Global power systems company, Rolls Royce, recently celebrated the 50th anniversary of its 'Power-by-the-Hour' approach to engine maintenance management. Since its introduction, we've seen companies from the automotive, aerospace and industrial sectors following suit, making product as a service (PaaS) plans available to their customers. With 40 per cent of the top 100 discrete manufacturers and 20 per cent of the top 100 process manufacturers expected to provide product as a service by 2018, now is the time for original equipment manufacturers (OEMs) to consider the benefits of using product lifecycle management (PLM) software for design, manufacture and beyond.
Here Bob Hillier discusses the concept of PaaS and the software tools that can help OEMs make the move to this new sales model.
Offering PaaS involves a complete transformation of the OEMs business model. It returns ownership and responsibility to the OEM, which drives the need for more reliable and higher quality products being delivered. If adopted on a wider scale, the PaaS business model becomes the basis of what industry is calling the new circular economy. As opposed to today’s economy, which is linear because products are bought, used and then disposed of, in the circular economy, a product is kept in use for as long as possible and fully recycled at the end of its life.
The majority of companies are likely to be affected by the move towards PaaS, whether it's because they will start offering it themselves, or because they will have to provide higher quality equipment as part of a supply chain.
One of the main advantages of offering PaaS is that the model gives OEMs the opportunity to build long-standing and deeper relationships with their customers. This naturally affects the level of trust between the two parties and presents opportunities for the OEM to propose additional products and services to compliment those already being used.
Research into PaaS suggests this business model can lead to increased economic and environmental efficiency, or eco-efficiency. Eco-efficiency is a concept that refers to maximising value, while minimising environmental impact.
The transfer of ownership back to the OEM creates the drive to increase a product’s efficiency and quality due to the stronger incentive structures of the PaaS contract. When purchasing PaaS, the customer pays the OEM based on output, rather than input materials. This means the OEM and the customer share the same incentives; lower materials throughput and increased process efficiency, resulting in lower total cost of use to the customer, and greater profits to the OEM
Information asymmetries should be reduced when the OEM owns the equipment. OEMs should have full knowledge of their products, including their quality and reliability, however the latter is not always transparent in traditional product sales. When a customer purchases a service, quality standards are a mandatory part of the shared contract, therefore the manufacturer should build into their equipment the necessary data gathering solutions to provide data for its in-life performance to feed back into design and engineering
The Industrial Internet and the Internet of Things brings a real opportunity for manufacturers to support these new business models, such as PaaS, and in an eco-efficient way. The rise of cloud computing and big data analytics makes it possible for manufacturers to process large amounts of data at a small cost, leading to more in-depth knowledge of the product they're maintaining as part of their service. The challenge is delivering this data in a way that the Manufacturer can use it effectively; and to give its design and engineering teams concise input to improve the product, its manufacturing, and its in-life service.
The move to PaaS diverts the obsolescence risk from the customer to the OEM because the manufacturer is contracted to offer replacement products upon breakdown. If the original product is no longer available, it's the OEM's responsibility to find a compatible solution, and fast.
Obsolescence of industrial equipment can result from a decline in demand, or from improved machinery technology. Obsolescence is a major factor to consider by OEMs offering PaaS, but it can be counteracted by implementing a PLM system that supports product obsolescence capabilities.
PLM solutions allow manufacturers to interact with virtual products in real-world settings, evaluating possible obsolescence scenarios and making changes early to eliminate costly in-service downtime.
Products should also be designed with obsolescence management in mind. Using industry standards and interfaces, incorporating open architectures and using commercial off-the-shelf (COTS) components can reduce the risk of product obsolescence and the chance of needing a complete redesign a few months down the line.
It is important that OEMs offering PaaS maintain high quality standards throughout the production process with a combination of best practice process quality and product quality. While product quality refers to the end product meeting the required specifications, process quality ensures the manufacturing and testing procedures are well-defined and measured.
PLM software, such as Dassault Systèmes' 3DEXPERIENCE, enables optimised virtual products to go through optimised virtual manufacturing processes. Any design or process quality concerns are fixed during the design stage; and key suppliers can securely access the 3DEXPERIENCE platform to ensure their part of the end product is fully aligned with the OEM’s product and process requirements.
Effectively managing a product's lifecycle allows OEMs to have full control over the development process, through to manufacturing and inservice life. If a PLM platform isn't in place, a manufacturer will have difficulty building in closed-loop rootcause analysis, which then makes optimised products more difficult to design and manufacture correctly first time.
If your business is preparing to offer PaaS, it's important to work with a PLM supplier who understands the requirments and can offer support throughout the implementation process, and to ensure the PLM Platform works seamlessly with your existing systems.
If you would like to speak to such a PLM provider with over ten years of implementation and consultancy experience, get in touch with Design Rule on 01604 491661.