Manufacturers looking towards equipment-as-a-service business models

27 July 2020

Relayr has released a report, highlighting the current mood of the US and German manufacturing industries.

The study set out to look at the attitudes toward current developments in the industry and any short or long term impact that the current pandemic will have on operations. It surveyed over 200 leaders in the US and Germany manufacturing industries. Topics ranged from how the crisis affects operations and how they are dealing with challenges presented by the pandemic to their assessment of future economic development.

Most respondents said that Covid-19 has affected existing customer groups and regions, and many manufacturers are looking for ways to adapt. Almost all respondents say technological advantages such as industrial IoT (IIoT), big data, and artificial intelligence support their coping with uncertainty.

U.S. companies have been hit hard by the crisis: Most respondents (67%) in the US say the crisis has had a somewhat negative or very negative impact on their businesses. Their biggest challenges are a decline in new orders (58%), their employees’ concerns about a possible COVID-19 infection (56%), and a decrease in sales (54%). However, only 11% of US companies are seriously concerned about remaining in business.

Investment behaviour is curtailed
Half of the US companies surveyed expect their investment behaviours to be lower than 2019, while 14% are unsure. In contrast, just over one-third (36%) plan to make investments at the same level or higher than last year.

Flexibility is the new mantra
What measures have the surveyed companies taken to meet the challenges of the crisis? ‘Increased flexibility’ was at the top of the list for US manufacturers (59%). Other top measures include improving customer service and relying on technical innovations to counteract the crisis’s effects.

Equipment-as-a-Service business models are becoming increasingly popular: A complete business model overhaul was an option for only a few of the surveyed companies and 16% of US companies are planning to transform at the moment.

However, a majority of those surveyed recognise that new business models, such as pay-per-use models (equipment-as-a-service), represent an advantage for both the supply and demand sides in the current crisis.

In the US, 34% said pay-per-use models represent a big or a very big advantage, while 29% consider it a slight advantage. Almost half of the companies surveyed also stated that they use a pay-per-use model themselves (18%), offer it (15%), or do both (9%).

Predictive analytics is on the rise: The respondents are adopting various technologies to gain a competitive advantage. In the US, 38% of businesses are implementing predictive analytics, followed by big data (33%) and IIoT (32%).

Of note, more German companies (47%) use IIoT and AI to gain a competitive advantage, while U.S. manufacturers have higher usage rates of predictive analytics.  These innovative technologies not only represent a fundamental advantage for the respective businesses but are especially beneficial in the current situation. Among the companies that use one or more of the listed technologies, 99% of the US respondents believe technology will help their company in the crisis.

Easing of lockdown measures shows positive effects: The first loosening of lockdown measures is already leading to positive effects. Since restrictions have lifted, 14% of US companies have felt a significant increase in demand for their products, and 45% have had a slight increase compared to the weeks before the easing.

Commenting on the report findings, Josef Brunner, CEO at relayr, said: “These unprecedented times and developments cannot be compared to anything in the recent past. Therefore, it is encouraging that the manufacturing industry is fairly optimistic about the future. It clearly shows modern technology, flexibility, and customer focus are extremely critical factors for economic success in general and for building resilience as a business. Thus, even in these unusual times, companies can build the most solid basis for shaping and securing their future and the future of the industry.”

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