Digital Transformation

Paving the way for sustainability: The Digital Product Passport

Have you ever wondered what information lies behind the products that shape our daily lives? From smartphones to food packaging, the Digital Product Passport (DPP) aims to show at first glance where a product comes from, how it was manufactured, whether and how it can be repaired. Therefore, the DPP has the potential to positively influence our consumption habits and will continue to be relevant for companies in the future.

Behind the scenes: The Digital Product Passport explained

The concept of the DPP was developed as part of the European Green Deal and the EU Circular Economy Action Plan. While it may sound abstract at first, it is already becoming a central element of sustainable consumption. Similar to a “passport”, it records all significant stages in a product’s lifecycle, offering detailed insights into production, repair, and disposal.

Why is this important?

Imagine being able to trace whether a product was produced sustainably and how environmentally friendly it is at the end of its life when making a purchase—the DPP provides these insights. It is no longer just a concept: the European Union has mandated its implementation, with all industries expected to comply by 2030. The ESG reporting obligation and supply chain law already require companies with more than 500 employees to collect their data. In Germany, the passport will first affect resource-intensive industries such as electronics, electric vehicles, industrial batteries, textiles, construction, packaging, and plastics.

What does the Digital Product Passport entail?

The German Institute for Standardization (DIN) and the German Commission for Electrical, Electronic, and Information Technologies (DKE) have set up a committee for the Digital Product Passport, aiming to define the technical design requirements for the DPP. This encompasses, for example, information carriers with standardized identifiers for the product, information on environmental impacts, durability, materials, suppliers, and more. To enable the adaption to different product groups and industries with a wide variety of data, the DPP requires a corresponding modular architecture.

How the Digital Product Passport will influence consumer behavior

The DPP offers consumers a clear view of a product’s entire journey, from creation to disposal or recycling. Its contribution to transparency could impact our consumption habits significantly. For example, by providing easy insight into environmental impacts, it encourages consumers to choose long-lasting products. Various levels of detail enable tailoring information to different target groups.

The DPP as a driver of sustainable circular economy

The DPP is more than just a passport for products: it drives sustainable growth in the circular economy. The Product Passport optimizes the product lifecycle, promotes standardization and sustainable design, improves resource and recycling efficiency, and helps with environmentally friendly procurement.

The DPP in business

For companies, it is important to prepare for the introduction of the DPP at an early stage. PLM systems like CIM Database PLM and advanced IT solutions alleviate much of the work. For instance, they can calculate LCA (Life Cycle Assessment) data directly from bills of materials and work plans and use material compliance methods to ensure safe material selection. IoT systems like CONTACT Elements for IoT provide additional production data, contributing to effective energy management.

A strategic step for a sustainable future?

The Digital Product Passport is not just a source of information but provides consumers with solid information to make responsible purchasing decisions. Companies can successfully prepare for DPP standards by expanding their PLM systems and IT solutions. Therefore, the Digital Product Passport is a strategic step and a guiding necessity for a sustainable future.

You can find a more in-depth take on the Digital Product Passport right here on the CONTACT Research Blog.

Achieving digital service excellence in three steps

The benefits of a strong service offering

Service is an anchor of stability in the machinery and plant engineering sector during times of global crises. After-sales revenues are less susceptible to external developments and economic fluctuations compared to new plant business. Additionally, their higher profit margins stabilize companies’ cash flows and mitigate risks. Moreover, an attractive service offering provides a clear competitive advantage in global markets.

According to McKinsey, customers can expect a longer product lifespan from manufacturers with corresponding maintenance contracts since no one knows the equipment better than the manufacturers themselves. Regular after-sales touchpoints deepen customer relationships and offer recurring sales opportunities, making it easier for machinery and plant manufacturers to understand their customers’ problems and resolve them with the appropriate service offerings.

The 2020 Customer Service Benchmark by the German Mechanical Engineering Industry Association (VDMA) shows that many companies in the machinery and plant engineering sector have recognized these opportunities and are expanding their services. While at the time of the last major VDMA study on this topic four years ago, only about 61% of companies offered maintenance contracts and generated around 20% of their revenue from services, an increase in these values can be expected in the next survey.

This places us in the midst of a market development that will accelerate in the coming years. Technological progress also contributes to this: the Industrial Internet of Things (IIoT) allows service business to be optimized on a customer-specific basis using data from the product’s operation.

In the future, it will become more important but also easier for machinery and plant manufacturers to increase the maturity level of their service. The following maturity model helps you assess where your company stands on the road to service excellence.

A Maturity Model for Service

Companies with low service maturity handle customer inquiries exclusively reactively. Such processes take a long time because they are still partly processed with paper forms, and searching for the required information is a tedious routine activity that does not generate value. If inquiries via email or phone are not digitally collected, this complicates the structured and prompt processing of service cases. In the worst scenario, inquiries get lost in email inboxes or remain unprocessed during an employee’s vacation because no one has insight into the current status of communication.

Digital Service Management

Digitalizing service processes is the first step to increasing internal efficiency. Companies can use a CMS (Customer Service Management) tool to manage delivered products. Services are planned and documented digitally, resulting in a service logbook for each customer and asset. Incoming customer inquiries via email or telephone are automatically converted into tickets internally and then systematically processed.

Only once service processes can be handled efficiently is it worth building up the after-sales volume. Therefore, the digitalization of internal processes is the basis for the transition from reactive to proactive service business. For example, by offering standardized service contracts with regular maintenance for sold equipment.

Connectivity & Automation

The next step for machinery and plant manufacturers is to develop their products into smart products that transmit selected operating data. In the past, there were concerns about the feasibility of this approach because providing this data depends on the customer giving his consent. However, more and more plant operators are now willing to do so. McKinsey has validated this trend in a survey and identified two significant factors:

B2C customer experiences lead to increased expectations for service experiences
Positive experiences with IoT-based remote services during COVID-19

Plant operators are generally motivated to share information with the manufacturer when the added value is tangible, for example, in the form of cheaper maintenance contracts and the promise of higher availability. Manufacturers can achieve this by using operating data to introduce usage-based maintenance strategies instead of following calendar-based maintenance cycles. This results in fewer services per plant and reduces overall costs. Furthermore, software can detect suspicious patterns in operating data early on and automatically initiate preventive measures based on rules.

Customer Integration

Companies with high service maturity integrate their customers into their business processes via a customer portal. Such a portal is the centerpiece of a modern service experience and strengthens customer loyalty. It enables customers to view their purchased products along with their operating data and the service logbook for each asset. An overview of past and planned services provides planning security and streamlines scheduling between the manufacturer and operator. A ticket system allows customers to submit new requests, track their processing status, and respond to corresponding inquiries directly in the system without the need for a service employee to answer phone calls and manually convert them into tickets. Additional services such as spare parts orders or trainings can also be requested through the customer portal, which streamlines and accelerates the sales process.

Conclusion

A strong service business has positive effects on cash flow, minimizes entrepreneurial risks, and simultaneously strengthens customer experience. How this is best achieved depends on the current situation in customer service, the company’s products, and the offering of the competitors and is unique for each company. Blueprints such as the maturity model described here provide guidance and enable a quick assessment of how excellent service can be realized step by step with the technologies available on the market.

CONTACT Elements for IoT helps your team effortlessly manage the increasing number of customer inquiries while enhancing the efficiency of your service department.

Digital Operational Excellence in Practice

Operational Excellence is the ability of a company to continuously improve its value chain in terms of efficiency and effectiveness. It is the ultimate discipline in the manufacturing industry. Companies face constant pressure to optimize their manufacturing processes and increase productivity. However, there are several hurdles to overcome, such as lack of coordination, paper-based processes, and a multitude of labor-intensive manual activities.

For sustainable production optimization, digitalization through Manufacturing Operations Management (MOM) systems is a fundamental cornerstone. It’s crucial that IT activities go hand in hand with the design of processes and methods, and their integration into the shop floor organization, which often faces challenges such as limited resources, skill gaps, and restricted operational capacity.

Based on our project experiences, we have summarized the following typical steps for you to achieve increased OEE (Overall Equipment Effectiveness) and EBIT:

Qualification and involvement

Early involvement of employees as ambassadors significantly contributes to the success of the project. Therefore, the project team and leadership are trained at the project’s outset. This fosters a shared understanding and ensures sustainable integration of activities. Additionally, to assess the coverage of process threads with the standard software and to create mock-ups for the target system as needed, key users must be involved early on.

Equipment and Asset Management

A simple system solution without smart machine integration often generates significant benefits in the initial phase of the project. This is particularly true for maintenance. Asset management documents the condition of the equipment ‘as maintained.’ This allows similar groups of systems to be managed in a standardized manner and to identify deviations (benchmarking). Further potential lies in the standardized spare parts management.

Cross-System Data Logistics

The next step typically involves the integration into company-wide data logistics. To achieve this, leading systems and consumers are identified and matching is designed at their interfaces. Companies should not underestimate this design phase, which is often the most challenging part of establishing a stable data logistics. In terms of technical implementation, certified interfaces for standard systems like SAP are preferable, as individual approaches are often maintenance-intensive and not future-proof.

Optimization of Shop Floor Control

Once order data (from upstream systems) and equipment are available in the MOM system, the optimization of processes surrounding production and shop floor control continues: Error-prone Excel tools are replaced, planning consistency is enhanced, and manual efforts are reduced.

For instance, through effective shop floor data collection (SFDC), operators can report causes and quantities of defects, improving the information basis for control. By digitally providing manufacturing documents, manual efforts and sources of errors can be reduced. All of these measures significantly increase the acceptance of digitally available information among operators.

Machine Integration and Data Preparation

The integration of machines and equipment into the MOM system (Machine Data Acquisition) creates a comprehensive picture of the current manufacturing situation. This enables companies to implement condition-based and predictive maintenance measures. Another particularly important aspect is the implementation of a cross-functional energy management on this basis, as the system provides data for calculating the CO2 footprint throughout the entire production chain.

Digital Shop Floor Management

Digital Shop Floor Management (SFM) serves as a central interface between IT and process optimization. SFM is the key lever for continuous improvement in production and is methodically supported by cascading rule meetings. This allows insights and issues to be visualized and addressed from the workshop floor to the site level, from OEEs and loss reasons at a single facility in one shift to the impact on operational performance and site EBIT.

Stabilizing and Improving OEE

The focus on improving OEE often revolves around reducing downtime and reasons for disruptions. This is based on the consolidated overview from Machine Data Acquisition (MDE) and Shop Floor Data Collection (BDE), identifying measurable causes of losses for each machine. A typical insight, applicable to many companies, is that OEE losses are not solely due to equipment failures but often stem from organizational issues. Therefore, alongside initiatives such as setup workshops, machine cleaning measures, and employee training, projects in office areas are also of significant importance (e.g., order processing, planning/scheduling, and product development/master data).

Enterprise-wide Benefits

Digitization through MOM software establishes a foundation for companies to optimize their production sustainably. In typical cases such as in medium-sized mechanical engineering, improvements of the average OEE across all machines by more than 10 percentage points and an increase in site EBIT by more than 2 percentage points are quite realistic. As long as there are sufficient orders, increased productivity is immediately reflected in higher EBIT. At the same time, improved process quality and responsiveness have a positive impact on customer relationships.