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OEM’s: are you prepared for PaaS?

07 November 2016

Bob Hillier discusses the concept of PaaS and the software tools that can help OEMs make the move to this new sales model.

Rolls Royce recently celebrated the 50th anniversary of its 'Power-by-the-Hour' approach to engine maintenance management. Since its introduction, companies from the automotive, aerospace and industrial sectors have followed suit, making product as a service (PaaS) plans available to their customers. 

Offering PaaS requires 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. 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 is fully recycled at the end of its life.

One of the main advantages of offering PaaS is that it gives OEMs an opportunity to build long-standing relationships with their customers and presents opportunities for the proposal of additional products and services to compliment those already being used. 

Research into PaaS suggests that such a business model can lead to increased economic and environmental efficiency, or eco-efficiency – a concept that refers to maximising value, while minimising environmental impact. It drives the OEM to increase a product’s efficiency and quality. 

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.

The Industrial Internet and the Internet of Things bring opportunities for manufacturers to support these new business models 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 are 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. 

So, 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. 

Bob Hillier is managing director of product lifecycle management PLM solutions provider, Design Rule.

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