”Everybody is in services” Servicification and trade policy

Emilie AnérMagnus Rentzhog

Presentation at lunch seminar: ”Servicification - Why free trade in services matter to manufacturing”

ECIPE, BusinessEurope and ESF

April 25, 2013

Servicification = more and more services as inputs and outputs in manufacturingIncreased dependence in the manufacturing industry on• Purchased service inputs• In-house service production • Sales of services integrated into products• Sales of services alongside products• Service import and export…supports competitiveness, productivity and trade

Key figures for manufacturing firms

Costs for services as inputsSweden: 25 %

Employees in service-related occupationsSweden: 46 %

Services sales in total turnoverSweden: 26 %

Added value in manufacturing: 30 % (OECD)

OECD countries: 13-30%

EU-12 countries: 40 %

Various MNCs: 25-50% of total revenue

Services needed by Sandvik for effective supply chain and delivery of goods

Legal servicesAccounting, book-keeping etc. Taxation servicesMedical servicesComputer servicesResearch and developmentRental/LeasingAdvertisingMarket researchServices incidental to manufacturingPlacement of personnelMaintenance and repairSecurity servicesPackaging

Maritime transport – freightInland waterways – freightInland waterways – freightAir transport - freight/passengerRoad transport – freight/passengerCargo-handling servicesStorage and warehouse

servicesFreight transport agency serviceFeeder servicesEnergy services

Printing, publishing DesignBuilding-cleaning servicesPhotographic servicesCourier servicesLogistic services Postal servicesTelecommunicationsAudio-Visual servicesEducational servicesEnvironmental servicesBanking servicesInsurancesHealth related servicesHotels and restaurantsTravel agency services

Services delivered by Sandvik to the customer

Computer servicesResearch and developmentRental/leasingMaintenance and repairManagement consultingTechnical testing and analysis servicesServices incidental to

manufacturingDesignEnvironmental servicesFinancial servicesLogistics Warehouse services

Motives for servicification in firms

  Servicification as a response/effect

Servicification as a strategy

Use of services (input)

Logistics and transport as a result of fragmented production (global value chains)Ex. Volvo AB imports parts from all over the world

IT and management services in order to increase efficiencyEx. Albin Components uses services to implement lean production, just-in-time delivery and total quality management

Offered services (output)

Recycling services as a result of regulatory demandsEx. Sandvik Tooling offers recycling services as a result of regulatory demands

Repairs, upgrades and surveillance services to prolong the relationship with the customerEx. Atlas Copco leases instead of sells many products, also offers upgrades and diagnostic services

Services as enablers in global value chains

R&D/Design

Raw Materials

Inter-mediat

e Inputs

Semi Finished Goods

Final Good

Assembly and

Packaging

Ware-house

Retail/Delivery

Customer Service

Source: USITC 2011

Financial services

Quality Control Services

Logistics Services

Marketing Services

The GVC of video game Minecraft• USA• Germany• England• Scotland• Holland• Canada• Japan• Denmark• Finland• Sweden

Plus: UN Habitat, and other countries (”Community”, marketing and ”3rd Party Servers)

Without order of importance

Trade policy implications

Shift towards a ”Goods AND services” mindset for 1. Formulation of trade policy2. Liberalisation 3. Negotiations

Service import dependency in the Swedish motor vehicle industry

Input-output tables for Sweden in 2008

Trade policy implications

Shift towards a ”Goods AND services” mindset for 1. Formulation of trade policy2. Liberalisation 3. Negotiations

Thank you

• Studies available at:http://www.kommers.se/In-English/

Servicificaiton”Everybody is in Services””At Your Service” [Sanvik case-study]

Services and GVC”Global Value Chains and Services – An Introduction””Minecraft Brick by Brick”