Servitization of Manufacturing

Over the last few decades, services are playing an increasingly important role in the global economy. Consequently, manufacturers all over the globe are revolutionizing production across categories and geographies by adding services to products. This shift in the value proposition, from production activities to the fulfillment of customer demand is the essence of what is called the ‘servitization of manufacturing’.

The Asian Development Bank in its working paper titled ‘The Servification of Manufacturing in Asia: Redefining the Sources of Labour Productivity’ (2018) defines the concept as: “The servicification of manufacturing, otherwise known as “manuservice,” pertains to the increasing reliance of manufacturing firms on services”. The bank opines that this is a multidimensional phenomenon which could take numerous forms. For example, it could be manifested in the production becoming more intensive in services or manufacturing jobs are becoming more service oriented.

Servitization enables manufacturers to improve trustworthiness of products, help customers obtain superior value, and develop new revenue streams. Its relevance becomes even more relevant in the post-COVID era since manufacturers are thinking afresh and going back to the drawing board to devise strategies to lure consumers.

Sources: Asian Development Bank; TCS; IBT

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