How Product as a Service (PaaS) supports long-term growth in manufacturing

Manufacturers today face increasing pressure to do more with less, while operating in a world where efficiency, adaptability and sustainability are more connected than ever before. One innovative solution gaining traction is Product as a Service (PaaS), a model offering a different path: pay for what you need, when you need it, and let specialists handle the rest. However, its real value lies in understanding where and how it can be applied for maximum impact. 

Rethinking capital expenses and asset utilization 

Owning assets outright once meant control and security. Today, however, it often means capital is locked away in equipment that sits idle or becomes obsolete faster than anticipated. Maintenance, upgrades and eventual disposal add layers of cost and complexity. This is especially problematic nowadays, as we navigate a market where flexibility and speed can determine competitiveness. 

The PaaS model offers a viable alternative to this approach. Instead of allocating money into ownership, manufacturers pay only for what they use. This shift from capital expenditures (CapEx) to operational expenditures (OpEx) transforms fixed costs into variable ones and lets companies redirect capital toward innovation, workforce development or market expansion. As a result, organizations experience several key benefits: 

Significant reduction in total cost of ownership 

Greater agility for manufacturers, allowing them to scale up or down without long-term commitments 

Improved sustainability through higher asset utilization, resulting in fewer resources wasted on unused equipment 

Where PaaS delivers the most value 

It’s important to recognize that not every asset is a fit for PaaS. The key is to identify categories where this service model delivers the most value, often those with high maintenance needs or variable demand. Ideal candidates include: 

High-maintenance assets, meaning equipment that requires frequent servicing, can be managed more efficiently by a provider with specialized expertise 

Seasonal or cyclical products, consisting of assets with fluctuating usage patterns, are well-suited to pay-as-you-go models 

For example, managing industrial batteries as a service allows for the optimization of charging cycles and lifespan, ensuring reliable performance and minimizing the risk of premature failure. Similarly, pallet pooling services like CHEP enable companies to minimize warehouse space requirements, streamline logistics and simplify the handling of damaged or surplus assets (challenges that can otherwise lead to accumulation). This share, repair and reuse model also generates environmental savings by eliminating waste and reducing inefficiencies. 

In practice, managing logistics and maintenance issues internally presents operational bottlenecks. The processes of sorting, cleaning and transporting used assets are labor intensive and often demand specialized expertise. Disposal becomes even more complicated due to the variability in regional recycling regulations and infrastructure across the US, making it difficult for companies to responsibly and cost-effectively recycle or dispose of assets on their own. These complexities drive up operational costs and risks, especially as sustainability commitments become increasingly central to business strategy. 

Specialized service providers have the necessary infrastructure, expertise and economies of scale to maximize resource use, recovery and sustainability. This allows businesses to focus on their core activities without the distraction of managing complex logistics. 

Partnering with providers to ensure data transparency and circularity 

For PaaS to reach its full potential, manufacturers and service providers must collaborate closely, especially around data and lifecycle management. Data silos and lack of visibility can undermine the effectiveness of service models. However, when done right, PaaS models can transform asset management and performance through advanced digital technologies and a focus on circularity, including: 

IoT integration: Sensors and connected devices embedded in assets provide real-time data on usage, condition and location. This continuous stream of information enables proactive maintenance, optimized utilization and rapid response to issues 

Digital twins: Virtual representations of physical assets allow for simulation and analysis, helping providers enhance performance, predict failures and plan maintenance more effectively 

Circularity: Service providers are incentivized to design products for durability, reuse and recyclability, supporting a more sustainable lifecycle and minimizing waste 

Using the previous example of pallet pooling, providers may track assets using serialization, RFID or GPS technology. This enables real-time monitoring of product movement, optimization of delivery routes and a reduction in losses. This not only improves operational efficiency but also ensures better asset utilization. 

The benefits of these advancements include greater transparency, made possible by access to detailed usage and performance data, improved decision-making and enhanced trust between customers and providers. In this way, both parties can track asset health, usage patterns and service history, enabling more informed choices and proactive management. At the same time, aligning incentives for sustainability and lifecycle management ensures that products are reused or recycled more effectively, supporting the principles of a circular economy. In essence, the success of PaaS depends on breaking down data barriers and embracing digital tools, paving the way for a more efficient, transparent and sustainable future.  

By Sandy Leyva 

www.chep.com/us/en/services-solutions 

Sandy Leyva is Head of Sustainability at CHEP Americas. CHEP is a global leader in supply chain solutions. Together with producers, manufacturers, retailers and logistics partners, CHEP advances the smart and sustainable movement of goods across more than 60 countries. Powered by its share, repair and reuse network of pallets, crates and containers, CHEP helps businesses optimize their supply chains to reduce costs and minimize the environmental impact of their operations.