Caterpillar has set a 10-year “aspirational target” to double its parts and service revenues from 2016 levels. That means that the company intends for all service, aftermarket parts and other service-related sales to be at the $28 billion mark by 2026, up from $14 billion in 2016, according to Jim Umpleby, Caterpillar chairman and CEO, speaking at the company’s 2019 Investor Day.
“We believe tremendous opportunities exist to continue to grow service revenues by working with our dealers to find new ways to increase the value we provide to customers,” Umpleby said, pointing to Cat’s now two-year-old Operating & Execution model as undergirding this anticipated growth.
This service growth will not be a straight trajectory, Umpleby warns. “When market demand is high for new equipment, services tend to be 30 percent of our machine, energy and transportation sales,” he said. During down markets, that percentage moves closer to 40 percent.
Cat estimates that 95 percent of the service opportunity comes after a machine has already accumulated 5,000 hours, said Bob De Lange, group president of services, distribution and digital.
Cat Financial, although not counted in the anticipated service sales growth, will still play a key role in this effort, assisting as the company transitions from customer service agreements to what it calls “customer value agreements.” These CVAs will take advantage of Cat’s machine telematics – the company says it will have close to 1 million connected assets by the end of 2019 — and digital capabilities.
Dealers now have access to several digital tools, including Cat’s Service Information System, Parts Inventory Optimization Tool, and its recently introduced Remote Flash and Remote Troubleshoot, which allows dealer technicians to access live machine diagnostics and remotely identify problems.
“Cat Financial is actually one of the greatest marketing tools we have,” De Lange said, adding that the division has more than 11,000 direct customer contacts per day. And CVAs can be included in the Cat Finance monthly payment.
“We have a very large installed base, over 2 million active assets in the field,” De Lange said.
This base gives Cat engineers critical information when designing the next generation of equipment.
One example: Cat’s coming next generation air filter, designed to have double the service life of the standard filter. “The air cleaner body is equipped with temperature and pressure sensors to provide the operator with an accurate measurement of the remaining useful life of the filter element,” said Denise C. Johnson, group president of resource industries. “And it does it in real time. The filters are launching now, Johnson says, and will be “available in full force on our next generation machines in 2020.”