Ecommerce and OEMs: three ways manufacturers can compete with Amazon on service
The company could see shares climb nearly 50% in the coming year as the company rolls out its Prime One...
Amazon continues to grow at an incredible rate.
The company could see shares climb nearly 50% in the coming year as the company rolls out its Prime One-Day Shipping programme in the US. For a long time, competitive fears around Amazon’s expansion have largely been limited to traditional retail categories such as clothing, entertainment and home goods. But with the e-commerce giant expanding into new markets, such as its highly publicised entry into the automotive aftermarket parts space, heavy equipment manufacturers are taking notice.
E-commerce has revolutionised the way products are purchased, where they are purchased and ultimately, the expectations customers have during the purchase process. Amazon’s success, coupled with the company’s ever-increasing efficiencies in shipping and customer service, is causing concern amongst OEMs over how they can compete. However, by reassessing their current operations, manufacturers can create the differentiation needed, not only to compete against Amazon, but also to increase financial performance and enhance the customer experience.
With this in mind, here are three key things heavy equipment OEMs should keep top of mind as ecommerce players potentially venture into service parts:
Service parts inventory management becomes a competitive differentiator
It’s no secret that Amazon is a powerhouse when it comes to logistics, with its vast distribution network and seemingly limitless access to products. However, ensuring all these cogs continue to tick over isn’t easy. Amazon CFO Brian Olsavsky has admitted that, while the company has experience handling large changes in its distribution and transportation logistics, expanding the company’s one-day shipping programme is a costly endeavour, leading to shifts in warehousing and inventory planning and generally reducing warehouse productivity.
If it is a challenge for a logistical powerhouse like Amazon, OEMs wanting to compete in the after-sales market must be prepared for significant organisational change and investment in technology. All too often, manufacturers’ after-sales service organisations are sub-optimised. And while service typically delivers high margins and revenue, now is the time to add efficiencies to processes, technology and resources.
The opportunity for OEMs lies in the demand for product uptime: today’s customers expect their equipment to be up and running at all times, which shifts the responsibility for maintenance from the end user to the manufacturer. This is an area in which Amazon cannot specialise and that creates an important opportunity for OEMs to take the competitive advantage.
To succeed in this field, OEMs must equip themselves to execute on repairs and maintenance before a failure ever occurs. Cloud-based solutions predictively identify when and where a failure will occur, and also ensure the necessary part is on-hand to execute on the repair. It is a huge shift from selling new products to synergising all processes throughout the after-sales service. Technology will enable manufacturers to optimise the service parts supply chain – from suppliers to distribution centres to dealers – to deliver exceptional after-sales service experiences.
Service parts pricing takes centre stage
It may seem obvious that selling a service part for the optimal price is key to maximising revenue, profits and demand. But many large, global manufacturers continue to use simple tools like spreadsheets and other manual methods to price their parts. As a result, these manufacturers are subsequently forced to continue using outdated pricing methods like cost-plus, opposed to more sophisticated, value-based algorithms. As both competition from players like Amazon and demands from customers increase, manual methods will make it even more difficult to optimise prices.
Modern cloud-based service parts pricing solutions incorporate real-time data from multiple sources: customers, competitors, IoT platforms and other legacy systems are all used to set optimal dynamic pricing, ensuring the end customer has a great experience, while the manufacturer maximises revenue and margins. As manufacturers mature to a more proactive, connected service model, their pricing needs will also evolve. So, OEMs must invest in pricing solutions with flexible architectures that can easily evolve and scale along with them as their needs change. In the future, when manufacturers are pricing service contracts and subscriptions, the complexities will be too much for manual systems to handle.
Data and analytics become a top priority
As the heavy equipment space becomes more competitive than ever, the need for OEMs and parts vendors to have a comprehensive view of their entire operations is paramount. Amazon invests heavily in data and analytics to identify customer behaviours and make the purchasing experience more efficient. OEMs must not only become data-driven organisations, but also ensure that the data is clean and accurate.
The success of any process or technology is only as good as the quality of data that’s put into it – even the world’s most sophisticated technologies cannot produce successful outcomes without a combination of clean data, the right processes, and equipping employees with the right skills.
As heavy equipment manufacturers compete with the likes of Amazon, they must invest in solutions to not only collect new types of data and analyse it efficiently, but also ensure that they implement the best processes to capture the right data. People involved in data analysis should understand how data is collected; people involved in data collection should understand how the data will be analysed and everyone should understand the impact that great data can have on end results. As more equipment is built with IoT-enabled parts, there will be more data available than ever. Acting on this data is the only way to achieve the service outcomes that an uptime-driven business model demands, so collecting the right quality of data, and analysing this efficiently with the latest technologies is a necessity for future success.
By Gary Brooks, CMO, Syncron
Image: Amazon Press.
Uber Freight to Acquire Transplace in $2.2bn Deal
Uber Freight is to acquire logistics technology and solutions provider Transplace in a deal worth $2.25bn.
The company will pay up to $750m in common stock and the remainder in cash to TPG Capital, Transplace’s private equity owner, pending regulatory approval and closing conditions.
“This is a significant step forward, not just for Uber Freight but for the entire logistics ecosystem,” said Lior Ron, Head of Uber Freight, and former founder of the Uber-owned trucking start-up Otto.
Uber’s Big Play for Supply Chain
Transplace is one of the world's largest managed transportation and logistics networks, with 62,000 unique users on its platform and $11bn in freight under management. It offers truck brokerage and other capacity solutions, end-to-end visibility on cross border shipments, and a suite of digital solutions and consultancy services.
The purchase is the latest move by parent company Uber, which launched as a San Francisco cab-hailing app in 2011, to diversify its offering and create new revenue streams in all transport segments.
Transplace said the takeover comes amid a period of “accelerated transformation in logistics”, where globalisation, shipping and transport disruption, and widespread volatility are colliding.
Uber Freight plans to integrate the Transplace network into its own platform, which connects shippers and carriers in a dashboard that mirroring the intuitive experience found in its consumer vehicle booking and food ordering services.
“This is an opportunity to bring together complementary best-in-class technology solutions and operational excellence from two premier companies to create an industry-first shipper-to-carrier platform that will transform shippers’ entire supply chains, delivering operational resilience and reducing costs at a time when it matters most,” said Ron.
Frank McGuigan, CEO of Transplace, said the resulting merger will offer enhanced efficiency and transparency for shippers, and benefits of scale for carriers. “All in all, we expect to significantly reduce shipper and carrier empty miles to the benefit of highway and road infrastructures and the environment,” he added.
History of Uber Freight
Uber Freight was established in 2017 and separated into its own business unit the following year. In 2019 the company had expanded across the entire continental US, established a headquarters in Chicago. Later that year it launched its first international division in Europe, initially from a regional foothold in the Nertherlands, and later moving into Germany.
The logistics spinoff attracted a $500m investment from New York-based Greenbriar Equity Group in October 2020, and launched a new shipping platform for companies of all sizes in May, partly in response to a driver shortage in Canada.