The revenue model of the manufacturing industry is undergoing a major transformation. An increasing number of companies are shifting from the traditional approach of "selling things" to a new model of "providing what can be done with things," called servitization. What is the background behind the birth of servitization, how has it evolved, and how is it trying to change the manufacturing industry?
From providing things to providing experiences – Servitization
What exactly is servitization, which is said to change the way manufacturing works? Let's take a look at the background and characteristics of the idea of servitization, and the changes it will bring about.
A shift to a new business model is required
Traditionally, the goal of manufacturing companies to increase profits was to "manufacture and sell products." However, competition in product performance and price is intensifying day by day, and in recent years there has been a constant need to deliver products to the market with extremely short lead times.
In this environment, the gradual process of changing generations, where improvements are made to one product and then a successor with improved performance is not suitable. This is because before customer feedback on the product can lead to better product development, it is necessary to move to the next generation of machines with completely different performance. As a result, it has become difficult to adopt a development method in which manufacturers and customers share and nurture good products.
Furthermore, while factory automation on the physical side of things, such as equipment and facilities, is taken for granted at manufacturing sites, digital transformation is also required. The shift to new structures, such as digital transformation and smart manufacturing, is also an urgent task.
In this environment, one business model is gradually attracting a lot of attention. This is servitization. It is a new form of business that aims not to sell the products that are made, but to sell the experiences and services that can be obtained by using those products. The manufacturing industry is on the verge of a change, from manufacturing to creating things.
Servitization is changing the manufacturing industry
So, what changes will servitization bring to the things and services provided by the manufacturing industry? The following three are major changes that are predicted.
- Flattening product usage fees
With servitization, from the customer's perspective, they go from "owning things" to "using services that use things." This is a feature that easily ties in with the subscription model that is mainstream in various fields. Even if it is difficult to calculate the cost-effectiveness of the initial cost, it becomes easier to calculate by flattening the cost in the form of a usage fee. This lowers the barrier to entry and leads to the development of new customers. - Servitization is the idea of getting companies to build long-term relationships with their customers
, rather than selling a product and receiving payment in return, by having customers pay for the services that can be used with the product. This means that the service is not just provided after the product is sold, but is provided on an ongoing basis. This means that customer relationships based on servitization are inevitably long-term. Another characteristic of servitization is the shift from a method of improving products and developing successors to a method of increasing customer satisfaction through repeated improvements to services. - Differentiation through services
In the race to develop products, the pursuit of functions that customers want to the extent possible with modern technology has resulted in a saturation of performance, making it difficult for companies to differentiate their products. However, with servitization, what is provided is a service, and differentiation is possible because there are no technological barriers to its constraints. Differentiation through services has great potential for business growth. Services that combine ICT solutions, which are particularly noteworthy, are expected to be the key to differentiation in the future of servitization in the manufacturing industry.
IoT and AI have revolutionized the manufacturing industry
One of the factors that is said to have triggered the spread of servitization is the practical application and spread of IoT and AI, which have brought about major changes throughout society.
IoT and AI have evolved into new forms of manufacturing, such as the concept of smart factories and smart manufacturing in the manufacturing industry. This also means that the overall system has become more important and valuable than a single innovative device. In these new forms, demand for servitization has been born. Equipment manufacturers have shifted from simply selling and delivering equipment to thinking about what else the equipment can produce and providing it.
Another factor is the increasing value of the information generated by equipment, rather than the equipment itself. This can be seen in the explosive spread of IIoT (Industrial IoT). Information generated by equipment, which was previously treated as a source of control I/O signals and calculation of operating rates, is now considered more important as a key that may improve the entire system.
This is where the value of information comes into play with servitization. By making devices smarter, it is now possible to efficiently collect valuable information and provide services that generate the next level of added value.
Evolution to meet customer demands: Edge computing
As more and more information becomes available due to improvements in sensing technology, new ways of using information are being required. This new way of using information is next-generation automation that utilizes AI. To maximize the benefits of automation using AI, greater precision and speed than ever before are required.
Edge computing is a technology that is garnering attention as a clue to solving this issue. By speeding up processing and adding real-time information, edge computing is attracting attention as a key technology that will advance smart manufacturing. So, how can edge computing be used to encourage a shift to value creation at manufacturing sites?
Requirements for edge computing for machinery and equipment
In the control devices and machinery that have been used in the manufacturing industry up until now, the most important things have been safety and productivity. With safety as a given, it is paramount to not reduce production efficiency, and downtime is the element that you most want to eliminate in order to ensure stable production.
In addition, manufacturing sites can be harsh environments depending on the manufacturing process and the characteristics of the processed products, so environmental compatibility such as durability, heat resistance, and dust resistance are also essential. It is also important that the system is easy to install, has simple operation, and can be quickly restored in the event of a hardware failure.
In the PLC-based control used in conventional manufacturing sites, a closed network environment that was completed within the factory was the norm. However, to make full use of the benefits of IoT, external connections must also be considered. At this time, security and vulnerability measures are essential for safe and stable operation. At the same time, it would be ideal if the distribution function was automatically executed according to the load situation, and failure analysis and failure prediction based on that were also automatically performed.
Related article:
How to choose an edge server to improve OEE – Overall Equipment Effectiveness | Stratus Blog
Introducing edge computing to realize value creation
By incorporating an edge computing platform that meets these requirements, it becomes possible to provide services with added new value.
For example, it expands the possibilities for providing benefits and services to customers, such as the following:
- Reduced maintenance workload
Unlike office environments, edge computing platforms for use in factories are designed to withstand a wide range of temperatures. Another major feature is their extremely rapid recovery ability. By incorporating this, customers can strengthen their conventional control systems while proposing infinite possibilities for IoT applications. - Creating a business model that makes remote maintenance services the core of revenue
One of the most important requirements for manufacturing equipment is to minimize downtime when an error occurs. By providing remote maintenance services, we can propose a business model that provides this most important service. - It can be said that the PLC-based control systems up until now have remained one step away from digital transformation. Although they are at the entrance to digitalization, they have not yet reached the stage of transformation. The
introduction of edge computing platforms will be the first step in digital transformation and will further expand the possibilities. Taking the first step in digital transformation, it will be a turning point that expands the possibilities of using IoT and AI, leading to the next innovation.
Use edge computing to realize servitization of existing machinery and equipment
In this way, by introducing an edge computing platform optimized for the manufacturing industry, it is possible to make existing machinery and equipment smarter and achieve servitization.
Instead of selling the machinery itself as in the past, relationships with customers will be built that focus on providing services, such as what can be done with the machinery. Furthermore, in an era in which the value of information is increasing, new business models will be created by incorporating edge computing, which takes information usage one step further.
Servitization is expected to become increasingly important in smart factories and smart manufacturing in the future. Why not consider introducing an edge computing platform to realize servitization?
Stratus offers the Stratus ztC Edge edge computing platform for the manufacturing industry as a solution to shift manufacturing from monozukuri to kotozukuri.
For more details, please see this document.
