It's time to stop thinking of products and services as separate

Professor Raj Roy, Director of Manufacturing at Cranfield University, explains why a considerable shift in the business environment is needed so products and services stop being seen as separate

The value of through-life engineering services (TES) is rooted in a basic principle: assets that work generate value, those that don’t only generate a cost.

TES means making sure any assets (vehicles, machinery, plant) are kept working, as reliably as possible and at the lowest possible cost – minimising the need for replacements, man-hours on maintenance or labour costs.

Technologies involved in TES approaches include big data, sensors, self-healing and self-repair materials, alongside sophisticated systems of analysis to maximise use of assets.

In essence, for industry it means buying one tool, machine, or engine every thirty years rather than every fifteen years. Because of TES, manufacturers are quickly shifting to a model where they are as much service providers as producers.

Figures show that the global market for TES is expected to grow to £710 billion by 2025 – and it’s estimated that £31 billion will be used directly for performance improvement through the application of TES. It’s estimated that around 16.8% or £275.2 billion of the UK economy could be developed and improved by engineering services.

In a TES transaction, the customer pays for a service or functionality rather than an asset, and does not think of products and services as separate.

It is the focus on desired functionality which enables the switch of emphasis from ownership of a product or system to delivery of a service. Maximising the service value throughout the expected operational life of the product or system, while minimising cost, become the central drivers.

‘Value-in-use’ becomes the touchstone by which a product or system is judged. This kind of cultural shift requires considerable change in the business environment.

Although there are areas of excellence unique to the UK, the opportunity for TES-based business models is presently underestimated. Whilst practised (though not always using the same name), TES are not well understood across the national economy and the market is immature.

Information sharing is constrained by a number of factors, not just because of IP concerns, but also commercial trust issues which limit the ability to exploit the opportunities presented.

Nonetheless, world-leading examples of TES exist in the rail, aerospace and defence sectors, as well as some isolated examples in other sectors. An example of TES’s use is the railways, where a large-scale and complex network of infrastructure is in regular use, with some assets being remote, while others are difficult to access, and in areas that are dangerous for maintenance staff.

The aim at Network Rail is for TES to extend the life and reliability of long-life assets, such as switches and crossings – areas that are currently estimated to consume 50% of all maintenance budgets.

Overall, in the UK, profit-and-loss-based financial drivers dominate. Investment decisions are made on the basis of cost rather than value, which leads to a disconnect between capital and through-life considerations. A commitment to service is seen as high-risk, leading to an aversion to invest and innovate in the field.

Under the present ‘ownership’ model, the risks are already high, particularly when it comes to obsolescence and technology lag. The underlying economics of TES models are not well understood.

Suppliers and procurers think in terms of products, not their function throughout life: through-life support is not a primary driver for OEM designs to tailored requirements where cost, schedule and performance are the focus.

In general, service is seen as an add-on to equipment sales and often a significant source of income, even though high service costs present a potential source of customer dissatisfaction.

Despite this, the value in TES has led to a five-year project led by Cranfield and Nottingham universities. Funded by the UK’s Engineering and Physical Sciences Research Council, the aim is to create a world-leading team that will help high-value UK manufacturers access the services market and generate more opportunities for end-users of engineered products.

The new TES research initiative can help improve and widen access to technologies that will underpin the shift to service models. Demonstrations of success will inevitably attract more manufacturers to TES.

But ultimately, when it comes to realising the 20/20 vision of the national strategy on engineering services (to meet the goal of a 20% reduction in whole life costs and a 20% increase in availability), there’s going to need to be a more collaborative and concerted approach.

 
Professor Raj Roy is the Director of Manufacturing and Director of the EPSRC Centre for Innovative Manufacturing in Through-life Engineering Services at Cranfield University.