Can asset service drive the circular economy?
Mark Wilding is Vice President for Global Customer Transformation at ServiceMax.
In the same month that the UK government backtracked on environmental targets and watered down sustainability pledges, the Ellen McArthur Foundation launched its strategy for circular design. It is perhaps a clearer indication of where business should be going in terms of sustainability, not least because it makes economic, as well as environmental sense.
The Foundation’s strategy is timely, aimed at inspiring change in how products are designed, claiming that “organisations need to leverage design systemically.” It’s an interesting idea because it echoes many of the trends that have already been emerging in field service, especially around servitization.
You don’t have to be a genius to understand the value of repairing and re-using equipment if it means keeping costs low and ensuring productivity uptime. Servitization is built on that premise that organisations sell outcomes rather than products, so customers focus not on how new or shiny equipment is but whether or not it gets the job done.
This fits with the basic principles of the circular economy outlined by the Foundation, the idea that manufacturers can design out waste and pollution and keep products and materials in use. Like servitization, it takes a different way of thinking to realise how this can benefit the overall business. As Malin Orebäck, Senior Expert Design, McKinsey Design wrote in the Foundation’s design strategy report; “a lack of holistic thinking is one of the reasons industries have been stuck in linear business models up to now; it’s only through rethinking at the system level that we’re likely to get unstuck. Which means, to implement a more circular model, a company should apply design talent and design thinking to its entire system, start-to-finish … or, for a circular model, start-to-finish-to-start.”
To be truly circular, an organization should design for service from the outset. This means factoring in service considerations, such common parts and reducing the impact on travel and carbon footprint of those parts, as well as building in reusability via recycling at the design state.
Maintenance and the extension of useful life
The old linear model of buying and selling products, with certain manufacturers focussed on driving faster replacements and upgrades, is entrenched. The challenge for manufacturers is to re-envisage trade as more service driven and less product driven. Understandably this takes time but there are economic benefits to both supplier and customer.
The European Parliament states that moving towards a more circular economy “could increase competitiveness, stimulate innovation, boost economic growth and create jobs (700,000 jobs in the EU alone by 2030). Redesigning materials and products for circular use would also boost innovation across different sectors of the economy.”
Of course, there is an argument that newer products can be more efficient, benefiting from the latest technologies and parts but it is not the point. If SLAs for an outcome-based approach call for a 15% reduction in costs, for example, not all products would need to be replaced to achieve this – in fact as long as products are still productive and cost and efficiency targets are being met, there is surely no need for a rip and replace approach.
Also, a replacement of an asset in one area can lead to the subsequent reuse of that asset in another area. It is about having intelligence of each product to know exactly, in real-time, how it is performing and whether or not it needs maintenance or parts need repairing or replacing. This ability to see products in action and be able to plan lifecycles against the needs of customers is key to how this will work.
Return and reuse of materials
AI-enabled asset management systems, with predictive maintenance capabilities can do this, enabling organisations to stay on top of product performance. This is where organisations can have insight into how to re-purpose products as well as understand when to return and reuse materials.
There is a lot of attention paid to the forward logistics associated with equipment and service parts, but not as much to the reverse piece. Bringing parts and assets back into inventory or repair depots can have a significant impact on net new purchase and consumption of resources. Technician vans and forward stocking locations can provide an incredible amount of unused inventory that can be repurposed for other service and maintenance initiatives.
All of this product intelligence can also be fed back to product designers, enabling them to embrace this idea of circular design knowing how customers use products but also how to enable maintenance and re-use by identifying common issues with parts. This should make for more reliability in product performance but also a faster and more efficient maintenance job should it be required.
Likewise, organizations must consider the resources and tools to bring products and parts back (reverse logistics) into their facilities or those of their partners and then invest in the capabilities to either repair, refurbish, or remanufacture these products and parts for industrial use.
From a financial perspective alone, this can make a lot of sense, as costs, such as energy bills are reduced from less new production. This also reduces carbon emissions and leads to less landfill, with more recycling and more re-use. At a time when most businesses are looking at costs and energy and emissions compliance, this makes a lot of sense. The circular economy can enable business and service teams are going to be increasingly at the heart of this, ultimately determining its success or failure.
