Midlife upgrade of capital equipment: A servitization-enabled, value-adding alternative to traditional equipment replacement strategies. (May 2020)

• Record Type: Journal Article
• Authors: Khan, Muztoba A.; West, Shaun; Wuest, Thorsten
• Is Part Of: CIRP journal of manufacturing science and technology. Volume 29(2020)Part B
• Page Start: 232
• Page End: 244
• Publication Date: 2020-05
• Subjects: Upgradability -- Product-service systems -- Servitization -- Capital equipment -- Replacement -- Circular economy -- Product lifecycle management -- Life cycle -- PSS; Manufacturing processes -- Periodicals; 670.5
• DOI: 10.1016/j.cirpj.2019.09.001
• Languages: English
• ISSNs: 1755-5817

Abstract

Abstract: Fast-paced technology lifecycles continuously increase the uncertainty of decision-making processes when it comes to acquisition of new technological innovations. This is especially true in case of technology acquisitions by means of equipment replacement that is often capital intensive and time consuming. The midlife upgrade strategy, building on manufacturing servitization and product-service system (PSS) business models, presents a promising alternative to traditional equipment replacement. Midlife upgrades describe the extension of capital equipment's remaining useful life by means of upgrading components, sub-systems or the like in response to certain triggers from users, environment, or market. However, the concept of midlife upgrade has thus far been discussed primarily from a theoretical perspective in literature. The state of the art lacks empirical evidence regarding the potential and outcome of successful midlife upgrades. In this paper, our objective is to empirically investigate the potential of midlife upgrade of capital equipment as a value-adding alternative to traditional equipment replacement in the context of servitization. To this end, first we develop a replacement decision framework based on the influencing factors and motivations behind equipment replacement. Then we present five case studies of capital equipment that have been upgraded during their middle of life to perform beyond their initial design specification. These case studies are analyzed based on the replacement decision framework with the goal of understanding whether the established influencing factors and motivations behind traditional equipment replacement are also applicable to capital equipment midlife upgrades and if so, to what extent. Our findings indicate that midlife upgrades have the potential to effectively postpone replacement while extending the remaining useful life of capital equipment and thereby facilitate the implementation of the circular economy. Our findings also suggest that midlife upgrades indeed present a value-adding alternative to traditional equipment replacement from the perspectives of both users and manufacturers, especially when provisioned with a servitized PSS business model.