Supporting the Transformation to Access-Based Business Models in a Circular Economy with a Practical Model for Calculating the Costs of the Provider

Abstract

In a transformation to becoming more circular, many original equipment manufacturers (OEMs) are investigating the potential of transferring product ownership from the user to the provider, thus enabling access-based business models. Such a new model also makes the product life cycle cost borne by the provider, meaning that the OEM gains an interest in reducing the life cycle cost and prolonging the life cycle for its own benefit. In this study, a case OEM is in such a transformation and postpones the end-of-life through refurbishment and remanufacturing. However, to launch the access-based business model, the OEM needs to understand its new cash flows. Therefore, the objective of this paper is to show how an OEM has been supported by a model for calculating the product life cycle costs when transforming to an access-based business model. Through applying transdisciplinary research, a calculation model was developed in close collaboration with an OEM to calculate and visualise the product life cycle costs. The study also shows how the remanufacturing cost can be estimated based on existing repair and maintenance data. Furthermore, the importance of developing decision-making insights to persuade upper management that the new circular practices can provide boosted profitability is highlighted.