German mechanical engineering companies are under enormous pressure: new orders are declining, margins are shrinking, and competition is intensifying. The solution often lies in the neglected aftermarket business. Spare parts and services can generate significantly higher EBIT margins than new machine sales and can account for 40–80% of total profits. With data-driven inventory management and intelligent pricing, these potentials can be systematically unlocked.
Aftermarket services are the most stable profit driver in economically difficult times. While new machine sales fluctuate with economic cycles, the demand for spare parts remains constant. Installed machines must continue running regardless of investment reluctance.
The numbers speak for themselves:
• Margin advantage: Service EBIT margins average 25% compared to 10% for new equipment — equivalent to 2.5× higher margins
• Profit share: 40–80% of all corporate profits originate from aftermarket business
• Revenue stability: One-third or more of total revenue in focused companies comes from services and spare parts
While new investments are postponed, existing systems must operate optimally. This dependency creates a natural monopoly position for original equipment manufacturers (OEMs), but only if the market is approached strategically and intelligently.
Traditional cost-based pricing systematically leaves margin on the table in the spare parts business. Most mechanical engineering companies calculate spare parts prices using a cost-plus approach: production cost plus a standardized markup. However, this method ignores actual willingness to pay and competitive dynamics.
Holmer Maschinenbau demonstrates the potential of market-based pricing impressively. Christian Läpple, Head of Spare Parts Sales, describes the starting point: “The market remained a black box.” After implementing market-based pricing intelligence, the company fundamentally improved its positioning.
The difference lies in the information base:
• Cost-Plus: internal cost + standard markup = limited margins
• Market-Based: customer value + competitive position + availability = optimized profitability
Practical implementation requires systematic market monitoring, competitive analysis, and customer segmentation. Modern tools make this analysis cost-effective even for medium-sized companies.
Aftermarket inventory strategy differs fundamentally from new product logistics. While serial production focuses on turnover rates and just-in-time principles, the spare parts business prioritizes availability.
The challenge lies in balancing capital commitment and availability. An unplanned machine downtime often costs the customer multiples of the spare part price. This asymmetry creates room for value-based pricing strategies.
Successful inventory management is based on three pillars:
Investment in intelligent systems pays off through reduced inventory costs while simultaneously improving customer satisfaction.
The following KPIs are based on proven industry practices and should be adapted to your company’s specific requirements:
Fill Rate (delivery readiness): Percentage of spare parts immediately available upon request. Typical target values vary by part category: safety-critical parts need highest availability; wear parts can tolerate longer lead times.
Inventory Turnover by part category: Different turnover rates for fast-moving vs. slow-moving parts require differentiated procurement strategies and warehouse concepts.
Price Elasticity Index: Measures price sensitivity across customer groups, enabling segment-specific pricing and identifying optimization potential.
Customer Equipment Uptime: Machine availability at the customer site correlates directly with customer satisfaction and likelihood of repeat business.
Service Revenue per Installed Unit: Long-term monetization of the installed base through systematic upselling and cross-selling.
Phase 1 – Inventory Analysis (Weeks 1–2):
Create an ABC analysis of your spare parts by revenue and criticality. Identify fast-/slow-moving inventory and map the age of your installed base. This foundation determines all further optimization measures.
Phase 2 – Market Intelligence Setup (Weeks 3–4):
Research competitor prices for your top 100 spare parts. Develop price anchors and segment customers by price sensitivity. This information base enables strategic price optimization.
Phase 3 – Technology Integration (Weeks 5–8):
Integrate IoT sensors for predictive maintenance with key customers. Optimize your ERP system for improved demand forecasting and implement dashboards for continuous KPI monitoring.
Phase 4 – Pricing Optimization (Weeks 9–12):
Introduce value-based pricing gradually. Test different pricing models with selected customer groups and develop a professional communication strategy for price adjustments.
Holmer, the specialist for beet harvesting technology, faced the typical challenge of medium-sized mechanical engineering companies: cost-based pricing with limited market knowledge. “The market remained a black box,” Christian Läpple describes the initial situation.
Implementing a market-based pricing strategy achieved the breakthrough. Läpple reports: “The proof of value was achieved solely through the price increase of just three parts.” Systematic market analysis revealed significant pricing potential that traditional cost-based calculation had concealed.
The result: improved margins without losing customers, since the pricing adjustments were market-appropriate and well-justified. Medium-sized companies can significantly improve their aftermarket performance through intelligent market intelligence.
Leading real-world examples show amortization within a few months. With average margin increases in the spare parts business, technology investments pay off quickly, especially for companies with a high service revenue share.
Start by focusing on high-revenue parts with low price sensitivity. Safety-critical components and exclusive OEM parts offer the greatest optimization potential, as availability matters more than price.
Communicate the added value: improved availability, guaranteed OEM quality, technical support. Position adjustments as “market alignment” instead of “increases.” Offer maintenance contracts as an alternative to individual part purchases.
Start with cloud-based ERP extensions for better demand forecasting. Simple IoT solutions for machine condition monitoring are already available at low cost. Partnerships with technology providers reduce development efforts.
The aftermarket business offers German mechanical engineering firms one of the few growth opportunities independent of economic cycles. With a systematic approach and intelligent tools, significant revenue increases can be achieved even in difficult times.
[S] Boston Consulting Group – Aftermarket Services Drive Growth for Industrial Manufacturers (2025): https://www.bcg.com/publications/2025/aftermarket-services-drive-growth-for-industrial-manufacturers
[S] MRI Network – The Growing Importance of Aftermarket Services in Manufacturing: https://mrinetwork.com/hiring-talent-strategy/the-growing-importance-of-aftermarket-services-in-manufacturing/
[S] Deloitte Insights – Aftermarket Services: A Digital Differentiator Beyond COVID-19: https://www.deloitte.com/us/en/insights/industry/manufacturing-industrial-products/aftermarket-services-digital-differentiator-beyond-COVID-19.html
[S] Middlesex Consulting – How Should I Price Spare Parts?: https://middlesexconsulting.com/how-should-i-price-spare-parts/
[S] MARKT-PILOT – First-Class After-Sales Service in Machine Manufacturing: https://www.markt-pilot.com/en/resources/blog/first-class-after-sales-service-in-machine-manufacturing
[S] MARKT-PILOT – HOLMER Maschinenbau Case Study: https://www.markt-pilot.com/en/product/case-studies/holmer-maschinenbau
Copyright © 2025 Peter Littau
Copyright © 2025 Peter Littau
