Caterpillar told investors this month that it plans to grow service sales to $28 billion by 2026, double what it sold in 2016, and up from $18 billion last year. Service sales not only includes aftermarket parts, but also covers “digitally-enabled solutions.”
Bob De Lange, group president of services, distribution, and digital, told investors the growth strategy serves three purposes: helping customers lower their total owning and operating costs, reducing the corporation’s sales cyclicality, and improving profitability through service sales’ “attractive margin contribution.”
De Lange cited the company’s 2 million active machines, close to half of which will be connected by the end of the year. In addition, nearly all new machines are manufactured connected, ready to transmit machine data.
“What makes the difference,” he told investors, “is not just having the data but making sure you combine it with the…decades of experience our engineers have in our products and service in our applications, so that they can bind that data with domain expertise and then apply data analytics to generate those useful insights.”
He said design elements, such as sensors on maintenance elements, will continue to make their way into the production of new machines over time. But digital enablers will fuel the growth in services. Those enablers function upon what De Lange calls the data architecture through which machine data is collected.
“And this is where our digital team really gets excited,” he said, “because this is where they get to combine all the data we collect from our equipment in the field together with all other data sources we have from all around Caterpillar, bring it in all into one location, managed data security, managed data integrity and then start applying data analytics and machine learning so that we can provide useful insight.”
De Lange said the company will be using Cat Financial as a marketing tool for service sales, citing its “11,000 direct customer contacts per day.” The company will use those customer touches “to build relations to identify opportunities for services, to offer services, do the follow-up of services to rally build that loyalty with our customer base over time,” he said.