UK manufacturing must compete using service

More than half of manufacturers in the UK say their capital investment will increase next year but a majority also predict their spend on IT will decrease. Against this backdrop, they must seek to make more money from service management - supporting parts and products that they sell - experts say.

The expenditure figures come from analysts AMR Research, whose recent study found 29 per cent of IT bosses expecting a decrease in IT spend and 24 per cent saying it will stay the same in 2004 as 2003. The manufacturing sector - like plenty of others - is clearly trying to do more with less.

But as manufacturing bases, especially in Asia, continue to sell on low prices, European companies must consider their approaches.

Nigel Montgomery, European Research director at AMR, said: "The [post-sales] service delivered by most UK manufacturers is awful." However, herein lies the big opportunity.

Paul Eggleton, business development manager at SAP, said: "You'll notice Rolls Royce doing it. They're selling 'power by the hour', not selling engines. Service management is an additional revenue stream."

SAP's ERP and other enterprise software products are widely used in the sector.

However, it is not just the massive manufacturers who will benefit from good service behind their products. AMR's Montgomery points out that even a Dyson, providing good customer care when a vacuum cleaner breaks down, will win business with this approach as will smaller companies.

In manufacturing, however, this will only work when companies have the technology in place to collaborate with their partners, suppliers and customers and culturally accept this approach.

Chris Grimshaw, senior programme manager at LogicaCMG, says the technology is there - it's all about using it. He cites business portals, CRM, "business intelligence really kicking in", and generally mature back office environments.

SAP's Eggleton added: "Manufacturing does matter. It is still the UK's biggest sector. But manufacturers have to take a wider view of what they're doing - it's not just about a better widget or producing on cost, it's about service excellence."