We are going through another Industrial Revolution. I like to call this one the “Age of Manufacturer Stewardship.” Capital goods (non-consumer) OEMs have become the first to embrace this business model. The drivers of this model are a combination of issues: environment, intellectual property rights, profits, the changing workforce, outsourcing and others.

OEMs are slowly becoming the stewards of the lifetime effectiveness (output of value/input of resources employed to create output) of their products. They are evolving from primarily a build-and-sell business model to one of services that ensure the ability of OEMs to manage a product’s lifetime effectiveness. This discipline has been termed “OEM product-services,” and materials handling principles are at its core. There are many telltale indicators of this new business model’s evolution:

• Almost 25% of all newly manufactured capital goods are accessed by users through operating leases,
• Parts-as-a-service (PaaS) is an offering in which the OEM is paid, for maintenance parts, a fixed price per product output-of-value generated—the more reliable the product, the more profitable for the OEM,
• Vendor managed inventory (VMI) services for consumables; both forward and reverse supply chain management,
• 24/7 technical support services, and
• Conditional based monitoring (CBM) and corrective action services.

The global leader in materials handling OEMs, Toyota Material Handling, recently announced the launch of the Toyota Fleet Solution program in the U.S. It provides lift truck fleet management services. Leaders from other OEM sectors have also been evolving their business model to product-services: Boeing, GE, Caterpillar, Schlumberger, United Technologies, HP, IBM and others.

The organizational challenges of this model are formidable, but I believe the marketplace is beginning to demand it from OEMs and their distribution channels. Those who “get it” will prosper. Those who don’t won’t be around 10 to 15 years from now.