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WoTD: Servitization

Monday, 1 August, 2016

“I spent the past week at the University of Birmingham in England with a group of 16 Operations and Economics Professors from across Europe,” wrote Rosemary Coates on 6 July in Supply Chain Management Review. She was there to lecture and to represent the Reshoring Institute, which provides “research and support for companies bringing manufacturing back to America.” As we know, manufacturing jobs will be one of the hottest topics in the so-called Rust Belt states during the US presidential campaign, and both candidates have made their positions on the subject clear.

In her blogpost, Ms Coates noted, “Some of the biggest buzz of the week was around the idea of Industry 4.0 (the Internet of Things) and Servitization.” What might appear to some as a misspelling there, “servitization,” is a real word. But what is it?

“This is the process of companies transforming from simply producing a product to including service in the total product offering. The complete product package includes field service, service level agreements and pricing for spares and replacement parts. European manufacturers are way ahead in Servitization.

Some American companies such as Cisco Systems have been including product services and consulting services in their product offerings for many years. But US companies like Cisco, that understand a fully integrated product offering and co-sell product and services, are few and far between.”

The etymology here involves creating a word from “service + -ization.” One assumes “serviceization” was considered unspellable and so we got “servitization” instead. In jargon-speak, “servitization is a transformation journey that involves firms developing the capabilities to provide solutions that supplement their traditional offerings.”


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