Insight
Parts sales are often the profit engine for industrial capital equipment manufacturers: despite generating less than 10–20 percent of revenue, they drive more than 40 percent of profits.
Parts sales are often the profit engine for industrial capital equipment manufacturers: despite generating less than 10–20 percent of revenue, they drive more than 40 percent of profits. However, recent technological changes—such as ubiquitous Internet connectivity, the proliferation of the Internet of Things (IOT), and the rise of big data—have increased pricing transparency, changing the risk calculus on which customers base their parts purchases.
This increased transparency, coupled with aggressive procurement strategies by customers, is rapidly eroding original equipment manufacturer (OEM) pricing power.
