China's manufacturing sector speeds up to become more service-oriented (2)

Service-oriented manufacturing, a new model that integrates manufacturing with service, is experiencing rapid development in China in the recent years. It has driven the constant emergence of new businesses, and has propelled the transformation and upgrading of the manufacturing sector.

Zhejiang Great Shengda Packaging Co., Ltd (Great Shengda) is a strong performer in the service-oriented manufacturing field. The company, by optimizing product design, can save more than 20 percent of materials used in packaging boxes. Being able to reduce over 40 million yuan ($5.7 million) of materials each year, the Chinese packaging enterprise has been selected as a supplier of SF Express, one of China's leading comprehensive service providers of express logistics.

As a producer of corrugated boxes, Great Shengda has a secret to its success – digital designing of products.

The company has a specially tailored design and management platform where its designing personnel can start system modeling based on the primitive drawings and structural demands submitted by clients. Besides, the design will be presented to the clients in 3D form on the platform, so as to ensure that what they see is what they get.

"By offering quality industrial designing service and letting our clients join this process, we not only shortened the R&D cycle by 80 percent, but also largely improved the satisfaction of the clients," said Sun Junjun, vice president of Great Shengda.

By integrating manufacturing with service, Great Shengda has extended its industrial chain to upper-stream designing and digital management services. It has transformed from a packaging producer to a service-oriented enterprise.

"Apart from industrial designing, service-oriented manufacturing also includes customized services, supply chain management, shared manufacturing, inspection, testing and certification services, energy conservation service and whole-life cycle management," said an executive from China Service-Oriented Manufacturing Alliance.

Manufacturing enterprises used to focus on production and aimed for selling their products, but service-oriented manufacturing helps them shift their focus from production to service so that they can extend their industrial chain to R&D and design, as well as branding service. By doing this, they can constantly expand their services and raise the added value of their products, the executive explained.

Added value is more presented on the two ends of a smiling curve – designing and sales, said Huang Qunhui, director of the Institute of Economics, Chinese Academy of Social Sciences. To transform into service-oriented manufacturing helps enterprises raise their value at the two ends, Huang, also the director of an expert committee of the China Service-Oriented Manufacturing Alliance, added.

Many international renowned manufacturers have transformed themselves into service-oriented manufacturers, and service-oriented business accounts for over half of their total revenue, Huang introduced. "Developing service-oriented manufacturing and increase the input in service will help Chinese manufacturing enterprises reduce cost and improve efficiency," Huang said. He believes that this will also help Chinese manufacturers extend their industrial chain to cover more high-profit links, foster new growth points and better cope with the downward pressure amid COVID-19.

China's Ministry of Industry and Information Technology recently issued a guidance together with other 14 departments to further promote the development of service-oriented manufacturing. The guidance proposed to support the development of multiple businesses, such as industrial designing service, customized service and supply chain management. The guidance said that prominent progress in the input and output of services of manufacturing enterprises shall be made by 2022, and a development pattern in which manufacturing and services are comprehensively and deeply integrated shall also be established.

According to the guidance, 100 demonstration platforms, including application service providers, shall be cultivated to promote the in-depth development of service-oriented manufacturing.