A strategy for midlife upgrades to provide value for both the equipment operator and the supplier Aston Spring Servitization Conference, May 2017 Dr Shaun West and Dr.-Ing. Thorsten Wuest
Introduction The problem and the purpose of this paper Problem With newer models of asset management possible due the IOT This paper investigates how can this be used to support midlife upgrades? upgrade strategies during the midlife of capital equipment. The upgrades are directly Purpose of this paper related to equipment To develop the concept of midlife in a product service system obsolescence, changes in context market needs and new To identify where value can accrue in a product service system technologies. during midlife upgrades West & Wuest, 2017
Introduction Product service systems ROS - Information exchange/access across and within lifecycle phases is crucial - Midlife value propositions should focus on creating real owner/operator value - The operational phase may be significantly longer than the design life Sales Servitization and Product Service Systems are strongly tied to product lifecycle management West & Wuest, 2017
Introduction The terminology of stakeholders related to a product service system may be confusing - The ‘owner/operator’ is the stakeholder using the PSS for the (intended) purpose - The manufacturer/service provider is the stakeholder responsible for the design, manufacturing and upgrade The terms ’user’, ’supplier’ and ’manufacturers’ are insufficiently explicit to employ here West & Wuest, 2017
Introduction Product lifecycles come with their own perspectives Business/production perspective Engineering perspective Levitt (1965) Wellsandt et al. (2015). Sources and characteristics of information https://hbr.org/1965/11/exploit-the-product-life-cycle about product use . 25th CIRP Design Conference, Haifa, Israel. Product lifecycles often focus on product production rather than the longer operational life West & Wuest, 2017
Methodology Two case studies of complex engineered equipment were used to examine the PSS GE 13E2 gas turbine - Cases built up based on published data - Cross case analysis based on five dimensions Figure 1: (left) GE GT13E2 gas tu - Findings compared with the literature Boeing B52 strategic bomber Two different engineered products that suit very different markets West & Wuest, 2017
Results GE 13E2 gas turbine has evolved ever since its introduction Year Status Alstom name/GE name 1992 Introduction GT13E2 / NA 1996 Blading change GT13E2V96 / NA 1998 Blading change GT13E2VA / NA 2005 Blading change GT13EMXL / GT13E2 2005 2008 Compressor change GT13EMXL up-flow / GT13E2 2005 2012 New compressor GT13EMXL2 / GT13E2 2012 New burners New blading The application of new technologies have been applicable to both the new units and the installed base West & Wuest, 2017
Results B52 bomber has evolved ever since its introduction 200 180 160 140 Number shipped 120 100 80 60 40 20 0 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 Technology around the aircraft has changed as has its mission West & Wuest, 2017
Results The cross case analysis based on the five key dimensions GE GT13E2 B52 25 years (planned) 20 years (planned) Design life - new units still being sold - today over 60 years, expectation of around 90 years total - operational lives of 40+ years Designed for base load electricity production Designed for high level strategic bombing Mission - market moved to rewarding flexibility - mission changed to low level bombing - some installed to provide local heating - anti-insurgence/anti-terror - cyber warfare State-of-the-art when designed, yet had inherit design Initial engines underpowered Technologies flaws - new engines fitted - new blading technologies introduced to reach initial HVAC system pool designed design life - new HVAC system installed to improve temperate Newer technologies introduced to upgrades Limited computing in 1950s - provided additional owner value - installation of (more powerful) computers - extended inspections intervals Five key dimensions allowed clear understanding of the operational lives of the equipment West & Wuest, 2017
Results The cross case analysis based on the five key dimensions GE GT13E2 B52 Newer more efficient power plants installed, move to New (Russian) weapons systems renewables - forced a change to low level bombing Environment - demanded a change in operations (flexibility) New communication systems in NATO - change in the competitive landscape - upgrade (6-12 years) of communication systems New NATO weapons systems - new weapons pods installed Control systems Control systems Obsolescence Blading Landing system Sub-systems (OEMs changed in the design process) Computers Weapons systems People Five key dimensions allowed clear understanding of the operational lives of the equipment West & Wuest, 2017
Results Lessons learnt from the key dimensions Design life - Exceeded their initially planned design life (2x-4.5x) Mission - The missions continually changed with the political and technological (etc) environment - New technology becomes available Technologies - New technologies keep the equipment relevant - Initial flawed / based on wrong requirements - New conversions, modifications and upgrades must (unknown to manufacturer AND customer) add value for the owner/operator Obsolescence - Parts become no longer available (or economically viable) Environment - Nothing operates in isolation but as part of a system Technology is only relevant if it creates value of the owner/operator West & Wuest, 2017
Discussion The beginning of life is important for the installed base build up - The beginning of life must be conceded - The equipment provides the ’best fit’ for the owner/operator (at that time) - The value for the supplier and the owner/operator may be low during this phase Consideration of the midlife must be included in the design-make phase West & Wuest, 2017
Discussion The midlife phase provides opportunities for both the supplier and owner/operator - Changes to mission and technology occur - Injections of new technologies reinvigorate the equipment - Opportunity to create locking/lockout The equipment transforms into a platform to base services, converions, modifications and upgrades on West & Wuest, 2017
Discussion Midlife and product service system thinking - The midlife phase is longer than the design life - For the asset to remain valuable for the owner/operator, conversions, modification and/or upgrades must offer measureable value - The manufacturer/supplier may gain additional value through locking out competition The midlife phase offers potentially most value to both the supplier and the owner/operator West & Wuest, 2017
Discussion Midlife and digital technologies - The IOT (digital twin?) helps to build a fuller picture of the operational use and benchmarking - The IOT supports validation of operational conversions, modifications and upgrades - The IOT support new revenue models Figure 1: (left) GE GT13E2 gas tu The midlife phase offers potenailly most value to both the supplier and the owner/operator West & Wuest, 2017
Discussion Other types of assets where this approach may be applicable More research is needed to confirm applicability of the model ( but we think it would apply… ) West & Wuest, 2017
Conclusions Servitization transformation through change management is an important theme Long-term operation is not plannable and changes do and will occur During the midlife new technologies that provide Nothing operates in isolation: mission and technology change value to the owner/operator should be offered. This can be used to help extend the During design the future midlife should be should be considered OEM’s lock-out/lock-in phase on the equipment. Product-service systems provide competitive advantages West & Wuest, 2017
Recommendations More research into the midlife phase of product service systems is required Research into how widely applicable is this model The applicability of the Research to better understand the value creation during midlife model and the value creation for each of the ecosystem actors should be further Improved models for value creation for the different stakeholders researched Clear stakeholder definitions (eg owner/operator and and supplier) West & Wuest, 2017
Thanks for your time! Questions over coffee… West & Wuest, 2017
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