According to the McKinsey Global Institute, the percentage of maintenance and repair work performed in the construction industry in 2012 had already inched up to 45 percent of construction revenue from 36 percent 10 years before.

Alternatively, according to the U.S. Bureau of Labor Statistics, demand for HVAC and refrigeration mechanics and installers is projected to grow 15 percent from 2016 to 2026, with demand for plumbers also set to grow by 16 percent.

Contractors may already be gearing up for aftermarket work, but does the industry have the technology in place to manage aftermarket service contracts profitably?

THE RIGHT TOOLS FOR SUCCESS

A new study conducted by IFS suggests there are significant gaps in how well contractors in HVAC, electrical, plumbing, security, roofing, and other trades can execute on contracts for aftermarket service. The findings revealed that among 200 trade contractors, 85 percent have maintenance contracts with customer-specific terms, pricing, and service levels, but only 14 percent said their software facilitated these contracts “very well.”

According to Tom DeVroy, senior product evangelist, IFS, the task of planning for services required during the lifecycle of a product today should be largely automated.

“Companies should be able to use field service software to automatically generate all planned maintenance as a result of a contract,” DeVroy said. “This should include specific model or equipment-based tasking, including compliance or inspection activity, materials usage, part usage, and performance standards.”

GAPS IN REVENUE GENERATION,SUB MANAGEMENT

Technology barriers also prevent full realization of revenue from field service — just 15 percent of technologies empower field technicians to upsell or sell new service contracts, and only 25 percent are able to issue new estimates.

While 89 percent of trade contractors in the study said they use subcontractors, just over 10 percent give their subcontractors a mobile app to tie them seamlessly into their field service management software and value chain.

A progressive approach to enterprise technology is crucial. Digital transformation “leaders” said their enterprise software did a good job preparing them for digital transformation, while digital transformation “laggards” said their software did not properly prepare them. Leaders were nine times as likely to say their software prepared them very well for service contract administration. DeVroy stated that companies using subs need to manage skills assessment, the bid process, work authorization, subcontractor performance, and invoice approval. Ideally, they want subcontractor invoice approval to be checked against subcontractor reimbursement rates, original order authorization, part reimbursements, and returns managed when appropriate. Digital technologies will replace cumbersome methods of subcontractor communications going forward.

WARRANTIES AND REVERSE LOGISTICS

Some service disciplines were beyond the reach of laggards, who were half as likely to be doing warranty repair work and less than half as likely to be involved in reverse logistics.

Managing service contracts becomes even more challenging when the terms and requirements of a contract are specific to each customer and subject to negotiation.

Only 30 percent of laggards from the study were even offering customer-specific contracts. These results suggest that a strong digital strategy can enable a company to adapt to new market and customer demands as well as profitably deliver aftermarket services their less progressive competitors cannot.

THE IOT AND 3-D PRINTING

While companies today work on aftermarket customer satisfaction and revenue, more progressive technology is yet to come.

The study found 25 percent of respondents predict that in five years, they will have IoT-enabled sensors that track component-level performance of products at customer sites in the field and that these components would be able to automatically dispatch a technician when needed.

Looking 10 years into the future, 44 percent of respondents said they expect to have artificial intelligence in place for predictive maintenance and diagnostics.

Perhaps more surprisingly, almost 33 percent said they expect to have 3-D printers on technician vehicles to manufacture new parts on-site when needed, expediting the repair and logistics process.

Thirty percent also said technicians will wear augmented reality glasses to give them in situ instructions on repair and service processes.

The race is on to realize revenue growth in the aftermarket. Not only will new revenue from aftermarket contracting drive growth directly, but contractors more capable in aftermarket services will become more desirable partners for the new construction that is happening.

Enterprise software that enables digital transformation will be a critical factor for contractors in balancing competitive contract pricing, profitability, and customer satisfaction.

Publication date: 4/2/2018

Want more HVAC industry news and information? Join The NEWS on Facebook, Twitter, and Link