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Spare Parts: Servitization and Pay-Per-Use as Revenue Models for the Future

In the past, not even very long ago, the status quo of almost all industries was a RTF (run-to-fail) maintenance. A mechanical engineer sold an efficient and ideally matching installation to its customer. If anything ever went wrong with that machine, maybe the engineer could supply and install some replacement parts, but that was about it. Not only didn’t the engineer alter the machine to new needs, nor did the customer let the engineer in on future ideas to grow. Nowadays, there is a noticeable shift towards servitization. Mechanical engineers have to recognize that their product, their machine, is a platform to deliver a service.

Lifetime maintenance service

In a servitization business model, not only machines and spare parts are delivered to the customer, but also a dedicated lifetime maintenance service, which guarantees an always running machine. One can also think even bigger: a 'pay-per-use' model, in which customers only pay for the use and maintenance of the machine, with a price for each machine operation to be carried out.

Servitization benefits

Servitization and pay-per-use have the great advantage that the users of machines no longer have to carry out the complex maintenance operations themselves. More so, this model guarantees that production will never stop unexpectedly – or at least the financial risk of a broken machine lies no longer at the client’s side.

For the supplier of machines and spare parts, the 'pay-per-use' model offers long-term customer loyalty due to a close collaboration between mechanical engineer and customer. Is the machine in question still the optimum for the customer’s needs? Is there any chance to optimize the processes around the actual use of the machine? What does the customer need in 3 years? An enormous strive for innovation and customer-centric optimization emerges from running such a new form of business (besides the obvious constant flow of revenue).

The spare parts issue

If the responsibility of keeping a well-oiled machine running lies on the engineering and not on the customer side, the issue of using copycat (and low-quality) spare parts is no longer a pressing one. If the engineer is doing the math, the installation of an original replacement is more likely, and the machine will last longer.

A servitization business obviously calls for the use of all kinds of new, intelligent solutions. Keeping in mind that an average IoT sensor nowadays costs about 35 cents, IoT-connected machines or predictive maintenance come into play. Whereas until recently the spare parts business was still known as reactive and not very receptive to new developments, significant steps are now being taken in the collection of data or the design of processes that enable fast and proactive action. Machines will soon send a notification when, for example, its transmission begins to deteriorate, so that parts can be replaced even before the machine breaks down.

Whatever the path taken, one thing is certain: in the spare parts business, the 'run-to-failure maintenance' model has become an outdated one. It is the 'manufacturing-as-a-service’ or servitization model that will now play the complex but very promising leading role. 

And where to host such a new business model? We say: in a digital customer portal.

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