Services in Machinery Manufacturing Sector in Poland - ScienceDirect

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ScienceDirect Procedia Engineering 182 (2017) 350 – 358

7th International Conference on Engineering, Project, and Production Management

Services in Machinery Manufacturing Sector in Poland Justyna Kozłowska* Faculty of Management, Bialystok University of Technology, Wiejska 45A, 15-351 Bialystok, Poland

Abstract Nowadays, offering services as an addition to the product, or even shifting to service provision seems an interesting and promising means for the manufacturer to become more competitive and distinctive. The article presents the basics of the servicization of the manufacturing industry concept. The main scientific purpose of the paper is to recognize the kind of services machinery manufacturers in Poland integrate with their products, if any. Also, the assessment is made to ascertain whether the number of services offered by manufacturing companies depends on the size of the organisation. The analysis enabled identification of thirteen forms of services, with the most popular being the warranty support and industrial services. The research has also proved that the number of services that are included in the offer depends on the company size. © Published by Elsevier Ltd. This © 2016 2016The TheAuthors. Authors. Published by Elsevier Ltd.is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of the organizing committee of EPPM2016. Peer-review under responsibility of the organizing committee of EPPM2016

Keywords: machinery manufacturing; products and services integration; services; servicization of manufacturing

1. Introduction After the Industrial Revolution in the XIX century came the era of the services revolution, and nowadays economy in most developed countries is based on services [1, 2]. Service sector has gained in importance and services as an activity and intangible products have captured markets on the global scale. It has touched and changed the industry sector as well. Fierce competition on the market place and accelerated technology development [14] triggered the need for the implementation of innovative solutions in many industries. Selling products is not enough, therefore manufacturing companies are forced to introduce services into their activity and offers or even, as e.g. IBM, shift entirely into service sector [3]. Even in China, where the economy is strongly manufacture-oriented, the servicization processes are considered inevitable and are being researched [4]. According to Levit: “There are no such things as

* Corresponding author. Tel.: +4-885-746-9896; fax: +4-885-663-1988. E-mail address: [email protected]

1877-7058 © 2016 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license

(http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of the organizing committee of EPPM2016

doi:10.1016/j.proeng.2017.03.110

Justyna Kozłowska / Procedia Engineering 182 (2017) 350 – 358

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service industries. There are only industries whose service components are greater or less than those of other industries. Everybody is in service” [5]. The global analysis conducted by A. Nelly in 2007 and updated in 2011, considering the servicization process in manufacturing companies all over the world, was the inspiration to the author for conducting the study on services in industry sector in Poland. According to the results of Neely’s research, there are significant differences between the level of servicization in analyzed countries. He also identified twelve different forms of services that manufacturing firms adopt and proved that in larger companies the servicization is more likely to happen [6]. Polish companies, however, were not mentioned in this study. There are several works, that analyze servicization of manufacturing sector, conducted in France [7] and in Europe [8], which revealed that the share of services in the output of manufacturing industries had increased in the large majority of French and European companies. But no such analysis has been done in reference to manufacturers operating in Poland, therefore the author decided to investigate into the polish market to find the answer to two questions: What kind of services machinery manufacturers in Poland, if any, integrate with their products? And: Does the scope of this integration (measured by the number of services in the offer) depends on the size of the organization? The prerequisites for the first question are historically based, as polish economy at the beginning of XIX century was focused mainly on the agriculture, and the industry share in national income was rather low. Only after the World War II did the industry of defense and metallurgy developed as well as chemical, machinery and electronic equipment. However, the political situation and its changes at the end of XX century have influenced deeply Polish enterprises, industries, markets and economy as a whole. Therefore, it seems intriguing and interesting if in such country as Poland, the process of servicization of industry follows the global trend. The second question was formulated on the basis of A. Neely’s research outcomes, i.e. that the large companies are more likely to servicize, hence the scope of services they offer is wider, or the form of services is more advanced. Vandermerwe and Rada claim that servicization “is happening in almost all industries on a global scale. Swept up by the forces of deregulation, technology, globalization and fierce competitive pressure, both service companies and manufacturers are moving more dramatically into services” [9]. The term, which is frequently used as a synonym to servicization, is a Product-Service System (PSS) which is understood as an integration of tangible products and intangible services into one solution/system to jointly satisfy the customer needs [10]. It has been very often discussed in the literature recently [11] and evolved mainly within the frame of sustainable economic development due to its ecological potential. An implementation of such solution in manufacturing company brings a lot of benefits of economic, ecological and social nature [12]. There are three basic types of product-service systems (being also considered as PSS business models): product-oriented PSS, use-oriented PSS and result-oriented PSS [13]. If company focuses on the product manufacturing and offers only product-related services and/or advice/consultancy it means it applied product-oriented PSS. Leasing or renting manufactured products, where there is no change of property rights, means that there is use-oriented model applied. And finally, the most advanced business model, where a manufacturer becomes a service/solution provider, is result-oriented PSS. This means that there is no shift of property rights and the offered solution includes: activity management/outsourcing, pay per service unit or functional result [ibid.]. This typology enables identification of the degree of servicization of a single organization and also, obviously, the more companies apply to the use-oriented and result-oriented PSS business models, the more servicized the sector or market. 2. Research methods The data for the analysis were drawn from the EMIS (Emerging Market Information Service) database. The choice of this database was determined by the accessibility for the author. The machinery manufacturing sector was chosen on the basis of the literature review which proved that many of case studies presented in academic works concerned this sector [e.g. 15, 16, 17, 18]. It is also intuitive that the investment goods sector is more suitable for implementation of the integrated product-service solution than for instance mass-production products. The collected database contains over nine hundred companies assigned to machinery manufacturing sector. The author believes that the size of retrieved database accounts for substantial part of all companies registered as manufacturers of machinery and industrial equipment in Poland, so the research results could provide a considerable knowledge about this sector and therefore constitute an important scientific value. In the collected set of 970 manufacturers there was 11% of large (over 250 employees) companies, 47% of medium companies (between 50 and 250 workers) and 41% of small (less than 50 staff). To ensure the feasibility of the study, 100 of them have been chosen using stratified sampling method

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with respect to the structure of the retrieved data in terms of the employment (e.g. 11 large companies were drawn randomly from the set of 106). Therefore, for the basic research the analyzed set of manufacturing companies consists of: 41 small, 47 medium and 11 large manufacturers. Then the companies websites and catalogues of offers were browsed and studied in details in order to identify if and what kind of services each manufacturer provides. Afterwards the relationships between the size of the company and the services offered have been examined using statistic methods and dedicated software (Statistica 12). 3. Analysis results 3.1. Machinery manufacturing sector in Poland The industry sector in Poland encompasses a vast range of companies activities. Manufacturing of machinery and industrial equipment is a part of it. Majority of reports describe the sector characteristics in general. There is a lack of works or reports on machinery manufacturing sector in particular. According to the report of Central Statistical Office of Poland (Polish: GUS) in 2015 the production sold by the section “manufacture of machine and equipment” was on the level of EUR 7, 486,86 mln (PLN 32, 193,5 mln), the average employment was 94,1 thousands workers and the average monthly payment was EUR 1, 024 (PLN 4, 405), [19]. On the basis of all collected data (907 companies) the percentage of machinery and equipment manufacturing companies operating in each Province have been calculated. Figure 1 presents the map of the geographical distribution of machinery manufacturing industry in Poland. It can be noticed that there are some regions with much higher number of machinery manufacturers, which may be related with natural resources, historical conditions, population, and a cost of work in each region.

Fig. 1. The distribution of the machinery manufacturing companies in Poland registered in EMIS database.

According to the EMIS activity classification, most companies are registered as: “Other General Purpose Machinery Manufacturing” (29.5%), “Industrial Machinery Manufacturing” (23%), “Agriculture, Construction, and Mining Machinery Manufacturing” (22.9%) and “Ventilation, Heating, Air-Conditioning, and Commercial Refrigeration Equipment Manufacturing” (9.14%) firms. The detailed information about the profiles of activities of Polish machinery manufacturers are provided in the Table 1.

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Justyna Kozłowska / Procedia Engineering 182 (2017) 350 – 358 Table 1. Profiles of the machinery manufacturing companies in Poland. Activity classification

% of analyzed companies

Industrial Machinery Manufacturing

23.42%

Agriculture, Construction, and Mining Machinery Manufacturing

22.90%

Ventilation, Heating, Air-Conditioning, and Commercial Refrigeration Equipment Manufacturing

9.14%

Engine, Turbine, and Power Transmission Equipment Manufacturing

3.78%

Commercial and Service Industry Machinery Manufacturing

2.52%

Metalworking Machinery Manufacturing

2.10%

Machinery, Equipment, and Supplies Merchant Wholesalers

1.68%

Motor Vehicle Parts Manufacturing

0.53%

Motor Vehicle Body and Trailer Manufacturing

0.42%

Electrical Equipment Manufacturing

0.32%

Hardware, and Plumbing and Heating Equipment and Supplies Merchant Wholesalers

0.32%

Automotive and Transportation Equipment Manufacturing

0.32%

Household Appliance Manufacturing

0.32%

Architectural, Engineering, and Related Services

0.21%

Miscellaneous Nondurable Goods Merchant Wholesalers

0.21%

Ship and Boat Building

0.11%

Investigation and Security Services

0.11%

Electrical Equipment, Appliance, and Component Manufacturing

0.11%

Electronic and Precision Equipment Repair and Maintenance

0.11%

Petroleum and Petroleum Products Merchant Wholesalers

0.11%

Computer and Office Machine Repair and Maintenance

0.11%

Other General Purpose Machinery Manufacturing

29.52%

From the detailed analysis conducted on a sample of 100 it has emerged that the following were classified as “other general purpose machinery”: construction machines like cranes, work platforms, lifts trucks and elevators, pressure pumping equipment, packaging machines, furnaces and metallurgical machinery and equipment. The structure of the studied group of manufacturers by company size was described in the previous section. It should be revealed though that only 2% of companies employ over one thousand workers. 3.2. Services offered by Polish manufacturers of machines and industrial equipment The conducted study enabled identification of the catalogue of thirteen forms of services that are included in the offer of the machinery manufacturing companies in Poland. These services are (the order of the list corresponds with the process of acquiring products i.e. machines or industry equipment by clients): before-sale services, financial services, lease, rental, assembly, trainings, technical consultancy, maintenance, warranty support, post-warranty support, modernization, disposal and other services. Before-sale services in most cases mean designing of the product (a machine, equipment, a vehicle or a system needed) or selection and adjustment of a product to the client’s needs. The type ‘other services’ encompasses vast range of industrial services, such as: welding, cutting, machining, milling, grinding, bending, stamping and other treatment using different technologies and methods. Financial services represent financial consultancy and assistance in the process of bank loans obtaining and applying for EU funds. As a technical consultancy there were included: technical and technological advisory, project control, technology audits, services concerning optimization and efficiency improvement, and diagnosis tests. Figure 2 shows the number of manufacturing companies in analyzed group that offer given type of services. The warranty support has become a kind of standard nowadays, as almost every company has it in its offer, regardless of

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the kind of product or size of the company (Fig. 3), while lease, disposal or financial services are very rarely included in the offer.

Fig. 2. The number of machinery manufacturers operating in polish market included into study that offer given type of services.

Figure 3 presents the distribution of the scores (the number of manufacturers) considering the size of the company. It can be easily observed that e.g. medium enterprises lead in: other services (i.e. industrial services mainly) and trainings, whereas small manufacturers more often offer assembly and assist the customer in before-sale activities (such as design and products selection) and offer repairs (post warranty support). As it can be noticed in both figures, none of the manufacturers groups provides pay-per-service solutions (namely the services which are oriented on functional aspects of material products).

Fig. 3. The number of manufacturers (small, medium and large companies) in the examined set that offer given type of services.

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It should be emphasized though that every manufacturer offers at least one form of service. The percentage of companies that include given number of services are contained in Table 2. Most frequently manufacturers offer packages that consist of 2-4 types of services. Table 2. The percentage of surveyed companies whose offer includes a given number of services. Number of services types offered by one company

1

2

3

4

5

6

7

9

11

The percentage of surveyed companies whose offer includes a given number of services

10%

21%

23%

23%

13%

4%

1%

1%

1%

Referring to the concept of PSS and its typology, the study proves that Polish manufacturers include mainly product-oriented services. Use-oriented services, i.e. lease and rental, have very low score (4% and 10% respectively) of occurrence in offers of analysed companies. The third type of the PSS, namely the result-oriented services (functional sale or pay-per-service unit), has not been offered by any company in analysed set. Therefore, it can be stated that the answer to the first research question has been found. 3.3. Analysis of the relationship between the size of the company and the service offer The collected data has also been processed by statistic methods to examine the relationship between the size of the company and services it provides. For every manufacturing enterprise the total of all services has been calculated (the variable is called “number of services”) and then the Pearson chi-square test of independence has been used in order to assess whether there is a relation between the “size of the company” and each of variables (i.e. all the service forms identified during the study complemented by the “number of services”). If the Pearson chi-square test results in the p-value (probability) of 0.05 or less, then it can be stated that there is a significant relation between tested variables. The results of the calculation are presented in Table 3. Variables (service types) that occurred to be in significant relationship with the company size (p-value < 0.05) are: disposal and technical consultancy and the “number of services”. These three variables are marked in grey in Table 3. Other variables gave the result of p-values below the critical value (i.e. 0.05) which means that their relationship with the company size is irrelevant. Table 3. The Pearson chi-square test results – assessment of the relation between the size of the company and offered services. Pearson's chi-square

Degrees of freedom

p-value

Number of services

33.888

18

0.0130

Disposal

12.318

2

0.0021

Technical consultancy

11.877

2

0.0026

Warranty support

1.409

2

0.4943

Post-warranty support

4.050

2

0.1320

Assembly

4.872

2

0.0875

Maintenance

4.286

2

0.1173

Trainings

2.158

2

0.3399

Lease

2.104

2

0.3493

Rental

1.699

2

0.4277

Before-sales services

0.590

2

0.7447

financial services

3.400

2

0.1826

Modernization

0.075

2

0.9632

On the basis of these findings the correspondence analysis was used to obtain more detailed picture of connection between variables. The calculation was done for every single pair: size of the company with every type of services separately. Due to editorial requirements, only the results of multiple correspondence analysis are presented below

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with the 3 variables that indicated significant relationship with the company size. Figure 4 presents the map of perception for variable “size of the company” and: the “number of services” (represented by the numbers from 0 to 13), “disposal” and “technical consultancy” plotted in two dimension plane. The fact that the points on the right side of the chart (blue ellipse) group together indicate that they co-occurred most frequently. On the other side, some other points are located in a close distance (orange ellipse) what means that these attributes occur together most often. Hence, it can be stated that the large machinery manufacturing companies usually offer 6 and 7 forms of services as an addition to their products, and also provide a technical consultancy whereas small and medium sized machinery manufacturing firms typically offer from 1 to 4 services and these are neither the service of disposal nor technical consultancy.

Fig. 4. Map of perception for analyzed variables.

On the basis of above analysis results it can be concluded that the differences can be noticed in number of services offered with respect to the size of company. The correspondence analysis however is a descriptive technique to represent categorical data in graphical displays and does not indicate any statistical significance, so other methods should be employed for further analysis. 4. Conclusions and discussion The conducted analysis allowed to achieve the scientific goal set at the beginning of the research process. The catalogue of services, that are being implemented by machinery manufacturing companies in Poland, contain 13 different forms, which are: before-sale services, financial services, lease, rental, assembly, trainings, technical consultancy, maintenance, warranty support, post-warranty support, modernization, disposal and other services. The study proved that polish manufacturers provide mainly product-oriented services. Use-oriented forms of services such as lease and rental are seldom included into offers of machinery manufacturing firms. It occurred that Polish machinery manufacturing companies most frequently offer packages of 2-4 types of services. The relationship analysis indicate significant statistic dependency between the size of the company and the variables: the number of services it offers, and an occurrence of two types of services (disposal and technical consultancy) in its offer. By correspondence


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analysis it was proved that large manufacturers most frequently provide the packages of 6 and 7 types of services and technical consultancy are commonly one of them, while small and medium sized manufacturing firms offer from 1 to 4 forms of services but neither disposal nor technical consultancy is one of them. The first constraint of the study is the database choice. It is possible that other databases could provide additional information or larger set of companies. Nevertheless, it is noteworthy that the retrieved database is relatively vast (over 970 machinery manufacturing companies) and the author believes that it accounts for a significant part of all machinery manufacturers operating on Polish market. The obvious limitation is the size of surveyed sample (100 firms) which was limited due to the manual character of search for information. The results probably should not be generalized but they certainly provide valuable insight into the servicization changes that take place in Polish manufacturing sector and which could be considered as a pilot study. To assess the level and scope of servicization of the manufacturing firms in Poland, the research should be conducted in wider scope and also the share of profits that come from services in overall company incomes should be studied. Acknowledgements The research was conducted within the S/WZ/1/2014 project and was financed from Ministry of Science and Higher Education funds. 7th International Conference on Engineering, Project, and Production Management (EPPM2016) was financed in the framework of the contract no. 712/P-DUN/2016 by the Ministry of Science and Higher Education from the funds earmarked for the public understanding of science initiatives. 7th International Conference on Engineering, Project, and Production Management (EPPM2016) finansowana w ramach umowy 712/P-DUN/2016 ze środków Ministra Nauki i Szkolnictwa Wyższego przeznaczonych na działalność upowszechniającą naukę. 7th International Conference on Engineering, Project, and Production Management (EPPM2016) was co-organised by the Agency for Restructuring and Modernisation of Agriculture (Poland).

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