Manufacturing Leaders Turn To As-A-Service Business Models Post-Covid

With reduced numbers of employees physically available, and factory shut-downs in many sectors, the manufacturing industry is turning to Equipment-as-a-service business models to try and pivot into a new way of

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This desire to pivot business models, and move even further towards a digital manufacturing process, is encouraging, but attitudes are notably different in the US and Germany, which could indicate a split in how medium-sized and multinational enterprises are responding to the pandemic. “24% of German manufacturing leaders are confident that their business will see positive effects when they rebound, compared to 13% in the US,” says Bedi, “this could be a result of German companies generally having a more favorable view of technology, as Germany is several years ahead of the US in terms of familiarity with technology. ” This confidence and comfortability with tech, however, does not necessarily mean that German companies will fare better, or be more willing to transform their business models to respond to the pandemic. “US companies are twice as likely to change their business model compared to German companies, which could be partly due to the size difference of relayr’s clients in Germany and the US [their German clients average $1-2Bn in annual revenue, compared to $200-400m in the US].

Despite the manufacturing industry’s strong need for physical labor and maintenance (Bedi points out that “a typical elevator repair job can take up to six trips”), the sector has been embracing technology for a significant amount of time and as such manufacturing leaders are, on the whole, motivated to make even further digital improvements. “Since February, we have seen three times the number of inquiries about as-a-service [XaaS] business models,” says Bedi, “A lot of people are thinking about how to become more resilient, and there’s no surprise that recurring revenue models are more resilient in the face of downturns and Black Swan events,” the likes of which businesses are living through now and will in the months to come.

At the same time, large enterprises in Germany and small-medium sized manufacturers in the US are increasingly turning to recurring revenue models to rejuvenate their business – as Bedi states “this shift is already happening – we are now seeing aluminium heating as a service, compressed air as a service, everything is being considered as a potential revenue source. ” The seemingly radical move towards recurring revenue streams and remote work is actually a calculated one, and manufacturing leaders are seeing the benefits of transforming both their business and their operational structures to be more resilient and adaptable.

But it’s not just smaller companies that are realizing the benefits of combining service, maintenance and equipment into a rolling lease agreement, and there are some fascinating examples of large-scale shifts to a flexible, technology-enabled way of operating. “Aluvation, for example, have a microfactory inside a shipping container for heat treatment, so they just bring this container to a Daimler/BMW parking lot, they treat all the parts that need to be treated, and then everything is charged by the amount of metal treated, or the hours of operations. ” Providing this specialist manufacturing process in a mobile setting and charging for the service provided has been a game-changer, and most importantly improves the process for everyone.

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