A radical shift is underway in industrial equipment manufacturing. Just as software as a service (SaaS) redefined the technology industry by changing the way that software is sold and managed, original equipment manufacturers (OEMs) find themselves moving away from their established role as machine makers and sellers and, instead, evolving into integrated solution providers.
Widely referred to as equipment as a service (EaaS), this business model may not be entirely new, but growing market demand and technological developments such as the Industrial Internet of Things (IIoT), cloud, 5G and virtual twins means that EaaS is gaining wider traction – and fast.
EaaS shares common traits with other established subscription models such as Netflix and Spotify, where users pay for what they use and get all the latest features and content included within their subscription package. In the same way, EaaS means that OEMs will move beyond selling pure assets (equipment) and instead deliver them as part of a bundle covering everything from ongoing maintenance and modernization to monitoring and optimization.
Unlike renting, EaaS puts the onus on the Industrial Equipment OEM to be responsible for the performance of the equipment and the overall equipment efficiency (OEE). If a line goes down or a component fails, it will be up to the OEM to get it fixed; the end user only pays for the equipment when it’s in operation. Equally, there’s a greater focus on helping customers get the most from their machine. Value-added services backed by strong data analytics will cover everything from machine and plant performance to energy management.
Why EaaS is becoming a strategic imperative for OEMs
In a survey by Bain & Company, 100% of OEMs said they plan to offer predictive maintenance by 2024. The vast majority (95%) added that they also intend to provide remote maintenance and operational efficiency services. These developments are driven by intensifying competition in the market and growing demand from customers as OEE and return on investment move higher up their agendas.
To keep pace and deliver these new services, industrial OEMs are looking to software and IIoT providers to provide the digital solutions they need, particularly around virtual twins, IIoT connectivity and global asset monitoring. These capabilities will bring greater transparency to the value chain, especially in terms of machine usage and operational performance.
They will also support third-party service providers – financial and insurance partners – to design the policies required to deliver EaaS business models and insure against production loss. As Deloitte explained, financial institutions are positioning themselves to take on this financing and funding role in EaaS as they prepare to lose revenue from asset financing in more traditional business models.
Indeed, there is a sense of inevitability about the transition to EaaS as key players mobilize for change, and new ecosystems – combining OEMs, software providers and financial institutions – begin to form. While on the surface, EaaS sounds like a more complex and multifaceted business model, in the long run, it promises to be more efficient and profitable for all, and kinder to our planet.
How virtual twins can make EaaS possible
At the heart of the transition to EaaS lies one crucial piece of technology: the virtual twin experience. A virtual twin, as defined by Gartner is a “virtual representation of a real-world entity or system.” In this instance, the virtual twin would be an exact digital copy of a specific piece of equipment complete with live operational information.
Having a unique virtual twin linked to an individual machine serial number within a specific location delivers multiple benefits:
- Connect: It allows all stakeholders in the value chain to connect within the same 3D model, access all the information they need about the equipment and contextualize field data.
- Simulate: Before the machinery is even installed, the OEM can simulate the setup of the production line and test different scenarios so that equipment can be configured to achieve maximum output. It could even be adapted to meet individual operators’ needs.
- Service: On the service side, the customer gains access to a full view of all spare parts, maintenance plans/processes and technical documentation within the virtual twin and can get targeted support to resolve issues quickly.
- Optimize: All parties can virtually track the behavior, health and performance of all equipment at any time. Through continual usage monitoring, machinery can be fine-tuned to perform better, use less energy and prevent operational bottlenecks. At the same time, the equipment OEM can remotely troubleshoot equipment issues and provide real-time assistance to reduce downtime.
- Maintain: The customer and OEM have all the insights they need to remedy technical issues and anticipate maintenance requirements throughout the lifetime of the machine, including the opportunity to study the feasibility of retrofits.
Even today, before companies make the transition to EaaS, the virtual twin is a huge step forward for traditional models. At Dassault Systèmes, we’re already using virtual twin technology in the 3DEXPERIENCE platform to support our customers to extend the digital continuity of each piece of equipment they develop, from manufacturing engineering to service engineering. That’s because there is a growing expectation for them to factor in the serviceability of the equipment they build, and they need new functionality to create a service BOM and all associated maintenance programs during product development.
As virtual twin technologies continue to evolve, the ability to plan ahead, factor in all service requirements and anticipate customers’ needs will only go from strength to strength. Indeed, the industry’s future will become more about how we successfully combine virtual and reality. Today, companies are only scratching the surface of what’s possible as they move from generic virtual twins for product design and engineering to specific virtual twins for full operational management. Eventually, virtual twins will encompass an entire production line and every piece of equipment across multiple plants – a company’s entire operation working at optimal levels in the virtual and real world.
Until then, equipment OEMs should think strategically about what their product platform is for the next 10 to 20 years and how it will support not only CAD, PLM, simulation and digital manufacturing, but also services. If they do that, then the inevitable move to EaaS will be far more straightforward.
Key benefits of virtual twins
Like we do in our own lives where we increasingly choose to repair and recycle what we already have rather than always buy new, equipment OEMs and their end customers are being expected to lengthen equipment lifecycles. New EaaS contracts will focus on OEE, energy usage and machine uptime, and there will be even greater reliance on data and analytics to carry out predictive maintenance and continually monitor machine health and function.
Critically, this outcome-based approach will align all stakeholders on maximizing the use of equipment in the field, leading to the following benefits:
- Improved customer satisfaction: Through better operational monitoring, OEMs will be able to identify machine faults and breakages before they happen, resolve breakdowns faster and continually help to prevent production bottlenecks leading to greater reliability across the production line.
- Greater profitability: EaaS opens up new revenue streams in more profitable areas of the business for OEMs, such as aftersales services. As part of this, they can ramp up profits from selling spare parts and equipment upgrades.
- Enhanced sustainability: A greater focus on durability, repair and reuse will lead to longer machinery operating lifecycles, less overall energy consumption and reduced waste.
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