Will the circular economy become a service boost?
The circular economy aims to use resources more efficiently and minimize waste products. From the point of view of many machine and plant manufacturers, the focus is therefore shifting to extending the service life of products through repair and maintenance services. Service will play a decisive role in this development.
The increased provision of spare parts or the offer of take-back and recycling programs to promote reuse are also part of such transformation processes. The circular economy opens up new business models and contributes to a more sustainable economy.
As a result of this development, service will become even more important within the company. The EU decision on the right to repair underlines the political relevance of the topic. Although the new regulation only applies to very limited product groups so far and only a small proportion of companies in the mechanical engineering sector are directly affected, this topic will increasingly affect the entire service sector in the future. For service providers, this means integrating sustainability concepts into their offering and bringing about a mindset change.
The circular economy and the role of service managements
The diagram shows the typical cycle that products go through and the various levers we can use to ensure that products remain in this cycle for longer and that as little as possible is lost.
In green, we have highlighted the areas in which the service department has the most responsibility. However, depending on how the company is set up, it is of course possible that the service department also plays a key role in other areas.
The first starting point is the Product design represent. The focus here should already be on sustainability and a long service life. Care should also be taken to ensure that machines are easy to maintain and repair (keyword: design for service). The use of easily recyclable materials should also be a focus. Of course, the service department can also provide support and advice here.
The next two steps include the Production and Delivery of the products. Efficiency is also the top priority here, so that the impact on the environment is kept to a minimum.
Then we come to the area where the service can shine. The possibilities here are vast and there are few limits to creativity. At this point, however, we would like to give a few examples of what service can achieve in all three areas.
The Efficient use can be enhanced by additional services (Value Added Services) are supported. In practice, these can take a wide variety of forms. They can include data-driven services that help customers to make better use of their systems. Training services for customers are also available for the same purpose. Another topic is benchmarking services, where the manufacturer offers the customer a comparison of how efficiently they operate their machines in relation to others.
Extending the service life alludes to the core business of customer service. The focus is naturally on maintenance and repair. Innovative concepts such as Predictive Maintenance be applied. Another important aspect relates to the spare parts business. In many areas, customers also want to work on the products themselves. For example, it can make sense to expand the spare parts portfolio and make it more transparent.
If a machine becomes obsolete at the customer's premises, services from the area of Second-Life to prevent premature scrapping. This includes refurbishing disused machines so that they can be recycled. This can be done as part of buy and re-sale services. Concepts that export disused machines to third markets can also be implemented. For example, it is often possible to export used machines from the German market to countries with lower purchasing power. The focus is always on the question of how machines can be used for longer.
The topics Waste Management and Recycling are in turn self-explanatory and do not usually fall within the remit of service management. Some value-added services are nevertheless conceivable in this environment, which you as a manufacturing company could offer your customers.
The two main drivers of the trend towards a circular economy
Both regulatory measures on the part of legislators and the growing environmental awareness of the population are demanding a longer product life. This is doubly fueling the trend towards a circular economy. As a result, companies are being prompted to adapt sustainable practices in order to meet the new requirements. The service sector plays a crucial role in providing solutions for the maintenance and refurbishment of products. What does this mean for us?
What problems will companies face?
The circular economy is fundamentally changing the service sector. Customers are gaining more freedom of choice thanks to the option of using independent service providers for repairs and maintenance or even being able to do more of the work themselves. Opportunities must be created to make this possible.
However, this development also promotes competition and contributes to market diversification by lowering the barriers to market entry. In the long term, this will lead to a more sustainable economy that uses resources efficiently and reduces waste. But in the short term, this could become a problem for some.
Services must be designed in such a way that collaboration with different players is possible. This requires openness towards cooperation and adapting one's own products for maintenance and further processing by third parties. In some cases, information about products has to be shared that many manufacturers would perhaps prefer to keep to themselves. This represents a major challenge for many companies. Last but not least, this development could also jeopardize the lucrative business model of the contract workshop.
The circular economy also presents us with challenges when it comes to safety-relevant components. Not everyone is allowed to work on them, which increases the complexity of the relationship between manufacturers, service providers and customers. It is crucial to define clear guidelines as to which interventions are permitted and which are not. This demarcation is essential for safety and maintaining quality standards. In the circular economy, joint strategies must therefore be developed to ensure both the integrity of the products and the flexibility of the service.
Service management needs to work differently
The circular economy offers opportunities for an innovative service approach. Longer product lifecycles create potential for repair services, maintenance services and also more innovative offerings. Manufacturers are encouraged to provide information for repairs, leading to a more open market with lower costs. This allows you to develop new business models to take advantage of these changes. Consider how you can generate additional revenue streams through modular builds and the provision of spare parts. Upcycling and refurbishing services are also attractive business models that are in line with a circular economy and help you stand out from the competition.
The circular economy as an opportunity
The circular economy represents an opportunity for innovation. In this economic model, the service sector is becoming increasingly important as products are designed to last longer and repair, maintenance and recycling play a central role. Producers can set themselves apart from the competition through sustainability and creative approaches.
Through the efficient use of resources and the creation of Value Added Services new business opportunities arise that are not only environmentally beneficial, but also Customer loyalty strengthen the circular economy. Ultimately, the circular economy can lead to a win-win situation for companies and society by combining economic and ecological goals.
At the same time, there is no way around this development. Further regulations in this direction are to be expected, and consumers and the environment will also increasingly demand this. As service professionals, we can excel here and make our contribution. This development could give your service department a real boost and make it a more important part of the company. The better and more creatively we tackle these issues, the more we can stand out and differentiate ourselves from the competition. Last but not least, the environment will also thank us.
