Asset as a Service: Revolutionising Ownership and Business Models in the Metal Sector

Asset as a Service (AaaS) business models are increasingly being adopted across various industry sectors, driven by a growing demand from users of such assets as machinery and equipment. In the AaaS model, users no longer purchase assets; instead, they are billed for the actual benefit they receive. This innovative approach to asset utilisation offers significant advantages, especially for the metal industry, where capital investment and maintenance costs can be substantial.

AaaS models require the use of sensors to collect Internet of Things (IoT) and telemetry data, which is then shared and processed via networked systems. This data provides a basis for calculating actual usage and current asset value. Automated billing, invoicing, and payment, as well as integration with existing enterprise resource planning systems, are essential for scaling AaaS models.

The Traditional Asset Financing Models

Until now, customers looking to finance an asset have traditionally had four options: purchasing, financing, leasing, or outsourcing. These options vary significantly in their design and impact on a company’s balance sheet.

1. Purchasing: The asset becomes part of a company's assets.
2. Financing: The company pays a fixed sum to a financial services provider over a set period.
3. Leasing: The leasing partner purchases the asset, with the end-user company paying the partner at a fixed rate over a set term.
4. Outsourcing: Services previously performed internally are contracted out, with the outsourcing partner retaining ownership of the assets used.

AaaS: The Future of Asset Management

In AaaS business models, the traditional division of roles among manufacturers, buyers, and financial service providers is redefined. With AaaS, assets are no longer purchased, financed, or leased by the user; instead, they are utilised on a pay-per-use or pay-per-output basis. This flexibility allows businesses to align their costs with actual usage, which is particularly beneficial in the metal industry where demand can be highly variable.

For instance, in the metal sector, equipment like CNC machines, laser cutters, and welding robots can be billed based on usage hours or the number of operations performed. This model not only reduces upfront costs but also ensures that businesses only pay for what they use, making it easier to manage cash flow and operational expenses.

Traditional vs. AaaS Models

IoT and Telemetry Data: Pivotal for AaaS

At the core of AaaS is the digitalisation of systems, driven by Industry 4.0. Increased digitalisation means that the measurement data recorded in each machine can be sent to the manufacturer or owner of the machines through networked systems, where it can then be processed and evaluated. This provides a complete record of how often and to what extent the respective machine was used, giving the manufacturer complete transparency.

For example, IoT sensors in metal fabrication equipment can track usage patterns, operational efficiency, and maintenance needs. This data enables predictive maintenance, reducing downtime and extending the lifespan of the equipment. As a result, productivity increases, and unexpected breakdowns are minimised.

Data Visual: IoT in Metal Fabrication

The Benefits of AaaS for the Metal Industry

1. Flexibility and Cost Efficiency: Billing based on usage rather than a flat rate means that businesses only pay for what they use. This is particularly useful for project-based work or seasonal demand fluctuations common in the metal industry.
2. Risk Mitigation: AaaS transfers the risk of asset ownership to the service provider. This means that businesses do not have to worry about asset depreciation or obsolescence.
3. Increased Transparency: IoT data provides real-time insights into asset utilisation, enabling better decision-making and more accurate cost allocation.
4. Enhanced Maintenance and Longevity: Predictive maintenance ensures that equipment is serviced at optimal times, reducing the likelihood of breakdowns and extending the asset's lifespan.
5. Sustainability: Efficient use of resources and reduction in idle time contribute to more sustainable operations.

Case Studies in the Metal Industry

Case Study 1: Rolls-Royce's "Power by the Hour"

Rolls-Royce's performance-based contracts for its jet engines, known as "Power by the Hour," are one of the earliest examples of the AaaS model. Customers pay based on the number of hours the engine is in operation, aligning costs with actual usage and providing a high level of flexibility and cost control.

Case Study 2: DMG Mori and Trumpf

Machinery and equipment manufacturers DMG Mori and Trumpf have integrated IoT technology with pay-per-use models. These companies offer advanced machinery for metalworking on a usage-based billing model, providing their customers with the flexibility to scale operations without significant capital expenditure.

Visual 3: Case Study Highlights of AaaS in Metal Sector

Implementing AaaS: Steps and Considerations

Implementing AaaS in the metal industry requires several key steps and considerations:

1. Digital Infrastructure: Establish a robust digital infrastructure capable of collecting and processing IoT data from all relevant assets.
2. Billing and Payment Systems: Develop automated billing and payment systems that can handle usage-based invoicing and integrate with existing ERP systems.
3. Data Security: Ensure that all IoT data is securely transmitted and stored to protect sensitive business information.
4. Customer Education: Educate customers on the benefits and operation of AaaS models to ensure smooth adoption and maximise utilisation.
5. Scalability: Design systems and processes that can scale as the business grows, allowing for the addition of new assets and customers without significant overhauls.

Challenges and Opportunities

While AaaS offers numerous benefits, it also presents challenges that need to be addressed:

1. Initial Setup Costs: Establishing the necessary digital infrastructure can require significant investment.
2. Data Integration: Integrating IoT data with existing business systems can be complex and time-consuming.
3. Market Adoption: Convincing traditional businesses to switch to an AaaS model may require substantial effort and education.

However, the opportunities far outweigh these challenges. By adopting AaaS, companies in the metal sector can achieve greater operational efficiency, reduce costs, and improve their competitive position in the market.

Conclusion: The Future of Asset Management in the Metal Industry

AaaS is set to revolutionise the way assets are managed and utilised in the metal industry. By shifting from ownership to a usage-based model, businesses can enjoy greater flexibility, cost savings, and operational efficiency. The integration of IoT and predictive maintenance further enhances the value proposition, making AaaS an attractive option for metal industry players looking to stay ahead in a competitive market.

As digitalisation continues to advance, the adoption of AaaS models will likely become more widespread, transforming traditional business practices and paving the way for a more sustainable and efficient future in the metal industry.