Maximise recurring revenue with a smart consumables business model
3 min. readShelly Boom
20% of machine builders’ revenue is expected to come from digital services in 5 years. If you are looking for a strategy to expand your market and maximise your revenue stream, then think differently and tap into a new business model by supplying your own consumables.
If your machines are dependent on consumables, offering your customers smart consumables services is a business model that is probably worth considering for you. By supplying your own consumables, or even better: sell machines in order to sell consumables, you can minimise machine downtime and generate complementary product revenue.Consumables in the sleeving machine of Sleeve Technology
What are smart consumables? Smart consumables are non-durable goods and products that are consumed during operation of your equipment and use cloud technology to monitor and notify when the stock is running out. Smart consumables are most commonly used in the printing and packaging industry. Think of cartridges and plastic bags or bubble wrap in boxes to protect the goods. When these consumables are out of stock or out of specification it can cause unnecessary machine downtime which leads to loss of productivity and high costs for your customers.
Granted not all machines offer this possibility for the machine builder. Sale of consumables would probably not be possible for standard machine tools, like CNC lathes or milling machines. However, maybe there are also some possibilities here, such as tools, lubrication, etc.
Ever thought of shifting from reactive to proactive servicing with smart consumables services? Manufacture your own consumables and optimise them for your machines to unburden your customers by replenishing their consumables before they run out of stock. As a result, they no longer need a large stock and don’t need to worry about running out.Packaging machine using consumables at Sleeve Technology
Manufacturing your own smart consumables does not only bring advantages for your customers that make it worthwhile, but you as a machine builder can also greatly benefit from it.
Produce consumables that are optimised for your own machines and aligned with customer quality requirements, or sell machines in order to sell consumables. This way, wear and tear minimises, equipment lifetime extends and downtime decreases. This can reduce costs for your customers and increase their production efficiency.
With your own manufactured smart consumables and predictive consumables fulfillment as a digital service you offer a unique competitive service that comes with high-margin and recurring revenue streams. Customers no longer purchase their consumables from an external consumables supplier, but from you since you offer a complete solution with optimised consumables for the machines they are using.
Imagine how you can help your customers with their consumables replenishment by supplying your own. You are going to manufacture, for example, plastic bags to protect goods in packaging, and monitor when they are low in stock.
Use cloud technology to shift from reactive to proactive services. Receive a notification when your customer used 80% of their consumables and make sure they receive them by means of an automatically indicated dispatch, before they even know they need them. This way, their need to worry about consumables is completely taken away.
Would your customers be interested in a service where you overlook and provide consumables just-in-time?Customers no longer need to worry about consumables running out of stock
Is selling consumables with your own machines an area you are considering? Then it’s time to build your own strategy on this new business opportunity. The following list could give you some inspiration:
The first phase is to analyse the current consumables practices, which consumables cause machine stoppage and which data is being captured. Analyse the statistical correlation and causality between the given quality of stock of the consumables. Some data will have a clear correlation and causality between standard PLC variables and external ERP systems.
Make in house testing on test rigs of the consumables in question to strengthen or disprove the hypothesis. Next step is to strategically plan to capture data through the use of sensors or PLC parameters. This data can be collected via an edge gateway and stored in the cloud for analysis and proactive alarmings. Based on data from the field and the analysis, confidence in the model and potential business model can be secured.
Define how increased value is most efficiently utilised towards the customers to increase satisfaction and revenue. Question yourself if this is just an increase in revenue and an additional offering for the after sales service, or can this also be used to further differentiate your machines and services from the competition? What value does this bring the end-users and can you apply value selling and achieve an attractive price point for this service?Steps to build a business model for smart consumables services
Would you like to have happier and more profitable customers? With high quality consumables and a consumable replenishment service you can ensure a higher uptime for your customers and benefit from recurring revenue streams. A win-win for both of you!
If you need help determining whether and how a consumables strategy fits your company, feel free to consult one of our industry experts without any obligations. Or get some inspiration from our E-book: Service opportunities for OEMs to boost revenue and meet customer demands including use cases and new revenue examples.