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Machine as a Service: Uber for Machines

Owning and operating a machine can lead to significant costs, mainly when the machine's operational efficiency is less than 50 percent. The “make or buy” decisions around machine ownership has there been since eternity. However, the Industry 4.0 platform gives us multiple hedging manufacturing investment options, increasing productivity, managing costs, and improving quality.

Tvarit believes that “Machine as a service” is one such business model that might see the light of the day as industry increasingly adopts to industry 4.0 paradigm . The Machine as a service is not new, in fact a Taxi ride and Uber ride is a classic example of Machine as service. Yet, the application of IOT based User-interface by Uber has out-competed Taxi ride and is now an industry standard. We would see a similar transition in Industry, where machines would be available as service. The quality control, machine control, machine usage and costs would be available to the client, just like when using Uber. This would be possible using Industry 4.0 platforms and technologies. Industry 4.0 gives up much more flexibility, information than the currently used business models. In Machine as a service business models, the cost of Machine would be hedged over a period of time as “pay as use” pricing mechanism. Pay as use business models are broadly categorized into two types; these two types can be further sub-categorized

Machine installation at the client site:

Machines are installed at the client's site. The Machine is not sold to the client. The machines are rented to the client and installed at the client's side and the client is assumed to pay for the Machine in the following three business models. One advantage of this model is that the product's IP is never compromised as the manufacturing happens at client's premises.

The Machine is installed at the client’s location. The client operates the Machine and pays for the usage. Such a method is a standard business model that is similar to rending a house. The Machine is rented, and the rent is paid for the duration it is rented. The Machine is located on the client’s premises. So, the Machine can only be used by a specific client for specific purposes. As the time increases, so does the charge paid to the machine manufacturer/owner. The owner of the Machine can pay the insurance costs of the Machine. These costs can be completely paid by the client. Also, the insurance costs can be divided between the owner/builder and the client. The insurance costs of the Machine could significantly impact the rent costs of the Machine.

The machine is installed at the client’s location. The machine is rented and charged as “Pay for use,” much like electricity or water. The more machine client uses, the more would be the cost of the machine. Again, the insurance of the expenses of having the machine at the clients location can be significantly high and it could be managed through multiple insurance models.

The Machine is rented and charged for the duration of the renting and the number of products manufactured by the machine. This model is similar to Uber, where a rider pays for both the course and the distance travelled.

Machine/Factory owned and operated by the machine builder or Investor or Entrepreneur

Another business model is the typical modern "manufacturing outsourcing" based business model. Here, the machine is operated by the machine builder/ owner and the client outsources the manufacturing. The location of the Machine is with the machine builder. This gives the machine builder flexibility to servitize (operate) the Machine to multiple clients to increase operational efficiency. The downside of this model is that the client's IP is compromised, as we have seen such issues happening in the cases of manufacturing outsourcing in developing countries. In this model, the machine could be operated at a higher operational efficiency as the machine builder/owner can use the same machine for multiple clients. Also, the insurance costs and risks of the machine ownership are not shared with the client. One can argue that this model could be relatively cheaper.

In this case, the machine is charged for “per unit production”. The insurance costs of the machine is entirely under the control of the machine owner/builder. The information on the quality costs can be relayed real time to the client for better coordination and trust.

The success of Machine as service depends a lot on the IoT integration and machine data. A high-quality IoT data can not only increase the efficiency of operations but also reduce the costs and risks. The quality of machine information shared among the various parties ensures greater trust, optimization, price sharing, cost hedging and higher overall machine productivity.

We at Tvarit strive to help our client hedge price risk on CAPEX investments by analyzing machine data and increasing multi-stakeholder trust using our proprietary technologies. We see Machine as service and factory as service as one of the emerging paradigms of the coming times.

Dr. Anirudh Agrawal

Associate Professor Flame University
Advisor Tvarit GmbH

Rahul Prajapat

Tvarit GmbH
Co-founder & CTO

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