MULTI-CLIENT STUDY ON THE SHIFT FROM MANUFACTURING TO A SERVICE ECONOMY 1998 to 2010

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MULTI-CLIENT STUDY ON THE SHIFT FROM MANUFACTURING TO SERVICES 1998 AND 2010

TABLE OF CONTENTS

EXECUTIVE SUMMARY

PART I: INTRODUCTION AND STruCTURE OF THE REPORT
PART II: FROM MANUFACTURING TO A SERVICE ECONOMY
PART III: FROM SELLING PRODUCTS TO SELLING SERVICES
PART IV: CONCLUSIONS AND OUTLOOK

APPENDICES

• List of figures
• Market figures
• Statistics, tables
• Sources and literature

PART I: INTRODUCTION AND STruCTURE OF THE REPORT

Chapter 1 - INTRODUCTION: FROM MANUFACTURING TO A SERVICE ECONOMY .... 1

1.1 What this report is about .... 2
1.11 'Doing the right things' .... 2
1.12 'Service is the ultimate luxury' .... 3

1.2 The main driver of the shift from manufacturing to services: business! .... 5
1.21 Business itself: a change in the way we look at business oppor­tunities .... 5
1.22 Scientific innovation and technology to build a more sustainable economy .... 5
1.23 Shareholder value driving services .... 6

1.3 Environmental and social benefits too .... 7
1.31 Reduced environmental impairment .... 7
1.32 Social benefits : job creation .... 7

1.4 The common denominators .... 9
1.41 A first mover (and first comer) advantage .... 9
1.42 Opening the fork between revenue and costs through eco-efficiency and performance .... 9
1.43 Selling know-how instead of goods incorporating the know-how: reaching down to the customer .... 9

1.5 New Synergies .... 11
1.51 A mutual commitment between supplier and customer, based on customer satisfaction .... 11
1.52 A logic in itself .... 11
1.53 A tale of two economies: wealth without resource consumption? and a tale of two schools of corporate thinking: industrial throughput production versus asset management .... 12

1.6 Implications .... 17
1.61 Implications for corporate strategy .... 17
1.62 Implications for competitiveness .... 17
1.63 Implications for investors .... 17
1.64 Implications for technological innovation 18
1.65 Implications for commercial innovation .... 19
1.66 Implications for product design and system solutions .... 20
1.67 Implications for greening the corporation .... 20
1.68 Implications for policy-makers .... 20
-The pillars of a sustainable society Innovation as the key to lower resource consumption
1.69 The issue of culture .... 23

1.7 Structure of the report .... 23

PART II : FROM MANUFACTURING TO A SERVICE ECONOMY

Chapter 2 - THE DRIVERS BEHIND THE SHIFT .... 27

2.1 Business drivers: corporate strategy driving the shift from manufacturing to services .... 27
2.11 Sufficiency strategies: from manufacturing to services .... 27
2.12 Efficiency strategies: from products to services .... 28

• S1 Sufficiency and prevention
• S2 Manufacturers selling performance
• S3 Manufacturers and fleet managers with take-back responsibility, cradle back to cradle
• S4 Fleet managers with operation and maintenance responsibility
• R Remanufacturing

2.13 Supportive strategies .... 31

• S5 Extended quality guarantees by manufacturers
• S6 Service contracts
• S7 E-business

2.2 Innovation drivers: Science and Technology driving the shift from products to services .... 32

2.3 Is the environment a driver of the shift from manufacturing to services? .... 35
2.31 Prevention and sufficiency solutions .... 35
2.32 Efficiency solutions .... 35

• Consumption goods
• Catalytic goods
• Durable mobile goods
• Durable immobile goods

2.4 Green public procurement and other policy measures as drivers of the shift from manufacturing to services .... 38

Chapter 3 GENERIC PREVENTION STRATEGIES .... 41

3.1 Definitions and Issues .... 41
[b]3.11 Introduction .... 41
3.12 The market .... 42
3.13 Key players .... 42
3.14 Expectations for 2010 .... 43
3.15 Implications for competitiveness .... 43
3.16 Implications for technology .... 44
3.17 Implications for the environment .... 45
3.18 Implications for jobs .... 45
3.19 Key policy messages .... 46

3.2 Prevention strategies: examples .... 47

• Professional cooperatives (Berufsgenossenschaft)
• Incident reporting system
• ZEV initiative in California
• Quality verification mechanisms

3.3 Sufficiency strategies: examples .... 50

• Saving the environment by re-using towels in hotels
• Car sharing

PART III : FROM SELLING PRODUCTS TO SELLING SERVICES

Chapter 4 CONSUMPTION GOODS - A CASE FOR SCIENCE 51

4.1 Definitions and Issues: consumption and dissipative goods .... 51
4.11 Introduction .... 52

• The main business drivers
• The main technology drivers

4.12 The market .... 53
4.13 Key players .... 53
4.14 Expectations for 2010 .... 54
4.15 Implications for competitiveness .... 55
4.16 Implications for technology .... 55
4.17 Implications for the environment .... 55

• Consumption goods
• Dissipative goods

4.18 Implications for jobs .... 56
4.19 Key policy messages .... 56

• Junction 2 in a loop economy

4.2 Examples of Life Sciences for consumption goods .... 60
4.21 Sufficiency solutions .... 60

• Zero-energy houses
• Chinese doctors 2000 years ago
• HMOs health maintenance organizations
• Vaccinations
• Mobil Oil selling quality checks

4.22 Efficiency solutions .... 61

• Strategy of selling performance based on knowledge
• Green Life Sciences in agriculture
• Grey Life Sciences in process technology

4.3 Life Sciences of management strategies for consumption goods .... 65
4.31 Selling commodity consumption goods .... 65

• Drinks and food
• (Energy) contracting

4.32 Fleet managers with operation and maintenance responsibility .... 66

• Energy contracting by public utilities
• Catering
• Cleaning and hygiene services
• Integrated company strategies

4.3 Examples of Material Sciences for dissipative goods .... 68
4.31 Re-usable smart materials .... 68

• Absorbing materials
• Service of ceramic valves
• De-bonding and de-polymerization

4.32 Materials with enhanced qualities in utilization .... 69

• Kyocera drums for laser printers
• Castolin-Eutectic
• Interface's leasing of carpet tiles
• From manufacturer of rails to provider of railroads
• other examples

4.33 Branded materials .... 71

• Lycra

Chapter 5 CATALYTIC GOODS - LOGISTICS AND POLICY AS KEYS .... 73

5.1 Definitions and Issues: catalytic goods .... 73
5.11 Introduction .... 74

• The main driver is the environment

5.12 The market .... 75
5.13 Key players .... 75
5.14 Expectations for 2010 .... 76
5.15 Implications for competitiveness .... 76
5.16 Implications for technology .... 77
5.17 Implications for the environment .... 77
5.18 Implications for jobs .... 77
5.19 Key policy messages .... 77

5.2 Examples of catalytic goods .... 79
5.21 Rent a molecule and re-refining solvents .... 79
5.22 Renting out textiles to industry .... 79

• MEWA Wiesbaden
• Eder Werbematten

Chapter 6 DURABLE GOODS - A CASE FOR FLEET MANAGEMENT AND PRODUCT-LIFE OPTIMIZATION .... 81

6.1 Definitions and Issues: durable goods, mobile and immobile .... 81
6.11 Introduction and specific business drivers for durables .... 82

• Business drivers: push, pull and internalization
• Reduced procurement and production costs
• Enhanced customer satisfaction
• Increased market share, shorter time to market and synergies
• Enhanced profits from highest quality
• Sinking waste disposal costs
• Requirements by Green Public Procurement

6.12 The market .... 86

• S2 Manufacturers selling performance
• S3 Manufacturers and fleet managers with take-back responsibility, cradle back to cradle
• S4 Fleet managers with operation and maintenance responsibility

6.13 Key players .... 89

• S2 Manufacturers selling performance
• S3 Manufacturers and fleet managers with take-back responsibility, cradle back to cradle
• S4 Fleet managers with operation and maintenance responsibility

6.14 Expectations for 2010 .... 91

• Mobile durable goods
• Cars and lorries
• Railway equipment
• Aircraft
• Government policy
• Immobile durable goods
• Facility Management
• Build and operate in civil engineering works
• Government policy

6.15 Implications for competitiveness .... 94

• Component standardization
• Junction 1 in a loop economy
• B.O. build and operate

6.16 Implications for technology .... 99
6.17 Implications for the environment .... 100
6.18 Implications for jobs .... 101

• Electronic data services

6.19 Key policy messages .... 103

• Boundary conditions
• Fiscal policy
• IPP Integrated Product Policy

6.2 Examples of mobile durable goods - investment goods .... 105

• Air-conditioning units and power generating equipment
• Artificial hearts for rent
• Automobiles

E-business
Hand-holding business
Leasing
Car sharing, car rental and car pooling
Policy issues

• Computers
• 'Manufacturing as service'
• Reusable packaging containers in a loop economy
• Selling security instead of security systems
• Selling quality in utilization instead of remanufacturing
• Component standardization = higher competitiveness
• General Electric: GE's way
• Xerox - leasing strategy and Design for Environment

6.3 Examples of mobile durable goods - consumer goods .... 111

• Prevention and sufficiency solutions
• Clothing and furniture for rent
• Selling the service of washing: white goods for rent
• Smart household appliances
• Eastman Kodak's SUC: films with a lens: green 'disposable' cameras for rent
• Take-back by independent companies for re-valorization

6.4 Examples of immobile durable goods .... 116

6.5 Examples of supportive strategies .... 118
6.51 Extended quality guarantees by manufacturers (S5) .... 118

• Key players

6.52 Service contracts (S6) .... 118

• Business drivers

Getting out of the profit squeeze
Opportunities to achieve a higher specific revenue

• Key players

6.53 E-business (S7) .... 119

Chapter 7 REMANUFACTURING AND REUSE .... 121

7.1 Definitions and Issues .... 121
7.11 Introduction .... 122

• National accounts / Statistics

7.12 The market .... 123

• Geographical market structure: USA, Europe, Japan
• Organization market structure

7.13 Key players .... 125

• R1 remanufacturing as a service
• R2 remanufacturing after take-back, for re-sale
• R3 in-house remanufacturing
• Europe
• USA
• Market organization

7.14 Expectations for 2010 .... 127
7.15 Implications for competitiveness .... 128

• Corporate accounting

7.16 Implications for technology .... 129

• Design for Environment or Eco-Design
• Learning by doing
• Quality

7.17 Implications for the environment .... 130

• Grey energy

7.18 Implications for jobs .... 131
7.19 Key policy messages .... 132

• Quality and progress
• Environmental and energy policy
• Utilization-focused technology policy
• Social policy
• Public procurement policy
• Competitiveness of different research-technology-development policies: Europe, Japan, USA

7.2 Remanufacturing - examples .... 137

• R1 remanufacturing as a service

Remanufacturing with technological upgrading of aircraft
Remanufacturing with technological upgrading of elevators
Lorry and aircraft tyres
Rail-grinding services

• R2 remanufacturing after take-back, for re-sale

Catalytic goods
Durable goods

• R3 in-house remanufacturing

PART IV : CONCLUSIONS AND OUTLOOK

Chapter 8 CONCLUSIONS .... 141

The main driver is business itself: a change in the way we look at business opportunities in the industrial sector

8.1 Ignition sparks and drivers .... 141

• A new way of corporate thinking
• Green sparks
• Getting out of the profit squeeze
• Getting out of the competitiveness squeeze
• Shareholder value
• Higher customer loyalty and mutual commitment
• Scientific innovation and technology are major drivers
• E-business

8.2 The shift has started a while ago and accelerates .... 145

• Insufficient national statistics

8.3 Key issues involved and their links .... 147

• Science
• EPeR extended performance responsibility
• Jobs
• Education
• Innovation
• Policy

8.4 Conclusions by product group .... 149

8.5 Conclusions by strategy type .... 151
S1 Providing customer satisfaction through sufficiency strategies, e.g. prevention services
S2 Manufacturers selling performance, services or results
S3 Manufacturers / fleet managers with extended product responsibility for take-back
S4 Fleet managers responsible for operation and maintenance
R Remanufacturing

8.6 A new quality .... 155
8.61 Quality defined as system functioning over longer periods of time .... 155
8.62 Enhanced profits from highest quality .... 156
8.63 A new quality of durable goods .... 156
8.64 'Global versus local' in the shift from manufacturing to a service economy .... 158

8.7 EPeR - an extended performance responsibility .... 159

Chapter 9 OUTLOOK .... 163

9.1 Issues .... 163

9.2 Competitiveness issues, manufacturing into services, 1998 - 2010 .... 164

• Differences in cultural values
• Economic structure created to foster manufacturing industries
• Mechanisms to finance social security
• Synergies within a service economy

9.3 Options to improve the competitiveness outlook .... 166

9.4 Technology issues, manufacturing into services, 1998 - 2010 .... 167

9.5 Options to improve the technology outlook .... 168

9.6 Employment issues, manufacturing into services, 1998 - 2010 .... 168

9.7 Options to improve the employment outlook .... 169

9.8 Public procurement policy .... 170

APPENDICES

Blue pages

List of figures

Market data and figures

Sources and bibliography