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Key Findings | Showcase | Benefits

Equipment as-a-Service –
Adding value along the supply chain

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KEY FINDINGS

01

  • Currently many markets experience uncertain conditions leading to delays in machine investments and a need for increased flexibility.
  • Business models dealing with these challenges provide great opportunities with the market for EaaS predicted to grow at 45% CAGR

02

  • EaaS business model offer customers increased flexibility and reduced need for initial financial commitment.
  • OEMs can secure long-term contracts and deepen their relationship with their customers.

KEY FINDINGS

03

  • Machine manufactures need to develop their organization capabilities regarding service delivery to enable EaaS models.
  • Data streams will be crucial components of the model and the ability to gather, analyse and draw development conclusions will be key for OEMs.

Showcase

  • The OEM’s customers have paused significant investment in equipment due to the fluctuating markets and uncertainties caused by international crisis situations.
  • This has led to reduced equipment sales at the OEM itself and reduced demand for services. Furthermore, it led to reduced margins in the company, so that cost pressure increased.
  • In this situation, the OEM weighed implementing cost reduction programs or identifying opportunities to increase sales.
  • Ultimately, the decision was made to introduce an EaaS model to offer customers new ways to obtain the equipment.
  • Due to the nature of the equipment, the OEM decided on a pay-per-output model.
  • In order to be able to offer the model to all international customers, the OEM was able to win globally active partners from the finance and insurance industry for the implementation.
  • In this model, services, spare parts, insurance and financing are combined in a bundle and offered at a price per production unit.
  • For the internal implementation, the OEM formed a project team consisting of internal specialists and external experts from Vindelici, which combined all documents, training and processes for the new solution and developed a roll-out plan.
  • Ultimately, the full-service package was tailored to the pilot customer in close cooperation with the insurance partner, the financing partner and the project team.
  • An early outreach with the EaaS model to potential pilot customers was conducted to validate market viability and gain valuable feedback from long-standing customers. Based on the gained feedback, adjustments to the model were implemented within the concept and implementation phase.
  • The OEM had to ensure that a secure connection of the equipment to the IoT platform was possible so that the production data could be transmitted without manipulation. The monthly billing of the model, as well as the planning of services, is based on this data.
  • Furthermore, the OEM needed to enable its organization to respond quickly to customer support requests and perform smooth on-site equipment maintenance. This included recruiting local service personnel, as well as training service staff on how to handle remote support requests. Furthermore, the technical basis for remote service within a customer center had to be expanded (e.g., to be able to provide real-time service and repair guidance to on-site staff on virtual displays).
  • In order to adapt the entire organization to the changed processes in an EaaS model, the OEM formed a cross-departmental team during the implementation phase so that necessary changes, e.g. in IT systems or accounting processes, could be implemented at an early stage. Furthermore, internal training was conducted for the sales force to explain the EaaS model and highlight the new benefits for customers. This enables the sales staff to have effective discussions with customers, during initial contact and later negotiations.
  • The pilot customer was a company that had carried out a vertical integration and therefore could not build on many years of experience in some areas. The OEM was able to supplement the customer’s lack of expertise with its existing know-how and services in the full-service package and guarantee a smooth start of production.
  • The customer was able to implement its planned growth strategy more quickly by reducing initial acquisition costs.
  • Furthermore, the customer appreciates the planning security due to the long-term duration of the service contracts, as well as the simple cost structure, since one price per production unit is charged for the entire full-service package.
  • On the basis of the EaaS model, the customer can benefit in the long term from the OEM’s experience with regard to the optimal operation of the equipment.
  • Furthermore, it is possible for the customer to absorb fluctuations in demand, especially as a new market player, via the EaaS model and thus to benefit from the advantages of a flexible cost structure.

Benefits EaaS

For the customer

Public_Sector_Consulting Initial acquisition costs Initial acquisition costs strongly reduced
strongly reduced 01 Equipment as-a-Service allows the conversion of CAPEX to OPEX
 Public_Sector_Consulting Full service package Full service package including maintenance, repair, financing and repair, financing and insurance of the equipment including maintenance, insurance of the equipment 02 Always well maintained equipment by the manufacturer allows full focus on production Public_Sector_Consulting Increased flexibility Increased flexibility as costs scale based on on usage or usage or production volume as costs scale based production volume 03 Costs incurred adjusted to market fluctuations through flexible payment based on the quantity produced Public_Sector_Consulting Cost transparency Cost transparency and long-term planning security security and long-term planning 04 One price for the entire full-service package offers the possibility of accurate cash flow planning based on production orders

For the OEM

Public_Sector_Consulting Sale of equipment to Sale of equipment to financial partners financial partners 01 Retention of previous sales cash flows and immediate recognition of sales as revenue Public_Sector_Consulting Insurance of the Insurance of the equipment to be maintained maintained and and repaired by partners equipment to be repaired by partners 02 Protection of the equipment through global insurance Public_Sector_Consulting Securing long-term Securing long-term service contracts
service contracts 03 Optimization of cash flow and reduction of revenue fluctuations via multi-year service contracts
 Public_Sector_Consulting Closer customer relationship Closer customer relationship and data insights into equipment usage and connectivity usage and connectivity into equipment and data insights 04 The data obtained via the IoT connection allows production and equipment to be optimized and new insights to be generated via data analyses
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Dr. Michael Hofmann

Constantin Chrocziel

Chris Schultheiß

Chris Schultheiß

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