The four key factors for success in the new, disruptive world of Equipment as a Service

Equipment as a Service EaaS is impacting multiple industries from OEM/manufactures to financial services and end users. BearingPoint provides a timely introduction and highlights four interconnected elements that enable best practice.

Donald Wachs

It’s a financially advantageous win-win-win for all players, from OEMs to financiers.

Donald Wachs, Partner and Global Leader, BearingPoint Products

The sharing economy drivers are now disrupting the original equipment manufacturer (OEM) sector. We believe this is a natural progression of the trend in renting or leasing as business and individuals adapt to demand for just in time rental of goods and services rather than outright ownership, especially for rarely used tools or equipment. This, coupled with higher equipment purchase costs due to the rise in global interest rates has driven the quest for ‘Power- by- the-Hour’.

The B2B sector, particularly in construction and transport & logistics, can now move to providing a service due to their ability to adopt new technology, specifically cloud computing, IoT and high end tracking sensors and link these seamlessly to highly sophisticated software and refinancing techniques.

Four Pillars of EaaS leading practice

So how can OEMs and banks look at equipment and finance in a new, productive way?

Selling, leasing or renting models have been around for some time but the EaaS answer lies in embracing an end-to-end software solution connecting these four essential pillars:

1. Equipment asset/fleet planning and inspection

With IoT software, the OEM can find out how its equipment is fairing, how much wear and tear has occurred, and when it needs servicing or replacing. Therefore costs are lower.

2. Leasing operations – integrated contract life-cycle management

The OEM receives digital just-in-time valuation of its equipment use, how it can invoice automatically, and how the client can pay efficiently.

3. Financial engineering of equipment lease

The OEM can now decide how to get the best price for the deployment of the equipment, what the best timing is to switch between bank loans, leasing/rental agreements or other financing; how to fund end-to-end from the OEMs to the banks; how best to insure or reinsure the assets; as well as clearly understand amortisation reporting and full audit trail.

4. Refinancing – flexible asset allocation to funding processing

How to turn the leases, loans and receivables into commercial, asset-backed securities, therefore creating a secondary market for mitigating reliability on the balance sheet.

Advantages to OEMs

OEMs get reliable, predictable cashflow, as well as equipment and maintenance insights from EaaS, benefiting from:

  1. Enhanced machinery design: the collected data (thanks to IoT platforms) from a wide range of production cycles are analysed and shared with the R&D team, letting them develop better features, operations and capacity.
  2. Predictive maintenance: the data, in real time, can show when the equipment needs checking up and repairing.
  3. More sales: OEMs can provide smaller customers with a flexible scheme that allows them to use the equipment on subscription rather than having to finance a purchase, as in the past.

Advantages to end-user manufacturers

For clients that are using a service, and no longer buying a product, i.e. equipment – there are several good outcomes:

  1. Less capital outlay: small and medium-sized producers can enjoy the OPEX opportunity rather than the traditionally more problematic and expensive CAPEX.
  2. Better, reliable data: they can receive production data that will enhance their understanding of machine use and productivity.
  3. Less operating expense: it’s the OEMs who will now be providing the maintenance and repair of their equipment.

EaaS offers an efficient, transparent, flexible, scalable and modular platform – seamlessly integrated with unified, user-friendly interfaces and analytics from SAP, open source and bespoke architecture. It’s a financially advantageous win-win for all players, from OEMs to manufacturers to financiers – provided all the pieces of the puzzle are tied together in the outlined leading practice.

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