How does the Industrial Internet of Things (IIoT) transform the business models of OEM ?
In this case study, we would like to address ourselves directly to the original equipment manufacturers (OEMs) represented here by Marc, the technical representative of OEM Inc. The Industrial Internet of Things (IIoT) and the predictive algorithms used (AI) offer revolutionary new business models for OEMs and especially for their industrial customers. They face a significant shortage of specialized technicians and are increasingly looking for a turnkey service that offers them operational reliability and peace of mind.
The Industrial Internet of Things (IIoT) is growing rapidly all over the world. By 2025, there are expected to be more than 75.4 billion devices and machines connected. In our previous articles, we mentioned that manufacturing industry is no exception with opportunities to optimize production and maintenance by reducing costly emergency repairs (click to read our previous article). The new business model for OEMs is to select and install the right sensors on critical components of equipment in service with customers, collect information and analyze it on an ongoing basis.
What are the benefits of this new business model for OEM ?
With the cloud, software-as-a-service (SAAS) has become very popular and accessible for companies. Essentially, it allows users to access a service for a monthly or annual subscription. The company provides the software, takes care of its maintenance, updates and security. For example, Netflix provides TV series or movies on a monthly subscription basis.
In companies, we use SAAS to manage our customer relationships with a CRM (e. g. Insighlty), for our accounting (e. g. Quickbook online) or for data collection with mobile forms (click here to learn more).
Marc the representative of OEM Inc.
Marc, the OEM Inc. representative, still uses the traditional service or lease contract model. However, he understands that these old models bring him their share of problems with his customers. In many cases, they do not detect early signs that the equipment has problems leading to urgent repairs. In addition, the maintenance schedule for this equipment may not be appropriate for the customer’s planned shutdown schedule. The equipment may also exceed or no longer meet the needs of the user.
In short, for these and many other reasons, service contracts are often costly for OEMs and unsatisfactory for their customers. Marc is thinking, among other things, of his last meeting with Franck, at the XYZ Factory, where he complains about his automated machines producing some of his components. Marc believes he has found a solution to reduce service costs and above all to better meet the needs of his customers, including Franck.
Franck, the production manager at Usine XYZ
Franck has signed a service contract with OEM for his critical machines. However, Franck is dissatisfied with the many downtimes and unexpected machine failures that cost him delays in orders and lost productivity.
Max, Franck’s’ maintenance technician and employee, is overwhelmed and exhausted in ensuring 24/7 emergency calls from operators. This morning, he gave his boss an ultimatum: Franck must find a second technician to maintain these capricious machines and his other equipment, otherwise Max will resign.
Franck wonders how he can solve this problem of human resources, quality and production. It was then that he was invited by Marc to attend a conference on the Internet of Industrial Objects and Predictive Maintenance. Franck returns to the encouraged office about the new IIoT technology and the SAAS system from his OEM supplier. He convinces himself and Max to try the machines connected with the OEM SAAS service contract. Here is a portion of the business model that was presented to him :
Example 1 : New business model for the OEM supplier
Back at the plant, Franck arranged a meeting with his OEM supplier. They discuss the problems experienced with current machines. Franck does not want to invest money in his current machines, as he is not sure that they are suitable for the manufacture of his customers’ new products.
Marc is convinced that the machines are adapted to his customer’s needs, but that the problems experienced are related to new operators who do not use the appropriate work methods. Operators push the machines to high production levels and thus pass on their operation and machine downtime problems to Max, the maintenance technician. Marc offers Franck to install sensors on his current machines and connect them to his IIOT platform, which Franck and Max will be able to access for a reasonable monthly fee.
After the installation of the sensors and the commissioning of the machine condition monitoring system, Franck and Max already have access to a lot of information they didn’t have before. Here are some examples of the screens they can view on their tablet or smartphone.
Screen 1 : Real-time data of an engine
Screen 2 : Vibration predictive analysis
After three months of using the IIoT platform and with continuous data analysis, Marc and his team at OEM discovered that :
- The technicians ensure the remote monitoring of the machines. Travel expenses for “useless” visits have drastically decreased.
- Technicians are notified more than 100 days in advance when maintenance is required based on predictive data analysis.
- The service technician’s visit is scheduled according to customer shutdown schedules without the customer having to worry about it.
- If certain critical values are reached on a machine at a customer’s site, the service technicians are notified by SMS or email and can thus validate with the customer whether the machines are operated properly.
- Technicians are able to provide customers with the root causes of problems so that they can implement appropriate preventive actions with their teams.
- The team of machine design engineers analyses the data of the machines in service, compares them to digital twins simulation and can thus improve the design of the equipment according to the real needs of the customers.
Franck and Max also see the many advantages of the ”Equipment as a Service” mode :
- Emergency repairs have become almost non-existent.
- Predictive maintenance provided by OEM makes it easy to schedule work according to the plant’s planned shutdown schedule.
- They can also monitor real-time machine data and have observed significant variations between experienced and new operators.
- They have organized refresher training to train new operators.
With the as-a-service equipment, peace of mind and good humour have returned to the team. We have reinforced good working methods with operators. The machines no longer break. Predictive maintenance is provided by OEM. Max has decided to stay with us and we are considering installing other sensors to track other critical machines. – Franck, production manager of the XYZ plant
This is why the concept of equipment as a service is a new business model with high added value. Sensors, IIoT, and AI allow OEMs to reduce the costs of roadside service teams. Monitoring is done remotely, for several sites. Industrial customers are interested in purchasing the PEACE OF MIND monthly on the follow-up of their equipment. They know how much it is worth : reduced failure rate, sustained production and consistent quality because the equipment is maintained before problems get out of hand.
- Are you an innovative OEM who wants to stand out from the competition ?
- Do your European competitors already offer machines connected to YOUR customers ?
- Would you like to integrate the ”peace of mind” option with IIoT technology and predictive data analysis into your service contracts ?
We can help you develop your PEACE OF MIND solution for your customers ! Contact us !
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