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Servitization in the UK Road Transport Industry

June 21, 2017

As part of our industry engagements and collaborations, we have been working closely with the UK Road Transport Industry. During the last 2 years, we have conducted an extensive programme to understand the provision of servitization and advanced services in this industry. The three key objectives that were defined for this programme were to examine (1) the risk perception surrounding introduction and implementation of advanced services, (2) the extent to which firms implementing advanced services position themselves in the network by employing strategic partnerships, and (3) how visibility of the entire value chain impact such initiative.

 

Several stakeholders were identified, and we conducted a series of interviews, focused groups, site visits, and workshops to get to the bottom of the story. As part of the research, we undertook a payment card exercise to estimate risk perception among companies operating in different positions within the UK road transport industry. This method provides a novel procedure to determine the best point of entry in the value network by analysing risk perception and partnering propensity. In this study we have attempted to shed light on the importance of selecting the right partner(s), and how visibility of the entire value chain will enable an effective development and delivery of advanced services.

 

The analysis of the findings was published this month (June 2017) as a research paper at the International Journal of Production Research, a well-established and leading journal reporting manufacturing, production and operations management research. Below I provided the abstract of the paper, and you can access and read the full paper here: https://goo.gl/BW3ASy.

 

For manufacturing firms, the integration of advanced services into their customer offerings has become a crucial decision. Such commercial decisions require weighting the risks and rewards of implementing a business model based on advanced services. While academic experts acknowledge uncertainty of returns on investment despite potential advantages, research generally fails to address the challenge of calculating the actual risks involved in 'servitization'.

 

This paper seeks better understanding of managers' risk perception and of servitization implications for strategic partnerships and network positioning, while considering the impact of factors such as entry barriers, technological knowledge and position in the supply chain (SC). Qualitative evidence is drawn from an industrial case study involving firms in the UK's road transport industry: fourteen in-depth interviews with senior executives from seven companies (manufacturers, operators, technology providers). During interviews, a payment card exercise measured risk perception and willingness to take strategic 'make-or-buy' decisions. Results suggest that implementing advanced services is perceived as a high-risk strategy, especially when firms lack in-house technological knowledge. However, collaborative strategic partnerships within supply chain networks can mitigate this risk and prove crucial to building entry barriers against external competitors. Based on these findings, implications for network positioning are developed.

 

 

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