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The Logistics Trend Radar 7.0 - Insights. Shaping Tomorrow

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Evolution of XaaS

Source: Siemens (2019): Everything as a service: a closer look at the business model of the future

Relevance to the Future of Logistics

Co-Located & Distributed Service Logistics Facilities

As product ownership and responsibility for uptime remain with the XaaS provider rather than with the user, the response time for necessary predictive maintenance is a key differentiator. One solution to faster response times is co-located and distributed service logistics facilities of and for these service providers.

Co-located and distributed facilities and spare parts networks, including inventory positioning, must be a strategic building block in support of the business. As such, logistics plays a vital role in this new equation as the seamless supply and delivery of parts is critical to maintaining asset or fleet performance when provided as a service. The need for co-located inventory may be reduced, however, by onsite on-demand three-dimensional (3D) printing and there may be no need for a technician to visit if they can instead use augmented reality (AR) to provide remote repair and maintenance support.

Logistics Services Diversification

Companies are broadening the lens of business potential to solutions that can be obtained as a service, and the providers of these services may choose to outsource operational processes to logistics organizations – introducing a new level of diversification. For example, many technology providers across industries offer automation solutions not as products but as services to their clients. Whether it is for picking pieces on an assembly line or transporting assets around a factory, these solution providers charge on a per-piece-picked or per-kilometer-travelled basis, thereby self-incentivizing robot upkeep and seamless continuous operations. This means that, when a robot does break down, the provider scrambles to get service back up running as soon as possible, shipping new spare parts or an entire replacement machine. As these companies look to expand their service market beyond their home region, they start to seek specialized logistics providers who can support timely and careful delivery of their solutions to their customers.

Another example is popular tire manufacturer Michelin’s movement towards selling mileage and kilometers instead of tires. Previously, Michelin sold tires to logistics providers, such as road freight carriers, mining operators, and airlines, similar to how they would sell to a B2C customer for their private vehicle. Now, utilizing Internet of Things (IoT)-enabled sensor technology, Michelin offers tires-as-a-service to its B2B customers, measuring temperature and pressure in tires to prevent tire failure and unnecessary operational downtime. The company has since expanded its offering to a complete tire management system, coordinating tire replacement and other maintenance offerings with its customers, while simultaneously helping subscribers reduce fuel consumption through optimized driving and training.

Service Billing Models & Tools

As companies transition from selling products to providing them as a service, new service billing models and tools are required. Rather than managing inventory to record the products that have been sold, companies moving to XaaS must enable more complex usage-based invoicing. This is achieved with accounting tallies across multiple users on predetermined bases (per hour, per kilowatt, per kilometer, per use, per pick, and more). Smart contracts using blockchain technology can automate complicated processes in a transparent way, performing steps when pre-agreed conditions are fulfilled.

Challenges

Challenge 1

The shift from offering products to services requires a deep understanding of not only the needs of the customer, but also the many components and systems in the customer’s domain that interact with the in-use product.

Challenge 2

XaaS increases the complexity of the billing model and therefore requires a strong IT infrastructure to ensure resilience.

Challenge 3

To integrate, deploy, and manage an XaaS platform in what is still an emerging field requires adequate yet scarce IT skills; development will therefore come with initial high costs.

Challenge 4

For the XaaS supplier, data analytics capabilities are crucial to business success, providing insights into customer behavior patterns as well as asset maintenance and inventory management.

The shift from offering products to services requires a deep understanding of not only the needs of the customer, but also the many components and systems in the customer’s domain that interact with the in-use product.
XaaS increases the complexity of the billing model and therefore requires a strong IT infrastructure to ensure resilience.
To integrate, deploy, and manage an XaaS platform in what is still an emerging field requires adequate yet scarce IT skills; development will therefore come with initial high costs.
For the XaaS supplier, data analytics capabilities are crucial to business success, providing insights into customer behavior patterns as well as asset maintenance and inventory management.

Outlook

The global XaaS market expanded from US$ 436.82 billion in 2021 to $699.79 billion in 2023, with growth projection to $3,221.96 billion by 2030, based on a compound annual growth rate (CAGR) of 24.4%. This imminent market development means business models are changing B2C and B2B relationships from product-centric to user-centric and so are the logistics concepts needed to support these models.

This trend should be monitored TO SOME EXTENT,with developments and use cases on the horizon.

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Sources

  1. Fortune Business Insights (2023): Global Everything as a Service (XaaS) Market