Executive Summary:

In this report, the explanations are based on journals of well-known publishers like Elsevier, Emerald
Insight, Wiley Online and Forbes. So, moving serially from the first section under the heading
“Definitions/Elaboration”, servitization seems to have found its place around 1800s through an aim
of equipping farmers in Midwest, America. Later on, in 1988 the concept developed as practice of
expansion from obsolete trend towards prioritization of service. The section defines resistance to
change as a factor negatively affecting prosperity through servitization. Likewise, maximum product
uptime has been mentioned as a tool for preventing breakdown. The focus is primarily on long term
growth and revenue generation rather than meeting short term financial goals. Moreover, the wise
use of technology has been defined as digital servitization. On the other hand, Industry 4.0 is
believed to be recognized in the year 2011, due to a process of defining German competitiveness in
manufacturing industries. Real time data analysis like ATM, Bet 365 app and Google docs are
presented as modern day applications. Similarly, use of artificial intelligence in 70% automation in
NANO car production line has been exemplified as a boon. Entering into the second heading,
“literature review”, benefits of servitization has been linked with independency to suppliers. There
has been highlight on result like mitigation on poor quality service and tendency to keep close eye on
customers. Furthermore, internet of things has been mentioned as a competitive advantage tool
enhancing market share, adding revenues, redefining value proposition, differentiating products and
reducing costs. The third heading “Driver and Barriers for factories in adapting servitization and
Industry 4.0” puts forward factors like exploitation linked with technology and exploration
connected with innovation as driving force for digital servitization. It further explains their relation
with turbulent environmental. Also, there is an interesting view presented where self-motivation
itself acted as a boost toward servitization. There is a chart entitled categories of smart servitization
drivers for manufacturers which provides clearer picture. Barriers have been linked with difficulty in
tracking customer’s changing behaviour. Also, organization structure and cross cultural environment
has been described as some other challenges. In adoption of “Industry 4.0”, social and environmental
advantages act as motivational force. However, difficulties lies in adapting the same in mechanical
firms due to lack of IT competency and risk of dependency towards the same. In addition, employee
qualification and acceptance came forward as another challenge. Meanwhile, it is important to notify
readers that review of literature on relevancy of existing practice i.e. use of ERP at chosen firm
(Sipradi Trading Private Limited) has been done under the section “Literarure Review” and “Drivers
and Barriers for factories in adapting Servitization and Industry 4.0”. Finally, the heading
“Relevancy of Servitization and Industry 4.0 at Sipradi Trading Private Limited” has briefly
explained operation process and value chain supply. It also explains Key Account Management
(KAM) strategy, off-road vehicle attainment process and free service campaign approach as
servitization driven implementations. Likewise, Industry 4.0 implementation through use of vehicle
diagnostic software (VP-37) and ERP has been discussed as relevant tools. At last, recommendation
is given as a way to fill existing gaps. It includes VP-37 training to customers, use of CNC lathe
machine and provision of Engine boring service with a view to add benefit by convergence of
servitization and Industry 4.0.
Table of Contents

1. Definitions/Elaboration:.............................................................................................................................5

2. Literature Review.......................................................................................................................................7

3. Drivers and barriers for factories in adapting Servitization and Industry 4.0............................................10

4. Relevancy of Servitization and Industry 4.0 at Sipradi Trading Private Limited......................................12

5. References:...............................................................................................................................................14
 1. Definitions/Elaboration:
(Kaňovská and Tomášková, (2018) mention the date around 1800s when the concept of
servitization was used for the first time by harvesters to provide service by delivering equipment to
farmers in the Midwest, America. Vandermerwe and Rada, (1988) introduced the term servitization
for the first time describing it as a process of change from outdated practice of delivering goods to
integrated approach ‘bundles’ prioritizing service. Servitization refers to a process of adding values
rather than typically selling product/service. It extends its parameters to delivering advanced services
through transformation. Innovation has led to change in business ideas and way it functions, thereby
valuing servitization now more than ever before. Some companies fall into the zone where changes
are resisted due to which their prosperity are adversely affected. Similarly, some adapt to change and
adopt techniques required to meet customer’s changing need. The aim of any competitive firm today
should incorporate concept of maximum product uptime which enables repair of equipment before
breakdown. Spring Servitization Conference, (2015) argues different forms of servitization has made
it difficult to make service tradable. It further states the confusion created on ownership of equipment
between economic actors. Therefore, it focuses on defining provision for service elements rather than
defining nature and identity of assets. Latest economy has shifted from just selling products to
providing access to outcomes of those products. The concept of after-sales service is also finding its
place more. Companies like blockbuster, AOL and blackberry are obsolete due to emerging leaders
like Netflix, Google and Apple. Nudurupati et al., (2016) describes servitization as a destiny towards
value-in-use. Some researchers have defined it as a “value proposition” and some as a necessity of
modern business for competitive edge through “innovation strategy”.

It was 2011 when concept of “Industry 4.0” was realized, with an act of defining German
competitiveness in manufacturing industries. Interchangeably, the term fourth industrial revolution
has been used. Basically, in production lines, machines are augmented with wireless connection and
sensors due to which central control and decision making becomes easy. For solving complex works,
methods of ‘’self-optimization’’, “self-diagnosis”, “self-configuration” and “cognition” has been
adopted. Internet of things has taken over traditional approaches in industries. .Tech reliability has
increased in different sector of society businesses where most of the tasks are automated by analysis
of real time data. In industrial 4.0 era there has been introduction of flexible mass production.
Talking about the cyber-physical system, analysis of real time data provides information
immediately like ATM generating result in real time. Likewise, Bet 365 app and Google docs can be
other examples. Similarly, the suggestion we get while searching hotels on search engine can be
taken as another real time example. Artificial Intelligence herein after referred to as A.I. has taken
over everything, relevant example of which can be approximately 70% automation in production of
NANO. Due to this, free time has increased and people are being able to focus on more complex
tasks. Furthermore, they are engaged in programming these sort of technologies based ethical
manner. One revolutionary example of Industry 4.0 is 3D printing used in Dubai, which built
buildings overnight. Real examples of Industry 4.0 today can be its use in logistics, public
transportation, repair and maintenance, manufacturing and food production. Additionally, use of Big
Data where huge size data are growing exponentially. They extract data from various sources dealt
by traditionally data processing software. For example, NYSE generally generates 1 terabyte of data
per day through processing using BIG data. Facebook and Instagram does the same for 500 terabyte
through improvised technology. Likewise, Jet plane single engine generates 10 terabyte in every 30
minutes with proper processing sytem. Jung, (2020) attempts to describe Industry 4.0 by relating
with reduced labor expense through the use of automated machines and incorporation of latest
technology. Marr.B, (2018) defines it as transformation from adoption of computers and automation
to data science and machine learning. It further highlights efficiency, productivity and waste
minimization that could be minimized.
 2. Literature Review
“Product firms can benefit from Servitization and Industry 4”

Karatzas et al., (2020) puts forward effectiveness and efficiency supported by servitization
through product-service offerings. Manufacturers can outsource product services and there is
independency to suppliers, at the same time control of ownership is taken care of by manufacturers
themselves. Likewise, front end services encourage customer’s participation, negotiation skills, and
communication, relationship-management and technical aspects. The adopted practices of
servitization includes reward system and teamwork prioritization. It further helps keep close eye on
partners and mitigate poor quality service. It also aid finding and developing key performance
indicators. Adoption of appropriate HR policy enhance operational performance and focus on service
orientation. This is quite useful during employee customer face to face encounter. Additionally, it
facilitates recruitment of right skilled human force; sticking to the philosophy of right man at right
place. The research done on major European vehicle manufactures and its network in the UK, the
same source points out fact that 60% of revenue generation was from service; thus highlighting
importance of improvement on the same. This meant customers were paying for service benefits
rather than ownership. Paiola and Gebauer, (2020) mentions that technology benefits firms through
understanding of transitional strategy. Digital servitization facilitates processing of real time data and
gathering information about customer integrating with firm’s information system. Talking about
Industry 4, Paiola and Gebauer, (2020) argues cloud computing’s offerings as it enables low cost
sensors and actuators for storing, accessing and processing massive amount of data. Likewise,
internet of things (IOT) provides competitive edge over others through differentiation, cost
reduction, increased market share, addition of revenue streams; thus redefining value propositions.
Moreover, digital servitization eliminate distribution channel’s concerns and shows way to direct
customer relationship. This further helps build a business model with introduction of advanced
services and customer centric techniques. Successively, benefits like opening up of a new niche
market, end user connection and reaching installed base can be taken into consideration.Additionally,
competence of stakeholders get concerns with further focus on successful management of networks.
Another important activity of recruiting specific knowledge personnel confirms presence of
knowledgeable and skilled man force like data scientist. This creates a sense of competition among
firms to train and update their work force over time. For an instance, digitalization techniques like
data analysis and interpretation help asses risk and mitigate errors; enhancing effectiveness of value
propositions thus contributing towards sustainability of a business. Jang et al., (2020) gives example
of autonomous vehicle and artificial intelligence to define increased potential of servitization and
significance in prosperity of a business. The article has given importance to value-in-use thing and
highlighted consumer’s servitization experience to be a parameter for success in the long run. Fast
and powerful wireless internet have eased way related to time and space allowing vast digital
communication through information and communication technology (ICT), with upgraded accuracy,
security; reaching next level of competitiveness. Further, “servitization” has been positively linked
with revenue, sustainability and employee retention. Genzlinger et al., (2020) states that evolving
manufacturing strategies has identified different dynamics of competitiveness. The selling of product
is no more an end of conversation with customers but service selling concept has made companies
adapt to fast changing needs thus facilitating service takers with real time solutions. The source also
provided fact about sharp increase of GDP in China due to servitization. Further, it provides
transformation of car manufacturers from product focused offerings to use-and result-oriented form.
Its journey towards mobility service provider has benefits like new target customers, new innovation
business model, increased diversity in offerings, overall organizational growth and product expertise.
Kroh et al., (2018) mentions that use of IT for communication between stakeholders improves firm’s
innovative program performance. It further adds that servitization helps build stronger market
knowledge. Sundblad.W,(2018) provide examples like reduced waste, reduced number of machine
failures, reduced downtime and improved throughput all as a result of “internet of things”. The
article mentions elimination of frustrations and debates among employees due to source of
production issues. Now, all employees with different field of expertise could collectively work to
solve common problems. Internet of things ensures high level of traceability. An example of France
based car manufacturer Faurecia has been given to show product quality enhancement and reduced
time from development phases to final production; all possible through use of internet of things.
Moreover, it helped in understanding of customer demand and through machine learning it made
possible to predict customer behavior. It also helped in inventory management and production
timing. Likewise, employee retention is better because of avoidance of disagreements and slow
decision making process. Similarly, cultural web shifts toward data based reasoning and intelligent
decision making. All these are not only important to achieve monetary goals but also critical to
strategic ones. Poliakine.R,(2019) presents ideas which sees business models free of waste due to
“Industry 4.0”. It further assures creation of new ecosystem of industry partnerships. The automation
will build relationships through software, robotics and end customer user interface technologies that
will help achieve definitive standards. Similarly, use of sensor technology and monitoring through
artificial intelligence assures reduction in errors. Work precision is another thing which could be
achieved through automated machines. Likewise, real time communication means reduction of
unnecessary line stoppages and data analytics points out areas of improvement. In the context of
Sipradi Trading Private Limited, which uses ERP, Seddon et al. (1999) defines operational benefits
of ERP in terms of process’s speed, operational volume and labour substitution. Further, from
managerial point of view, it enhances utilization of resources, strengthen decision making and
improve overall performance. Similarly, its impact at strategic level can’t be ignored. These include
differentiation of product, business growth, innovations, cost leadership and building up of external
linkages. Also, there is aid through reduction in IT cost and increased capability. Regarding
organizational benefits, it provides platform for development of learning organization concept,
empowers staff members and build common goals. Chou and Chang, (2008) mentions that adoption
of customization and organizational mechanisms through use of ERP meant improvement in
coordination and task efficiency; thus influencing overall benefits.
 3. Drivers and barriers for factories in adapting Servitization and Industry 4.0
Coreynen et al., (2020) showed that turbulent environment acted as a driving force towards
being digitally servitized. Further, exploitation linked with technology for improving product, service
and process, and exploration leading towards innovative service were also responsible for digital
servitization. However, exploitation solely doesn’t increase use of high tech but are more likely
oriented toward digital servitization when the environment is technologically turbulent. Contrary to
this, high-exploration firms do not move toward digitization for the same technologically turbulent
environment. Moreover, exploitation positively lead towards servitization with a condition applied
that there is no exploration model incorporated. On Contrary, exploration lead toward servitization
significantly when exploitation model is included. Either of exploitation and exploration are more
likely oriented towards servitization. Nevertheless, when both models are included exploration effect
overrides exploitation. Another factor, competitive intensity hereinafter referred to as COMP has
effect of servitization. Exploitation associated positively with servitization becomes less oriented
toward the same when competition grows but is significant at the point where COMP is average.
Contrastingly, exploration model get more oriented towards servitization when competition is high
and is significant only at the mean value of COMP. Kaňovská and Tomášková, (2018) interestingly
put forwards idea stating self-awareness and self-motivation as a driving force for smart servitization
but connects it mainly with competitive values. The findings show that some companies started
servitization due to customers and some due to competitors. Further it shows three types of
motivation respectively demand based motivation, economic motivation and competition based
motivation. The following chart demonstrate a clear picture on related matter.

Competitive Advantage

Product Trend

Categories of Smart
Servitization Drivers

Finance Data

fig: Drivers of servitization in manufacturing sectors.

Zhang and Banerji, (2017) present barriers or challenges in terms of strategy, organization and
network. It further adds that competitive and complex environment make coordination difficult and
managing cooperation among large number of players become more challenging. Similarly,
achieving environmental benefits demanded by situations are harder. Likewise, tracking changing
behaviours of customers and work in accordance to their acceptance are not easy. This is mainly due
to heterogeneous demand. Moreover, financial goals are hampered due to lack of competency in
early investment and pricing strategies pose challenges as well. Furthermore, knowledge and
information are not one night agenda, which may lead to lack of expertise in early days. Finally,
organizational structure create hindrance due to resistance to change and cross cultural environment.
Thus, it makes servitization a complicated cultural shift process. Müller et al., (2018) puts ideas
which defines strategy benefits as driver for implementation of Industry 4.0 in product firms. These
two terms have significant and positive interdependency. Similarly, operational benefits have the
same effect on manufacturing companies. Likewise, waste reduction, resource utilization and
improved working condition lead towards implementation of Industry 4.0. However, challenges
work as barriers to some companies in implementing Industry 4.0. The article provides differentiated
approach which separate mechanical firms and plant engineering from Industry 4.0. Due to more
focus on hardware and machineries, mechanical plants lack IT and software expertise; leading to
threat and exposure to other IT firms within the platform. This works not as an opportunity rather
susceptibility and dependency towards companies with virtualization and IT competencies. This can
be defined as a challenge related to competitiveness and future viability. Employee qualification and
acceptance comes forward as another challenge; however it has positive relation with Industry 4.o
implementation goals. This is because employees have fear of job insecurity and therefore reveal true
values concerning innovation, once it is put forward to them by their management. Stentoft.J,
Jensen.KW, Phipsen.K and Haug.A (2019) argues that industries which lack experienced
technological pull tend to stay where they are. Lack of resources act as hindrance to digital
adaptation and transformation. The research article concludes that drivers effect positively the use of
Industry 4.0 but lacks supportive evidence to relate negative effect of barriers on readiness and
practices. In relation to the software used by Sipradi trading Private Limited, Hwang, (2011) states
high cost and implementation time as a challenge in use of ERP for any firm. The research adds
ultimate customer value as a motivating force to adopt ERP system. Sheu et al., (2004) considers
factors like culture, language, government rules, management styles, labour skills and politics which
could act as both the drivers or challenges in practice of ERP. Hwang and Min, (2015) provides fact
that drivers of ERP are internal rather than external. However, because of mediating role of internal
environment, external environment could also play indirect role. The focus on organizational
capability act as a force to create that urge of adopting ERP sooner rather than later.
 4. Relevancy of Servitization and Industry 4.0 at Sipradi Trading Private Limited
Sipradi Trading Private limited is a sole distributor of TATA vehicles in Nepal. It is
responsible for sales and service of commercial and private vehicles throughout Nepal. However, we
have chosen after sales service of Sipradi to relate it with the term servitization and industry 4.0.
Moving into the operational processes, the service department follows following procedures. First of
all, vehicles which come for maintenance are checked in at main gain and given a token. Then, it
moves into the workshop and stays on the defined bay. For booked vehicles, they stand on a separate
booking bay. After this, job card for vehicle is opened using ERP (Enterprise Resource Planning)
software. Further, technicians are allocated as per the nature of the work. For example, scheduled
servicing are done by less skilled ones and complicated repairs by experts. During the repair, spare
parts are made available through requisition to spare part department from service personnel. After
the task is finished, vehicle is taken for a test drive. Then, the job card is closed and customers are
sent to billing section. Finally, the customer are sent to customer representative officer (CRO) where
feedback is taken and customer service index (CSI) is prepared. Customers take gate pass from CRO
and exit accordingly. Talking about value chain functions, aligning flows, coordinating processes
and managing resources are briefly addressed here. When it comes to aligning flows, vehicle flows
are managed by using token system and booking preferences. Similarly, time consuming and short
hour tasks are well differentiated by service engineer. Likewise, processes are well coordinated
among service advisor, service engineer, technician, spare part personnel and manager. For example,
if a removed accessory fall under warranty, field engineer coordinates the task to warranty officer.
Likewise, when diagnosis extends the given time limit, they are coordinated with trouble-shooters in
India. Further, management of resources like water flow in washing bay, manpower allocation,
trouble-shooting tools availability are done by service manager. Now, moving into the relevancy of
servitization, the company has value added service maintained through KAM (Key Accounts
Management) approach. Vehicles which fall under KAM gets served with priority and time
efficiency. Similarly, off-road vehicles get timely response and addressed even quickly when it’s
within Kathmandu valley. Moreover, free service camps are organized time and again where vehicles
overall check-up needs no money. Likewise, areas which are not reachable easily, technicians are
sent along with Engineers to address basic servicing task to overall diagnosis. Similarly, there is one
customer representative officer (CRO) in each service unit who prepares customer service index
useful for taking feedbacks and improving ways to meet changing customer needs. It is also helpful
in assessing customer’s behaviour. These were some of the customer oriented job performed by the
company; primarily focused on needs and demands, relationship and long term growth. Moving on to
uses of technology, Sipradi utilizes vehicle diagnostic software VP-37. The software is connected to
electronically controlled unit (ECU) though PC. It detects faulty areas like fuel injection pump,
crankshaft sensor, coolant temperature and others. This is an example of collection and analysis of
real time data signalled through sensors. Another example is the use of Enterprise Resource Planning
(ERP) software which enables automated record keeping. If the vehicles job card isn’t closed after
completion of one job at any workshop in Nepal, it can’t be opened at any place. Furthermore, ERP
also makes warranty decision easy as service track records can be viewed within seconds of vehicle’s
information entry. Additionally, it assist inventory management where spare parts can be located
within seconds of search process. In addition, Sipradi also has manpower allocation device which
uses finger prints of technicians to keep record of their total working hours. This is helpful to
accountant on preparing incentive based on worked hours.

Despite of all the above utilization and adoption, there are few recommendations. It is
recommended that company provides compulsory training to customers regarding vehicle service. If
regular servicing can be done by users themselves, it saves time and labour cost. Further, vehicle
diagnostic test device has to be provided to each owner so that they could check for defects and get
prior information before having to get stuck during long tour. Moreover, the concern towards
addressing off-road cases outside Kathmandu valley need to be prioritized. It might not necessarily
be the mechanism for immediate cash inflow, however plays decisive role in sustainability.
Likewise, the company can introduce CNC lathe machine which can be used for metalworking and
thermal spraying. This would save time from taking the work to vendors and at the same time
contribute on firm’s revenue; thus setting example of servitization through and industry 4.0
convergence. Finally, Engine boring service should be given by the company itself rather than
depending upon different vendors. Again, it reduces delivery time and generate cash; defining both
customer centric approach and profitability.
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