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What is the Machines as a Service Business Model?

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What is the Machines as a Service Business Model?

26 Apr, 2019

In this article, we will cover the fundamental aspects of the machines as a service model. Machine manufacturers and factory owners can use this article to learn more about what utilizing machines as a service is all about, the key benefits of the machines as a service model, and which industries are currently using this model.

This article covers:

  • Machinery within the “smart” factory context
  • What is meant by the machines as a service model
  • The key benefits of the machines as a service model
  • The industries which are using it
  • What it takes to implement a machines as a service model

 

Machinery Within the “Smart” Factory Context

Machines and equipment on the factory floor in the “smart” factory context should:

  • Have sensors that are able to collect data and transmit this data to IoT gateways
  • Be connected to factory IoT platforms, HMIs and the SCADA system
  • Play a role in efficient automation systems within the factory
  • Be part of efficient big data enhanced product lines and assemblies in the factory
  • Be part of multiple value chains in the factory
  • Generate revenue for the factory as part of internal factory value chains and external client supply chains and production lines

Staff should be able to engage with these machines through the use of advanced HMIs such as screens, smartphones and PCs both on-site and remotely. Staff should also be able to easily access from these machines (using the HMIs) the big data collected and processed.

Data collected from the machines should be utilized in predictive maintenance operations, data-driven quality control operations, product optimization, customer requested customizations and other factory-related optimization. In the “smart” factory context, the emphasis is placed on machine-to-machine engagement and connectivity, machine-to-human engagement and the delivery of key data and KPIs to staff and other personnel.

Machine manufacturers consequently have to design machines with their main roles in the “smart” factory in mind. Additionally, OEMs should consider additional revenue generating models that they can implement through these machines.

 

What are the two types of Machines as a Service Model?

Type 1

The main type of machines as a service model, involves machine manufacturers selling the machine at little or no cost, and receiving a small sum for every item or product produced by the machine. This is the dominant type being utilized currently.

The “smart” factory facilitates the use and implementation of this model due to the emphasis on data collection and data-driven optimization. Product and operational data generated from the machines would need to be integrated into both the manufacturer’s and the client’s internal and external processes.

There is also a need for a robust industrial cloud platform that would deliver the real-time data from the machine to the manufacturer and the client. Machine manufacturers can schedule predictive maintenance more effectively since they would be receiving consistent data about their machines from the cloud platform. Either the machine manufacturer or another technical provider could set up this industrial cloud platform.

Type 2

In addition to being part of the product lines of the factory, machinery on the factory floor can also be outsourced to customers or clients that want to use that machine as part of their production lines and assemblies. Consequently, revenue is generated for the factory owner due to the role the machines play in internal factory processes and value chains, as well as the role these same machines play in external client processes and value chains.

In this second type of machines as a service model, one factory would purchase a machine and other clients/customers could then, using a subscription-based paid service, use this machine in their assembly lines.

 

The Key Benefits of the Machines as a Service Models

Using these models provides benefits for both the manufacturer and the clients using the machines to produce outputs.

Clients who have not purchased the machines outright themselves but are outsourcing these machines from the manufacturer, benefit from lower capital expenditure investments, consequently turning CAPEX into OPEX. In addition, they benefit from the increased flexibility this model offers and can implement just in time manufacturing. A factory can also be set up fairly quickly since the cost of hiring the multiple machines needed would be less than purchasing each machine individually. The predictive maintenance would also be handled entirely by the machine manufacturer whose predictive data algorithms would be enhanced since they would be collecting machine data from multiple client sources.

OEMs benefit because the machine becomes a source of revenue for its entire lifespan versus just a one-off sale. Additionally, OEMs benefit since they are in a constant relationship with their clients due to this model and can offer their clients additional machinery, packages and services as the need arises. OEMs can also use the data they are collecting from multiple clients and multiple machines of a certain type to improve the design of that specific machine.

 

The Industries Using the Machines as a Service Model

The office equipment, jet engine and medical device industries have all been using the machine as a service model. Rolls Royce, for example, offers clients options that involve paying for a fixed hour of operation of a machine, rather than purchasing the machine.

Many people are familiar with a type of machine as a service model. For example, instead of purchasing high-spec printing equipment for themselves, they may pay for the use of a printer or photocopier at a Digital Printing shop.

 

What Does it Take to Implement a Machines as a Service Model?

Machine manufacturers considering the machines as a service model should firstly ensure that their machine is designed to deliver the needed data to both the machine manufacturer and the clients using the machines. OEMs should incorporate the latest IoT technology into their machines so that they can monitor the real-time usage of their machines effectively, and the product outputs. OEMs should spend time thinking about the percentage they are going to claim, from the production outputs/time in use of their machinery. Furthermore, they should also discuss the predictive maintenance and repair options with their clients, and provide packages to accommodate predictive maintenance.

It is advisable that OEMs who are currently selling their machinery using the once-off model, start incorporating the machine as a service model with some of their machines in order to see the benefit of a consistent revenue stream. Also, older machinery may need an upgrade in order to accommodate the machines as a service model.

 

 

Conclusion

The adoption of machines as a service model is definitely something both machine manufacturers and factory owners should consider in order to increase their revenue and profits. “Smart” factories of the future look set to adopt the machines as a service model increasingly, since it lowers capital expenditure, the factory can be set up and production can start quickly. Machine manufacturers benefit from this model since they can receive a consistent income stream from their machines and increase their market share.

 

Sources:

https://www.forbes.com/sites/willemsundbladeurope/2018/08/13/machines-as-a-service-industry-4-0-powers-oem-aftermarket-revenue-growth/#1dce8f353541

https://www.forbes.com/sites/forbestechcouncil/2018/04/11/industry-4-0-the-smart-factory-and-machines-as-a-service/#b9fba161dff5

https://www.digitalistmag.com/customer-experience/2017/10/26/manufacturing-wisdom-apply-pay-per-use-for-equipment-as-service-05444323

https://www.digitalistmag.com/customer-experience/2018/04/03/make-industrial-machinery-more-profitable-with-iot-06042223

https://www.manufacturingglobal.com/technology/industrial-internet-things-iiot-opportunity-manufacturers-cannot-ignore