J. Service Science & Management, 2010, 3: 138-142
doi:10.4236/jssm.2010.31017 Published Online March 2010 (http://www.SciRP.org/journal/jssm)
Service Provision in Knowledge-Based
Industries – A Global Study on the
Tooling Industry
Günther Schuh, Wolfgang Boos, Fabian Gaus
Laboratory for Machine Tools and Production Engineering (WZL), RWTH Aachen University, Aachen, Germany.
Received October 2nd, 2009; revised November 15th, 2009; accepted December 24th, 2009.
ABSTRACT
In today’s times, more than ever cost competition and high demands o f globalized value-add ing cha ins put stron g pres-
sure on small- and medium-sized toolmakers. As an exclusive differentiation in price is not an option, new means for
achieving sustainable competitive positions have to be found. A promising approach for differentiation is to enhance the
existing range of products by offering customer-specific services within so-called industrial product-service-systems.
However, the lack of local presence inhibits the toolmakers’ abilities to deliver these services to their global customers.
To address these challenges the European R&D-project TIPSS has the objective to develop suitable methods, tech-
niques and technologies, for toolmakers to improve their local and global performance thus enabling them to offer in-
dustrial product-service-systems on a global scale. The basis of the project is a large scale toolmaker and parts pro-
ducer survey focusing on service provision. The survey identifies the global footprint of toolmakers regarding the pro-
vision of tool-related services. Key findings of the survey with respect to designing industrial product-service-systems
are presented in this paper.
Keywords: Production Engineering, Product-Service-Systems, Tool & Die Making
1. Introduction
Today’s turbulent economic environment confronts the
global tooling industry with serious challenges. Cost co-
mpetition and the high demands of globalized value chai-
ns put pressure on small- and medium-sized toolmakers.
As a sole focus on price does not lead to a sustainable
competitive advantage, toolmakers in high wage econo-
mies have to find new means for differentiating them-
selves from their competitors or else become easily re-
placeable for their customers [1–3]. One approach for
differentiation is the forward integration into the cus-
tomer’s value chain [4,5]. By offering enhanced product
related services via so-called industrial product-service-
systems (IPS2) [6], certain aspects of the customer’s
value-adding chain can be provided by the toolmaker.
IPS2 are hybrid products consisting of the product itself
combined with a comprehensive set of product-related
services [7–9]. While generating additional cash-flows
along the product’s entire life-cycle, IPS2 increase the
dependence of the customer towards his toolmaker str-
engthening the competitive position of the latter.
In order to develop IPS2 that truly deliver added value,
the toolmaker is challenged to acquire a profound know-
ledge of his customer’s needs. Based on this knowledge
he can define a portfolio of relevant services and develop
the appropriate technological solutions. In the following
the concept of IPS2 is elaborated and, based on an exten-
sive survey, an overview of the capacities and compe-
tences of today’s toolmakers pertaining to the offering of
IPS2 on a global level is given.
2. Industrial Product-Service-Systems
Linking innovative services to the core product and th-
ereby creating indu strial product-service-systems is may-
be one of the most promising ways to create more cus-
tomer value and to gain a true competitive advantage
[10–12]. Especially the tooling industry has not yet bene-
fited from this “new manufacturing” that enables produ-
cers to profit from higher service profit margins, growth
opportunities in mature markets and longer lasting cus-
tomer relationships.
In the TIPSS project, the concept of industrial prod-

Service Provision in Knowledge-Based Industries – A Global Study on the Tooling Industry 139
uct-service-systems encompasses the integration of the
toolmaker into the customer’s value chain. The tool-
maker thus becomes an integral part of the customer’s
production process, increasing the dependence of the
customer towards his toolmaker. Figure 1 illustrates the
increasing integration of the toolmaker into the cus-
tomer’s processes as the portfolio of offered services
expands. Starting at the core product, the tool, each layer
adds another service.
While moving outward in the diagram the degree of
connection to the core product decreases, meaning that
vertical integration into the customer’s processes incr-
eases.
The challenge for achieving the optimal added value
for both sides is to adequately configure the industrial
product-service-system with respect to the service port-
folio as well as the technology to enable the service pro-
vision. Furthermore offering industrial product-service-
systems and making money with them is an issue, which
cannot just be carried out on the level of operations. As
the success of a company is founded in its business
model [13–15], the latter ne eds to be re-designed to align
strategic and operational objectives. Thus offering indus-
trial product-service-systems requires a new business
model which addresses the customer’s needs by adding
value to his processes generating sources of income al-
ong the tool’s entire life-cycle.
3. Survey Findings
As a base for designing industrial product-service-syste-
ms respectively a business model encompassing them, a
large scale survey addressing both toolmakers and their
customers was conducted. The survey was carried out in
two parts, starting with the customers and ending with
the toolmakers themselves. In total 278 comp anies in rel-
evant economies all over the world participated in the su -
rvey. The outcome of the survey was on the one hand an
evaluation of tool-related services by both toolmakers
Emotional Profile and Customer Experience
Emotional Profile and Customer Experience
Parts Production
Product Design/ Development
Tool Productivity and Availability
Product Optimization
Pilot Series
Prototypes
Tool System
Process Optimization
 Planning
 Design and Construction
 Work Scheduling
 NC Programming
 Model Making
 Tool Manufactu ring
 Tool Assembly
Primary Benefits
1
2
1Integration into customer‘s value chain2Increasing responsibility of the toolmake
r
Emotional Profile and Customer Experience
Emotional Profile and Customer Experience
Parts Production
Product Design/ Development
Tool Productivity and Availability
Product Optimization
Tool Productivity and Availability
Product Optimization
Pilot Series
Prototypes
Pilot Series
Prototypes
Tool System
Process Optimization
Tool System
Process Optimization
 Planning
 Design and Construction
 Work Scheduling
 NC Programming
 Model Making
 Tool Manufactu ring
 Tool Assembly
Primary Benefits
 Planning
 Design and Construction
 Work Scheduling
 NC Programming
 Model Making
 Tool Manufactu ring
 Tool Assembly
Primary Benefits
1
2
1Integration into customer‘s value chain2Increasing responsibility of the toolmake
r
1Integration into customer‘s value chain2Increasing responsibility of the toolmake
r
Figure 1. Extended product-services within the TIPSS
Business Model
and parts producers as well as a global footprint of tool
makers regarding the provision of these services. The
findings referring to the latter are illustrated in the fol-
lowing. The global footprint describes the current struc-
ture of the tooling indu stry regarding four aspects of ser-
vices provision on a global level:
1) Global customers – Are toolmakers taking advan-
tage of globalized markets?
2) Local on-site presence – How do toolmakers pro-
vide services on a global le vel ?
3) Global partnerships – Do toolmakers cooperate to
tackle challenges in teams?
4) Global sourcing – Are toolmakers taking advantage
of globalized supply markets?
In the following the results of the survey reflecting
each of the four dimensions are elaborated.
3.1 Global Customers
The first part of the global footprint investigates to which
degree toolmakers currently take advantage of globaliza-
tion by entering new markets to sell their tools. Figure 2
depicts the structure of the toolmakers’ markets in each
region.
It can be seen that North American and Western Euro-
pean toolmakers still have a very strong focus on their
own region. The regions China/South East Asia, and to a
13%13% 13%13% 13% 13%
100%
North
America South America
0%
North
Africa
0%
Middle
East Western Europe Eastern Europe IndiaChinaSouth East Asia
0%
Australia
North America
Percentage of toolmakers that deliver tools within own region
Percentage of toolmakers that deliver tools to other regionsPercentage of toolmakers that deliver tools to other regions
44% 36% 11% 22%
51%
14% 24% 12%
South
America North Africa Middle East
94%
Western
Europe Eastern Europe IndiaChinaSouth East Asia
6%
AustraliaNorth
America
Western Europe
20%
60%
20%
0%
North
America
0%
South
America
0%
North
Africa Middle East Western Europe
60%
Eastern
Europe
0%
India China
0%
South East
Asia
0%
Australia
Eastern Europe
28% 22% 44%
78% 56% 39% 50%
83%
North
America South America North Africa Middle East Western Europe Eastern Europe India
61%
China
33%
South East
Asia Australia
China/ South East Asia
Figure 2. Regions to which toolmakers deliver tools

Service Provision in Knowledge-Based Industries – A Global Study on the Tooling Industry 140
lesser extent Eastern Europe, have a higher percentage of
export to other regions. This shows on the one side, that
North America and Western Europe are currently still
target markets when it comes to parts production. On the
other side it also shows that toolmakers in China/South
East Asia and Eastern Europe are using the globalization
of markets more consequently for selling their tools.
The customer’s point of view is given in Figure 3. The
illustration shows th e ratio of global vs. local purchasing
of companies within the different regions. Parts produc-
ing companies were asked to rank the top four countries
from which they purchase tools. It can be seen that com-
panies in Western Europe and China/South East Asia
frequently purchase tools from toolmakers within their
own regio n.
Figure 4 illustrates reasons why p arts producing com-
panies are hesitant to buy tools outside their own region:
Customers were asked to rank the importance of sev-
eral disadvantages they perceive when buying tools from
toolmakers in other regions of the world on a one-
to-seven scale, seven being the most severe disadvantage.
The evaluation shows, that a lack of services was
ranked just after quality issues and delivery time, clearly
implicating the importance for a toolmaker to be able to
17% 34% 45%
65%
83%
Western
Europe
66%
China/ South
East Asia
55%
North
America
35%
Eastern
Europe
100%
Percentage of top 4 r a nked tool supplyi n g
countries loc ated within own region
Percentage of top 4 r a nked tool supplyi n g
countries located in other regions
Figure 3. Local vs. global purchasing of tools
4, 3
5, 3
4, 6
4, 8
5,0
4, 6
4,0
3,8
4,8
Price
Tool quality
Cycle time
Warr anty conditions
Delivery time
Distan ce
Lack of services
Reputation
Language
Perceived disadvantage
“Lack of service”
Disadvant ages perceived by customers
(Scale 1 to 7, 7 being the most sever disadvantage)
Figure 4. Disadvantages perceived by customers when pur-
chasing tools on a global level
deliver services on a global level.
3.2 Local on-Site Presence
To draw a picture of toolmakers’ on-site presence, parts
producer were asked to estimate the percentage of main-
tenance work that was conducted by their toolmaker at
their production site. Figure 5 shows that a customer’s
toolmaker only performs tool related services locally at
the customer’s production site in rare cases.
This either means that tools are shipped back to the
toolmaker for maintenance or that the customer performs
maintenance with his on capacities. Figure 6 proves that
indeed a large part of the required maintenance work is
performed by the customers themselves. Three quarters
of the customers state that they conduct more than 50
percent of the maintenance with their own capacities.
3.3 Global Partnerships
The third perspective of the global footprint investigates
partnerships and other relationships between toolmakers
in terms of vertical or horizontal integration into each
other’s processes. Toolmakers where asked whether or
not they do have any partnerships regarding the provision
of services.
Figure 7 shows that a large part of the toolmakers,
especially in China/South East Asia, is currently not co-
operating with other toolmakers for improving service
provision (left). The right side of the figure shows the
reasons why toolmakers choose not to cooperate. It sticks
out that while North American and Western European
toolmakers are worried about the protection of their
know-how, Chinese/South East Asian toolmakers simply
< 80%
4%
7%
<= 100%< 40%
4%
< 60%
16%
0
60%
< 20%
9%
76%76%
Percentage of tool related
service performed at the
customer’s production sit
e
Figure 5. On-site service provision (customer response)
43%
51-75%
32%
26-50%0-25%
11%
14%
76-100%
75%75%
Percentage of maintenance
conducted by customer with
own capacities
Figure 6. Maintenance service performed by customer

Service Provision in Knowledge-Based Industries – A Global Study on the Tooling Industry 141
50%
44%
67%
29%
The cost is
too high
Not thought
about it yet
16% 3%
57%
No appropr.
partner found
33%
100%
No standard
procedure to
cooperate
29%
22%
75%
50%
Know-how
protection
29%
Eastern EuropeChina/ South East AsiaWestern EuropeNorth AmericaEastern EuropeEastern EuropeChina/ South East AsiaChina/ South East AsiaWestern EuropeWestern EuropeNorth AmericaNorth America
30%
44%
25%
35%
Percentage of toolmakers without
partners for service provis ion
Figure 7. Percentage of toolmakers without service partners (left), reasons for not having service partners (right)
have trouble finding appropriate partners.
3.4 Global Sourcing
The last perspective of the global footprint focuses on the
ability of the toolmaker to use globalized markets for
sourcing. Figure 8 list for each region, which part of the
value chain is externalized to the global markets. It can
be seen that standard tool parts are the largest part of
global sourcing. It seems that while Eastern European
and Chinese/South East Asian Toolmakers have a str-
onger focus on selling their tools in other regions than
their Northern American and Western European coun-
terparts, they also go further when it comes to open ing up
their value chain to suppliers from other regions. Fur-
thermore the graphic shows that while standard tool parts
are commonly sourced globally, service are still mostly
procured locally.
Toolmakers were asked to list advantages and disadvan-
tages they perceive when sourcing globally (Figure 9).
While North American, Western and Eastern European
toolmakers mostly see an advantage in price, Chinese/
South East Asian toolmakers source globally because of
quality, reliability, reputation, warranty conditions and,
surprisingly, delivery time.
4. Conclusions and Outlooks
The analysis of the results showed that only certain as-
pects of the challenges regarding global service provision
are being adequately addressed by toolmakers in general.
When distinguishing between the different regions of the
world, it becomes clear that especially emerging markets
like China/South East Asia and Eastern Europe are open
to take advantage of opportunities lik e global purchasing
and exporting of tools. However, local on-site presence
as well as partnerships between toolmakers for supplying
17%
14%
25%25%
39%
29%
11%
43%
89%
86%
China/ South Ea st Asia
Eastern E urope
Western Europe
North America
Complete toolsServices
13%
25%
Tailor made toolparts
27%
0%
Standard toolpa rts
56%
63%
Figure 8. Parts purchased by toolmakers in foreign coun
tries by region
-0,6
-0,8
-1,2
-0,6
-1,5
-1,2
-0,6
-1,1
-1,1
Customs
procedures
Deliver y time
Distance
Warranty
Conditions
Reliability
1,5 Price
Quality
Lack of services
Communication
Reputation
-0,5
-0,3
-0,9
-1,1
-0,8
-1,4
-1,1
0,3
-0,6
Delivery time
Reputation
Lack of services
0,9
Communication
Quality
Price
Distance
Reliability
Warranty
Conditions
Customs
procedures
North AmericaWestern Europe
-0,4
-0,9
Deliver y time
Customs
procedures
Reliability
Quality
Reputation
Price
Lack of services
1,3
Distance
0,8
0,5
Warranty
Conditions
1,5
Communication
2,4
1,1
0,4
1,6
-1,3
-2,0
-2,3
-0,7
-2,3
0,0
-0,3
Warranty
Conditions
Customs
procedures
Lack of services
2,7
1,7
Price
Reliability
Delivery time
Reputation
0,7
Communication
Quality
Distance
Eastern EuropeChina/ South East Asia
Perceived adv a ntage (scale 0 to 3)
Perceived disadvantage (sc a le -3 to 0)
Perceived adv a ntage (scale 0 to 3)
Perceived disadvantage (sc a le -3 to 0)Perceived disadvantage (sc a le -3 to 0)
Figure 9. Advantages and disadvantages of global sourcing
perceived by toolmakers

Service Provision in Knowledge-Based Industries – A Global Study on the Tooling Industry 142
services are currently still on a very low level in all re-
gions of the world. In general the results show, that co-
operation among toolmakers is still not common and
their ability to deliver tool related services on a global
level is not sufficient for the current demand for such
services.
The results show that in order to be able to offer IPS2,
toolmakers have to adapt new business models, which
focus on four m ajo r topics:
1) Service provision
2) Cooperation with partners
3) Customer integration
4) Strategies for identifying relevant customer needs
Currently each of these four topics is being addressed
insufficiently by toolmakers on the whole. Especially
smaller toolmakers that do not have the capacities to of-
fer adequate services on a global level will have to adjust
their business models accordingly. Only through close
cooperation with other toolmakers as well as their cus-
tomers will they be able to strengthen their position in
the vast competition of the globalized markets.
The development of an appropriate business model for
toolmakers is currently being addressed within the FP7
project TIPSS. Further information on the project as well
as the complete evaluation of the TIPSS toolmaking sur-
vey can be fo und on the p roject’s website (www.tipss-fp 7.eu).
5. Acknowledgements
The research and development project “TIPSS” (Tools
for Innovative Product-Product-Service Systems in Glo-
bal Tool and Die Networks) is co-funded by the Euro-
pean Commission within the Seventh Framework Pro-
gramme (FP7).
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