EAM NXT 2020 Speaker Interviews: Luis Prato

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The landscape of asset management is changing. As digital transformation is taking over the manufacturing industry, enhancing efficiency and monitoring the performance of assets becomes crucial. Increasingly, organizations are investing in innovative technologies such as IoT, AI and ML to ensure live visibility for their physical assets. This change leads to the question: Is your EAM strategy competent enough to provide a competitive edge for your organisation?

At EAM NXT 2020, our new business platform dedicated to B2B enterprise asset management, we brought experts from various fields to tackle this question from several angles. In efforts to dig into these angles before EAM NXT 2020, we interviewed Luis Prato, affiliated researcher at Erasmus University,industry veteran with more than 15 years of experience and speaker at EAM NXT 2020. Luis explained how new technologies such as IoT, predictive maintenance, AI and ML are transforming the image of service business along with contracting and relationship between buyer and suppliers.

As an affiliated researcher at Erasmus University, your research focuses on the effects of digital technologies in buyer-supplier relations and contractual governance of pay-on-performance-based models. Can you elaborate on your research in terms of the technology? How these technologies affect buyer-supplier relations?

Manufacturing organizations are rapidly considering maintenance services enabled by digital technologies to transition towards performance-based contracting models ( e.g pay-per availability, pay-per-use, pay-on-economical results). The dramatic reduction of costs in smart sensors, remote communication, business applications and analytics provide new tools for this achievement.

For instance, Predictive Analytics, one of the digital technologies, fuels the migration to Predictive Maintenance which enables companies to increase productivity. These technologies can also be leveraged beyond the factory floor by linking them to back other services such as spare-part management, field services and technical support. Thus, opening up the door to more results-oriented or outcome-based business models.

Our interest is to investigate the opportunities presented by digital technology for the implementation of these new contracting models. How will commercial and contracting models look like when maintenance services are enabled by digital technologies? What kind of KPIs and payment models companies should companies implement to make it happen? How will the relationship between buyer-suppliers change? These are among the questions we are exploring within our research.

Can you give a specific, real-life example of how new technologies affect the buyer-supplier relationship?

Sure, the discrete manufacturing sector can be a great example. System’s suppliers may design, engineer, install and maintain complete turn-key solutions for producers of durables or non-durables goods. These assets are now enabled with digital technologies. And “connected factories” become more prevalent thanks to industrial automation. Asset management strategies are affected by these phenomenons.

Besides, these transformative steps, manufacturers may be willing to pay-on-performance or pay only for the outcome obtained. For example, the number of units that production lines produce per day or availability of the production line.

How did you start to work on this topic?

I hold a BSc in Mechanical engineering and an MBA along with more than 15 years of industry experience in the service business for manufacturers. While working in the industry, I realized that most manufacturers have difficulties in delivering, monetizing and contracting maintenance services.

About three years ago, I got involved in a project to develop an IoT- predictive maintenance cloud platform for a producer of rotating equipment. The project included retrofitting of our machines with smart sensors, developing algorithms to predict failures and using a cloud system to store immense amounts of data. In summary, a new portfolio of smart products, but the real value was dependent on our success in delivering, monetizing and contracting “maintenance services”. The product was absorbed into this new ecosystem and we had to change partially our business model. Here it was the moment where I understood the importance of combining technology and services. After that, I got in contact with the university and we started this research project.

You have more than 15 years of experience in the industry. What has changed since you started?

Traditionally, the mindset of these organizations is mostly product-centric. They focus on innovation and development of the best products for their respective markets. Back then, maintenance was the ugly kid or a necessary evil for these organizations. It was only seen as a cost driver by many sectors, including the manufacturing industry. But now I see a lot of change in terms of how maintenance is considered

Today, it is thought to be a part of the business model. And we see a lot of players in the industry, especially in digital space like ServiceMax IBM; GE Predix, Bosch, Microsoft, Amazon, SAP and Zuora among the big names, and thousands of newcomers which will change this landscape. We also see consulting firms considering preventive maintenance as part of their practice. Maintenance is moving from being a cost item into a revenue generator driver. That is the main trend I’m seeing.

If I asked you to define the state of the manufacturing industry with 3 words, what would those words be? Why?

One would be “transformation” because we are in the midst of a huge wave of change. Another one is “commotion” as in; we don’t know what we are supposed to do and how to do it. There are a lot of “growth opportunities” but also business issues. For instance, how to organize internally? There is a blurred frontier between IT, maintenance and operations. It’s very difficult to define organizations nowadays.

What are the biggest trends in Enterprise Asset Management now? Why is that? And how will they evolve in the future?

Smart sensors on machines and assets will help us to collect data and keep track of the whereabouts of the parts and the personnel which will result in better service.

Continuous remote-monitoring of assets within organizations is a major trend in Enterprise Asset Management (EAM). Business applications can leverage the information collected, to help managers with data-driven decisions and create a more holistic view of assets to increase efficiency and productivity.

Internet of things also makes possible for assets (machines) to interact with each other without human intervention. The combination of data collections tools with the intelligence provided by an IoT application facilitate the identification of losses in performance and potential pricess optimizations across the company.

As said earlier, Predictive Maintenance not only helps improve field service management but also helps improve customer satisfaction by avoiding unexpected downtime.

Smart logistics will have a great impact on the value and supply chain. If you want to maintain machines predictively, you have to make sure that people and the parts are available. Because if you don’t have the parts, you can’t scale proactively and if you don’t have the people you can’t perform the maintenance activities required.

In manufacturing, we also see the emergence of mobile remote services, with smart and glasses that you can use to monitor machines from afar. You can identify errors from machines as well as connecting digital twins.

Another trend will be Machine Learning (ML) and Artificial intelligence (AI) which optimize best practices in maintenance and production. Nevertheless, that will take a few years to get there as the industry is at the beginning stage. I think this is a very exciting opportunity.

Companies are moving away from reactive maintenance models and shifting towards more sophisticated business models. New technologies are implemented to fully benefit from this shift. How are EAM systems affected by this? What are the main challenges that companies face during their transition phase?

Right now, there are few providers of digital technologies that can support companies during the transition phase. First of all, it can be very costly, especially for small to medium-sized companies. Moreover, these companies don’t see the benefit of Digitalization and changing their processes.

Lastly, finding talent is an issue as well. We need more engineers, data scientists, service evangelists, commercial gurus and digital experts to make the transition.

Indeed, finding the right talent has become an issue for many manufacturing companies. How do you think they can attract more talent?

To be honest, I don’t have an answer to that. I think companies need to change their mindsets. They need to bring fresh professionals to c-level positions so that they can bring new insights and perspective to the table. I don’t have anything against experience but there a lot of leaders lacking skills in digital. And that creates an issue when you want to explain the balance required nowadays between IT/Digital, engineering, production and maintenance. They need advisors to guide them about the new space.

During your presentation, you will give insights into the new role of the maintenance department in the digital era and future challenges to overcome in organizations. If you were to summarize the takeaway of your presentation, what would that be?

It’s still in work-in-progress. What I can say is; in our research, we have seen service organizations taking the driving seat in such transformation projects, supported by multidisciplinary teams from different background like finance, controlling, sales, operations and marketing.

Any message you want to share the participants of EAM NXT?

Looking forward to seeing you all!

Interested in learning more about our speakers? Make sure to read our interview with Tim Vangsgaard Hansen, the Strategic Asset Manager at Copenhagen Airports.

Read the agenda and register to EAM NXT 2020 from here.