How EaaS can benefit OEMs and manufacturers

Equipment-as-a-service (EaaS) can improve original equipment manufacturers (OEMs) and their customers’ productivity without significant upfront investments. Several benefits and questions to consider are highlighted.

By Brandon Teachman June 5, 2023
Courtesy: Cincinnati Incorporated/Steve Rourke, CFE Media and Technology

Equipment-as-a-service (EaaS) insights

  • Equipment-as-a-service (EaaS) allows original equipment manufacturers (OEMs) to provide their customers with the equipment they need on a rental or subscription basis.
  • EaaS can help customers that might need a particular task performed in a short period of time, which saves them from having to make a long-term investment that could hamper their bottom line.

Manufacturers face the increasingly challenging task of keeping up growth and improving their bottom line. As a result, many manufacturers are turning to equipment-as-a-service (EaaS). EaaS is a model where original equipment manufacturers (OEMs) provide their customers with the equipment they need on a rental or subscription basis. EaaS allows customers to use the latest technologies and equipment without significant upfront investment. Instead, they can pay for the equipment as they use it, which can help reduce their costs and improve cash flow.

Three EaaS benefits for OEMs

The thing most people think of when they hear of any product as-a-service is likely increased revenue. While this does play a factor, there is more to it than that. Offering equipment on a rental or subscription basis can help improve revenue predictability and stability, reducing the reliance on one-time sales. The other benefits of EaaS include:

  1. Increased customer base: EaaS can attract new customers who may not have been able to purchase the equipment outright.

  2. Better customer relationships: EaaS also provides OEMs with a method to build ongoing customer relationships. The relationships help to increase customer loyalty and improve customer satisfaction.

  3. Better equipment designs: EaaS allows OEMs to collect data on how their equipment is being used and how it is performing. This information is used to discover areas for improvement, create new products, and give insights to customers to assist them in optimizing their operations.

Six EaaS selling points for the manufacturers

Manufacturers often seek new ways to increase efficiency, reduce costs and stay competitive. EaaS may be a solution OEMs can help with. EaaS can provides benefits such as:

  1. OpEx vs. CapEx: In an EaaS model, the equipment is a rental, which provides end-users with predictable and consistent costs for their equipment. Being a rental allows the user to claim it as an operating expense (OpEx). Operating expenses are often easier to get approval for than larger capital expenses (CapEx). Some manufacturers have even negotiated a price per part rate, allowing companies to correlate to the finished result.

  2. Scalability: By allowing end users to add equipment as needed, EaaS can assist end users in scaling their operations more effectively, which results in no significant upfront investment in new machinery to scale up their operations to meet demand.

  3. Improved uptime: Manufacturers can reduce the risk of equipment downtime by providing equipment on a rental or subscription basis. The OEM is incentivized to help keep the line up and running. This can be the OEM conducting preventative maintenance, prescriptive maintenance, on-call support, or other time-saving operations.

  4. Reduced risk: Manufacturers can reduce the risk of investing in equipment by providing equipment on a rental or subscription basis. If business decreases, companies can choose not to renew the lease. An employee’s safety falls on the manufacturer; the OEM will ensure their machine meets local codes.

  5. Latest technology: Another benefit of EaaS for the end user is access to the newest technology. Since EaaS providers are responsible for upgrading the equipment, they can ensure the end user can access the latest technology. These updates can include software, firmware and security updates.

  6. Environmental impact: EaaS also helps to reduce equipment’s environmental impact. By providing equipment on a rental or subscription basis, manufacturers can reduce the environmental impact of their equipment. This is because when one customer is done using the line, it can be rented out to another customer to ensure continued life and the need to dispose of the equipment.

Four ways IIoT helps EaaS succeed

The industrial Internet of Things (IIoT) plays a critical role in the success of EaaS. With a modern controls infrastructure, it is easy to get manufacturing lines online, and some applications for this data include:

  1. Predictive maintenance: By collecting and analyzing data from sensors installed on the equipment, IIoT systems can predict when maintenance is needed and prevent equipment breakdowns. This allows EaaS providers to offer a more reliable service to end users, reducing downtime and improving equipment performance.

  2. Remote monitoring: With IIoT, EaaS providers can monitor equipment performance in real-time, detect issues early and address them before they cause downtime or impact productivity. This ensures end users always have access to high-performing equipment.

  3. Performance optimization: By collecting and analyzing data on equipment usage, IIoT systems can identify patterns and make recommendations for improving efficiency, reducing waste, and optimizing production. This helps end users maximize the value of their equipment while minimizing their costs and environmental impact.

  4. Improved communication: Communication is vital with any customer, but with EaaS, it is critical to provide data that makes it easier for the customer to keep it running effectively. Typical examples of this are proactively emailing possible issues to the customer, automatically sending the customer a weekly report showing critical production information or sending the customer a monthly email with the maintenance schedule.

Seven question to ask in determing how EaaS fits into a company’s goals

There are a few critical aspects to remember when deciding if EaaS is the best strategy for a company. EaaS, which offers equipment on a rental or subscription basis, can help manufacturers stay competitive and enhance their financial situation. However, not all OEMs will benefit from this approach. It is crucial to determine whether EaaS is the best fit. There are some questions to consider when deciding if EaaS is the right choice for the business:

  1. Is there a demand for EaaS in your industry? Companies should research existing and potential customers to determine if there is a desire for EaaS offerings.

  2. Are you making repetitive machines? In order to lease a machine to multiple people and to justify the investment in development, it cannot be a highly customized machine.

  3. Is EaaS financially viable? Companies will need to analyze the costs and benefits of offering EaaS to determine if it makes financial sense for your business.

  4. How will you bill the customer? Companies need to decide if it will be billed as hours used, per month flat rate, per piece or some combination of these.

  5. Can you provide the necessary support and maintenance services? Offering EaaS requires ongoing support and maintenance services. Companies must ensure they have the resources and expertise to provide this level of service.

  6. Is digital transformation and IIoT technology already being supported and embraced? EaaS often uses technology to monitor and optimize equipment performance. Companies must ensure they have the necessary technological infrastructure to support these efforts.

  7. Is the necessary legal framework in place? There may be legal requirements companies need to meet to offer EaaS. This will include — but may not be limited to — a contract with the customer. This is an easy problem to overcome, but companies must partner with a legal firm with experience in this unique area.

EaaS can aid OEMs in maintaining their competitiveness and enhancing their financial performance. By offering equipment on a rental or subscription basis, OEMs may improve income streams, lower the risk of investing in unnecessary equipment, strengthen client ties and stay one step ahead of the competition.

The sort of equipment the company provides, the sector they operate in and the company’s culture should all be considered when determining if EaaS is the best fit.

Author Bio: Brandon Teachman is an application engineer at Vision Control & Automation, where he helps businesses improve their manufacturing processes through automation solutions.