Key points
Mike Hynes is a Senior Account Executive at relayr, a company that is helping UK manufacturers looking for a reputable servitisation partner.
If last year was considered a turbulent year for many manufacturers due to factors such as the US-China trade war and a looming Brexit, then 2020 has seen the economy take a major hammering because of the lockdown caused by the coronavirus pandemic.
It will be a battle for survival of the fittest when lockdown restrictions are eased and businesses attempt to return to normal, whatever scenario that will take, in the UK.
However, there is help available, to build more resilience in revenues for the manufacturing sector, technology-driven through the Internet of Things (IoT) and delivering advanced processes such as servitisation. or in short EaaS (Equipment-as-a-Service).
What can be done with EaaS?
EaaS describes a process in which production systems or machinery are not purchased but provided by a supplier for a fee. Unlike the traditional asset sale model, the responsibility for maintenance, service, repairs, and replacement remains with the provider.
An EaaS operation can be one major innovation strategy to enable manufacturers of any size to create more value for their customers while diversifying income streams.
It has never been so critical to tap into equipment's full potential and gain a competitive edge by predicting maintenance needs and enabling efficient processes.
Take the automotive industry for example. Globally auto sales are expected to plummet by 22% this year and it’s against this potential gloomy backdrop that UK car makers will tentatively be re-starting production with new safety protocols for employees following the easing of some lockdown restrictions. Some have already restarted production lines, albeit with reduced workforces in some cases.
In these challenging times for car manufacturers, adopting servitisation could open new opportunities for that sector in the UK by embracing digital transformation and benefiting from the Industrial IoT.
Vision of the Future
One of the significant advantages of combining EaaS and Industry 4.0 is the availability of real-time data. Networked systems offer a way of quickly and effectively adapting to current regulations while guaranteeing complete traceability of products and allowing timely retrofitting.
In addition to that, there is the possibility to react before a machine breaks down, which ensures higher efficiency and customer satisfaction.
However, implementing servitisation needs a solid strategy to be able to profit from the benefits and avoid financial risks. As this is a relatively new concept, manufacturers need to understand that adopting an EaaS model should be first and foremost aligned with the company’s whole vision and strategy. In addition to that, they need to find a sustainable way to upgrade their legacy machines and allow for predictive maintenance service.
One of the most famous names in engine technology, Rolls Royce (RR), successfully introduced a servitisation model for its aircraft engines over 20 years ago.
The company started leasing its aircraft engines with a fully comprehensive service with usage-based fees, “Power by the Hour”. Thus, RR was able to monitor performance better, provide maintenance in a timely manner and build stronger relationships with customers.
White heat of technology
Aluvation, a German specialist in the heat treatment of aluminium components for the automotive industry, partnered its IoT technology provider to launch its latest product, Heat Treatment-as-a-Service, to the market.
The company’s goal was to deliver modular, mobile and cost-effective micro-factories providing on-demand aluminium processing on a pay-per-use basis directly to their customers’ manufacturing locations.
The benefits of this new business model included ultrafast time to market (days instead of months), reduced maintenance costs, increased uptime and flexible adjustment of capacities. Today, by increasing or decreasing processing modules, a new heat treatment line can be in place in days instead of a standard 6-12 months.
Like Aluvation, UK manufacturers can expand their services and reach new markets by moving away from the limitations of the capital expenditures (CAPEX) model as switching to operating expenses (OPEX) offers customers greater flexibility and scalability. OPEX decreases costs in maintenance and servicing, increases revenue streams, and builds stronger customer engagement.
By ensuring recurring revenue streams, subscription models offer a resilient solution in comparison to transactional one-off business. In times of economic downturn and rapid change, it is critical to rethink business models and find a flexible solution. If manufacturers do not act, they risk being overrun by the competition.
Servitisation can drive productivity
The UK manufacturing sector can be transformed, future proofing businesses and empowering them to make informed decisions that drive efficiency, cost reductions and other benefits to give clients a competitive advantage.
The implementation of servitisation models paired with smart manufacturing is also a way to attract talented staff as there will be more technology-based jobs. The use of data and applications allows employees to recognise new abilities and to increase productivity.
In the face of significant challenges – the pace of technology change, growing customer expectations and increased competition, not to mention the impact of coronavirus – industry 4.0 is shaping the future and is setting new standards across all sectors. The stakes are high – survival in a constantly changing environment with growing competition.
IoT specialists such as relayr can guide manufacturers through the servitisation transformation process, imparting invaluable advice as to how businesses can start to take their first steps on the EaaS journey and make an enduring success of their new business model.
