Mitigating the Machinery Orders Decline: The Strategic Role of Aftersales Services

William Barkawi
  • Machine tool orders have been trending downward since 2021. When fewer orders are placed, OEMs are making fewer sales and experiencing revenue disruptions.
  • The aftermarket is the perfect opportunity for OEMs to secure new revenue channels and enhance the customer experience.
  • Furthermore, it's important to remember that parts sales margins are at least doeble the margins of new machines sales.
  • With tools like ClearOps, OEMs and dealers can manage aftersales priorities with ease. Predictive demand planning, smart tool monitoring, and service coordination are just a few of its features.

What does machine order downturn mean?

Without machinery orders – often referred to as machine tool orders – we wouldn’t be able to enjoy the convenience of cars, the production rate of today’s agricultural sector, or even life-saving medical devices. The term “machine orders” refers to all the active orders for equipment, machines, and tools needed for production across all industries. The providers of these machines, original equipment manufacturers, are tasked with achieving high fill rates and streamlining the process of getting machinery and tools to end users.

Since machine orders are foundational to the health of the global economy, what happens when machine orders decline? When machine orders trend downward, it signals a potential disruption in the production levels of many different industries. If automakers aren’t ordering production tools, they’ll make fewer cars. If farmers aren’t ordering as much equipment, it could mean that yields are down this year.  

As machinery manufacturers, OEMs should closely monitor machine tool orders to anticipate demand levels. When machine orders decrease, OEMs can expect a reduction in purchase orders, lower revenue numbers, and a range of other business implications. With the right tools, a creative outlook, and quality customer service, OEMs can combat machine order decline with one, single thing: aftersales. In fact according to McKinsey, aftermarket service margins are nearly usually at least twice as high as those on new unit sales, and for businesses that use aggressive business models, they can even reach ten times higher peaks.

Quantifying the Machine Orders Downturn

The global supply chain is so interconnected that when machine orders fall, they’re often falling around the world. For instance, 2023 saw key order declines in many countries:

The downward trend, which started in 2021, continued in the first few months of 2024, sending worrying signals to manufacturers. In April, the US experienced a 25.6% machine order decrease compared to March, but year-to-date numbers are coming in at 5% above the average yearly order volume for this time period since the US Manufacturing Technology Orders report began in 1998. Even with a small amount of cushion, the sustained decreases in order numbers are throwing OEMs for a loop.

Machine Orders Around the World

When looking at machine orders decrease, assessing in-play economic factors as well as regional considerations can help provide crucial context. In the US, the CHIPS Act, along with other infrastructure investments from the Federal Government, has helped propel major growth amongst electrical equipment manufacturers and power-generation and transmission manufacturers. For OEMs that provide equipment to those industries, ensuring availability and meeting demand is crucial.  

A few thousand miles away, Germany is experiencing a major drop in the machine tool industry, with a large portion of that due to a 32% decrease in export orders. For OEMs in that region, connecting with international manufacturers and continuing to expand as global production starts to regain its footing is crucial. While there is no one-size-fits-all solution to solving the machine orders downturn, understanding exactly what is causing it can help open the door to a solution.  

machine orders downturn

Why are Machine Orders Falling?

Because production, at a high level, is closely linked to overall economic health, when there is volatility in the economy, manufacturers can expect a slowdown period. If you think about the fact that the manufacturing slowdown started in 2021, you can look at a few of the big-picture factors that were happening then – and since then – and identify the causes of a machine orders decline.

Recession Fears

The global pandemic upended every country’s economic predictions. At this point, recession fears have lingered in many countries for years. When businesses and consumers share a common fear that the economy is going to fall and hardship is going to take over, major expenditures – like those on equipment and machinery – are going to take a backseat in strategic business conversations. The US has narrowly escaped a true “recession” label, but other countries haven’t been so lucky; in 2024, the UK, Japan, Ireland, and Finland are actively in a recession, and Germany experienced a recession in 2023.  

Interest Rates

Tacked onto volatile economies – or in some cases the culprit of some of the volatility – heightened interest rates have made it harder for businesses to make investments using debt. Think about it – it’s not uncommon for a farmer to take out a loan to purchase a new plow that’s going to cost tens of thousands of dollars, but if that farmer isn’t able to afford the loan because of high interest rates, they will probably put those purchases off for as long as possible.  

Geopolitical Tensions

The last few years have illustrated how today’s supply chain connectivity leads to major disruptions when countries are in conflict. For instance, Russia’s war in Ukraine caused global fuel and grain shortages. Germany, a country that was largely dependent on energy from Russia, faced a crisis in 2022 because Russia cut off all fuel supplies to the nation. The impact on Germany’s industry from these tensions was far-reaching, with experts now saying it will never fully recover.  

Industry-Specific Downturn

In many cases, OEMs will notice fewer machine tool orders as specific industries face downturns. Faced with supply chain issues, heightened prices, tariff battles, and more, automakers had a really hard 2022. There was an uptick in 2023, but now, interest rates are causing more buyers to opt for used cars or wait on purchasing vehicles altogether. The ups and downs of the industry itself directly influence OEMs that sell to automakers around the world but it’s up to manufacturers to be agile enough to move through the ebbs and flows of their target industries – the question, then, is how do they achieve it?

OEMs: Absorbing the Hit

Never strangers to operational shifts, OEM leaders have to be ready to adapt to upstream and downstream variables that impact the output of their organizations. When industries suffer, either because of industry-specific plights or economic pressure more broadly, things can shift drastically for OEMs, dealers, and other key suppliers. In the last few years, OEMs have had to adapt to these conditions and more:

  • A fast upswing in demand due to PPP Loans and government subsidies during the early pandemic.
  • After the quick demand uptick, global supply chain issues caused many production lines to halt because products weren’t reaching customers in a timely manner.
  • Rising prices for materials and fuel made operating margins slimmer, and since most OEMs already have slim margins, this made it hard to maintain operations.
  • Changing trade agreements and new tariffs between countries like the US and China have incredible implications for manufacturers worldwide.  

Faced with downturns in machine tool orders, OEMs have no choice but to react. There are many potential solutions on the table, but finding the one that works and that can be implemented quickly isn’t always seamless.

To insulate the business from risk, OEMs may need to diversify their business strategy and start partnering with industries that are in a period of growth. They should also focus on cutting costs without sacrificing quality wherever possible; if a new supplier can offer raw materials at a lower price point, that can have a major boost on OEM health. However, these aren’t the only ways to weather a machine order decline; focusing on aftermarket initiatives and utilizing new technology are both game-changers for OEMs.

Proactive Mitigation: Catching the Aftersales Tailwind

Machine tool orders are the foundational revenue driver for OEMs, so when they start to decline, OEMs must build alternative pipelines and drive new revenue through those. The most effective revenue driver that constantly provides sales opportunities is the aftermarket. When OEMs supply equipment to their customers, when that equipment needs a replacement part or tune-up of any kind, aftersales opportunities are present.  

For a long time, OEMs let aftersales efforts fall to contractors and independent distributors, causing leakage within their own income statements. But now, instead of leaving potential revenue on the table, manufacturers can capture aftermarket opportunities to balance the decline of machine orders.  

In order to compete with third-party aftermarket dealers, OEMs should incorporate spare parts planning into their strategic plans. Whether they have preferred dealers or manage aftersales independently, equipment manufacturers shouldn’t overlook the lift potential that the aftermarket can have. To become a preferred aftersales provider, be sure to:

  • Have access to well-trained technicians and service repair experts who can help customers replace parts with ease.
  • Use predictive demand forecasting to ensure part availability; reducing wait times for spare parts can help your organization stand out among other service providers.
  • Consider using the Internet of Things to alert your service team before machine downtime occurs. Getting ahead of problems before they happen will boost customer retention.

OEMs that provide repairs and aftersales can establish a long-standing relationship with their clients as industry experts. By making the client’s lifecycle longer than the initial machinery sale, OEMs have the opportunity to expand the lifetime revenue of their customers while offsetting any impact from lower-than-normal machine tool orders.

machine tools orders decline

Bolstering Aftersales Efforts Through Technology

Succeeding in the aftermarket requires a different approach than finding new equipment buyers or selling machinery to returning clients. Aftersales depend on continued customer service, predictive analytics, inventory planning, and seamless partnerships with part dealers. Even OEMs that have robust technology solutions would benefit from an aftersales platform that connects the entire supply chain. To do aftersales – and do it well – OEMs need technology that enables:

Demand Prediction

With the power of machine learning models, predicting demand, and, in turn, making spare parts planning easier is more than doable in the OEM space. Armed with sales data from the original equipment purchase, OEMs have more data points than third-party service providers when it comes to anticipating machine lifecycles and spare parts needs – take advantage of that! With an aftersales platform like ClearOps, sales data is seamlessly considered when forecasting the demand for spare parts.

Inventory Management

If you can anticipate the demand for spare parts, you’re only addressing half of the process. Manufacturers should also be able to manage the aftersales inventory they have on hand. Inventory levels should be sufficient enough to cover demand without keeping spare parts on hand for too long.  

Service Coordination

In order to maximize machine uptime, OEMs should automate the management of service tasks as much as possible. If a customer orders a replacement part and has to wait too long for the machine to be repaired, they’re going to look elsewhere. A farmer would much rather wait 2 days for their tractor to be back in the fields than 2 weeks; automated service coordination will help your organization achieve the former.

Real-Time Equipment Monitoring

Instead of waiting for a machine to stop working before assessing the problem, what if smart technology could identify vulnerabilities before downtime occurs? IoT technology could alert the service team and inventory system, optimizing the aftersales process from start to finish. The right aftersales platform makes this all possible.  

Aftersales: A Secret Weapon

It’s no surprise that the demand for machine orders will rise and fall from year to year, and even month to month. With so many external factors impacting the number of orders manufacturers are getting, diversifying the strategic focus to include the aftermarket is a no-brainer. The aftermarket has its unique qualities, but with the right technology, it provides a secret weapon to OEMs facing volatility.  

ClearOps is a top-of-the-line aftersales platform that makes it easy for OEMs and dealers to navigate the aftermarket without expending too many additional resources. It provides key features such as automated service management and real-time equipment monitoring, allowing OEMs to make a name for themselves as aftermarket go-tos.  

The bottom line is this: customers don’t want to have to find a new company to help them repair a part; they’d much rather go to where they sourced the part to rectify any issues. If your OEM can’t provide that convenience, then you can be sure they’ll find a new OEM for all future purchases.

Keep your customers happy. Repair their machines. Prioritize aftersales. Your business will be better off for it.  

FAQs

What are machine tool orders?

Machine Tool Orders track the fluctuation in the overall value of new orders received by machine tool manufacturers.

What are machine tools manufacturers?

Machine tool manufacturers are companies that design and produce machines used for shaping and machining metal and other rigid materials. These machines include lathes, milling machines, drilling machines, and other types of equipment used in manufacturing processes to cut, shape, and finish parts and products.

Why it's worth investing in aftermaket business?

According to McKinsey, the margins for providing aftermarket services are at least double those for selling new machines. They can even reach peaks of ten times higher margins when aggressive models are implemented.

Machine Tool Orders track the fluctuation in the overall value of new orders received by machine tool manufacturers.

Machine tool manufacturers are companies that design and produce machines used for shaping and machining metal and other rigid materials. These machines include lathes, milling machines, drilling machines, and other types of equipment used in manufacturing processes to cut, shape, and finish parts and products.

According to McKinsey, the margins for providing aftermarket services are at least double those for selling new machines. They can even reach peaks of ten times higher margins when aggressive models are implemented.

Free OEM Guide
"Boosting Aftermarket Performance In a Decentralized Dealer Network"
Boost Aftermarket Performance

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
FREE E-GUIDE

We want you to succeed!

Maximize your success in a decentralized dealer network with our comprehensive guide.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Contact

Book your free demo!

Get in contact with us today - see your Aftersales Success tomorrow.

ClearOps is an aftersales platform that enables collaboration between manufacturers, dealers and end customers.
We are already trusted by the world's leading manufacturers and over 8000 associated dealers.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.