is just one piece of the share economy puzzle that’s revolutionising the after-sales service supply chain.

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It’s not just consumer products that are experiencing this shift – manufacturers and equipment rental companies are also preparing themselves to meet these new demands. Take “power by the hour,” for example: an agreement that allows a company to lease or rent equipment for a certain number of in-use hours, buying the functionality rather than the actual piece of equipment.

Rolls-Royce originally made the concept famous in the aviation industry, but for manufacturers of long-lasting durable goods, like heavy equipment or aircrafts, this is a model they must start watching. According to Grand View Research, the global construction equipment rental market is expected to reach $84.6 billion by 2022, due to increasing construction activities across the globe and rising government investment in emerging economies.

Manufacturing’s next disruptor: the share economy

As with the car subscription model, rental companies and manufacturers must maximise equipment uptime to also maximise revenue. Being quick to react to service and repair requirements is good but to be excellent, the emphasis needs to be on pre-emptive maintenance, which requires more sophisticated management of service parts and after-sales service.

As with any business transformation, both challenges and opportunities exist for manufacturers and rental companies. Some organisations will need to transform and optimise their after-sales service departments to become more customer-centric and efficient. For the end-customer, it’s a win-win: with little risk associated with renting, replacement is less complicated, maintenance costs are lower and there are fewer transportation and servicing requirements.

As for manufacturers – organisations that don’t adopt rental models could get left in the dust, and those that do adopt rental models without improving the efficiency of their after-sales service functions will face challenges. The share economy can be a significant revenue driver, but companies must adopt the right technologies and business practices to be successful.

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