18 May 2022

How OEMs adapt to the global chip shortage

The global chip shortage made us all aware of the importance of microchips and the impact a long-lasting shortage can have. Here is how IXON deals with the chip shortage.

Machine builders are currently experiencing major problems, since machines are waiting for missing components. They can’t be delivered on time which results in financial issues, and affects customers in different industries, such as automotive, agriculture and packaging.

The chip crisis will continue in 2022

The pandemic has accelerated the already critical situation for chip makers. According to a survey taken by German research institution IFO, 89% of machine builders are affected by the chip shortage. Some of them are experiencing large financial problems or were even forced to plan temporary plant closures. The problem is that the lack of chips, also known as semi-conductors, is expected to last well into 2022.

Ways for machine builders to deal with the chip shortage

We see three ways in which machine builders are dealing with this chip crisis. Some companies set crisis teams in the early stages of the shortage to map their response and review their supply strategies, increasing their product stock to create a buffer. Other companies deal with the shortage by redesigning their products so fewer chips are needed.

Some machine builders are shifting their strategy from a delivery per machine business model to a service business model. Where in the past, most revenue came from machine delivery, it has become more and more common to generate the majority of revenue from service models. They expanded on the way they provided service by retrofitting their existing and running machines with new digital services, such as wear and tear part monitoring and consumables as a service.

Generate revenue from your existing and new fleet: we see that machine builders who implement service models suffer less from the component crisis, also financially. Service models are a secure source of income and avoid potential cash flow problems. You are no longer dependent on machine deliveries, since you generate recurring revenue from your existing fleet.

We understand that it’s challenging and a big leap to start with the implementation of service models, especially during the chip crisis. However, you can start with small steps and still achieve fast ROI due to a fast time to market.

The E-book: “Service opportunities for OEMs that boost revenue and meet customer demands” provides a detailed explanation of service model use cases, including their business cases.

Company info: Ixon