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Product-service systems (PSS) are business models that provide for cohesive delivery of products and services. PSS models are emerging as a means to enable collaborative consumption of both products and services, with the aim of pro-environmental outcomes. [1]
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Product service systems, put simply, are when a firm offers a mix of both products and services, in comparison to the traditional focus on products. As defined by (van Halen, te Riele, Goedkoop) [2] "a marketable set of products and services capable of jointly fulfilling a user's needs", PSSes can be realized by smart products.
The initial move to PSS was largely motivated by the need on the part of traditional manufacturing firms to cope with changing market forces and the recognition that services in combination with products could provide higher profits than products alone. [3] Faced with shrinking markets and increased commoditization of their products, these firms saw service provision as a new path towards profits and growth. [4]
While not all product service systems result in the reduction of material consumption, they are more widely being recognized as an important part of a firm's environmental strategy.[ citation needed ][ timeframe? ] In fact, some researchers have redefined PSS as necessarily including improved environmental improvement. For example, Mont defines PSS as "a system of products, services, supporting networks, and infrastructure that is designed to be competitive, satisfy customers' needs, and have a lower environmental impact than traditional business models." [5] Mont elaborates on her definition as follows: A PSS is a pre-designed system of products, services, supporting infrastructures, and necessary networks that is a so-called dematerialized solution to consumer preferences and needs. It has also been defined as a "self-learning" system, one of whose goals is continual improvement. [6]
This view of PSS is similar to other concepts commonly seen in the environmental management literature, such as "dematerialization" [7] and "servicizing". [8]
PSS has been used to create value for customers beyond selling products as functions. Typically, there are four approaches to PSS design.[ citation needed ][ specify ]
There are many methodologies on PSS design. Dominant Innovation system uses an Innovation Matrix to identify gaps from customer's fear, not needs based on scenario-based path finding. A new value-chain ecosystem can be further developed to link these gaps between two invisible spaces. [9] For example, John Deere developed Agric Service business based on the customers' worries on soil related issues. It integrates sensors with GPS to develop cognitive site map about soil content to optimize crop yields. Several peer-reviewed scientific articles have reviewed and give an overview of the PSS design research field. [10] [11] [12] [13] [14] [15] [16] [17]
In recent years,[ timeframe? ] PSS has been further integrated with big data analytics for accelerated innovation. Other technologies such as prognostics, health management and cyber-physical systems have further created service innovation technologies for PSS. For example, Alstom has been developing Train Tracer technologies[ clarification needed ] since 2006 and is implementing Health Hub system[ clarification needed ] for its transport fleets.
"Product Servitization" is a transaction through which value is provided by a combination of products and services in which the satisfaction of customer needs is achieved either by selling the function of the product rather than the product itself, by increasing the service component of a product offer, or by selling the output generated by the product. [18] The concept is based on the idea that what customers want from products is not necessarily ownership, but rather the function that the product provides or the service the product can deliver. [19] This means that the provider of "servicizing solutions" may get paid by the unit-of-service (or product function) delivered, as opposed to the (more traditional) unit-of-products sold. See service economy for more on product servitization.
One type of product servitization solution is based on transactions where payment is made—not for the "product"—but for the "product-service package" (part of PSS) which has been sold to the customer. This servicized purchase extends the buying transaction from a one-time sale (product acquisition), to a long-term service relationship (such as in the case of a long-term maintenance-free service contract). [20]
Another type of servicizing may be a strategy for providing access to services for people who cannot afford to buy products outright. For example, in the case where auto ownership is economically unfeasible, creative servicizing offers at least three possible solutions: one in which transportation can be achieved simultaneously (as in car-pooling); one in which transportation can be achieved sequentially (as in car-sharing); [20] and one in which transportation can be achieved eventually (rent-to-own).
There are various issues in the nomenclature of the discussion of PSS, not least that services are products, and need material products in order to support delivery, however, it has been a major focus of research for several years. The research has focussed on a PSS as system comprising tangibles (the products) and intangibles (the services) in combination for fulfilling specific customer needs. The research has shown that manufacturing firms are more amenable to producing "results", rather than solely products as specific artefacts, and that consumers are more amenable to consuming such results. This research has identified three classes of PSS: [21]
This typology has been criticized for failing to capture the complexity of PSS examples found in practice. [22] [23] Aas et al. [22] for example proposed a typology with eight categories relevant in the digital era, whereas Van Ostaeyen et al. [23] proposed an alternative that categorizes PSS types according to two distinguishing features: the performance orientation of the dominant revenue mechanism and the degree of integration between product and service elements. According to the first distinguishing feature, a PSS can be designated as input-based (IB), availability-based (AB), usage-based (UB) or performance-based (PB). The performance-based type can be further subdivided into three subtypes:
According to the second distinguishing feature, a PSS can be designated as segregated, semi-integrated, and integrated, depending on to what extent the product and service elements (e.g. maintenance service, spare parts) are combined into a single offering.
The following existing offerings illustrate the PSS concept: [24]
In the framework of the European research program of TURAS (Transitioning towards urban resilience and sustainability), [25] a study, in Belgium, explored new hybrid-combinations between products and services systems in order to develop new creative and sustainable business opportunities (both economically viable and creating new jobs) for the Brussels-Capital Region. Five workshops have been organized on the following topics:
After 5 co-creation workshops, with more than 50 different stakeholders, and the use of specifics tools, 17 PSS inspiring and promising ideas were identified. After a selection process 4 were chosen for further development of their business models through a series of tools (debugging, light experimentation, simulation, etc.). The study led to the development of a practical toolkit (freely downloadable): PSS Toolkit – Development of innovative business models for product-service systems in an urban context of sustainable transition. [26]
Several authors assert that product service systems will improve eco-efficiency by what is termed "factor 4", i.e. an improvement by a factor of 4 times or more, by enabling new and radical ways of transforming what they call the "product-service mix" that satisfy consumer demands while also improving the effects upon the environment. [21]
van Halen et al. state that the knowledge of PSS enables both governments to formulate policy with respect to sustainable production and consumption patterns, and companies to discover directions for business growth, innovation, diversification, and renewal. [27]
Tietze and Hansen discuss the impact of PSS on firms' innovation behavior identifying three determinants. First, product ownership is not transferred to the customers, but remains with the PSS operating firm. Second, the purpose of a product is different if it is used within PSS solutions than compared to the purpose of products in classical transaction based business models. When offering PSS, products are used as a means for offering a service. Third, the profit function of PSS operating firms differs substantially from profit functions of firms that develop, manufacture and sell their products. [28]
From a manufacturer's perspective, the business potential of a PSS is determined by an interplay of four mechanisms: cost reduction, increased customer value, changes to the company's competitive environment and an expansion of the customer base. [29]
Industrial ecology (IE) is the study of material and energy flows through industrial systems. The global industrial economy can be modelled as a network of industrial processes that extract resources from the Earth and transform those resources into by-products, products and services which can be bought and sold to meet the needs of humanity. Industrial ecology seeks to quantify the material flows and document the industrial processes that make modern society function. Industrial ecologists are often concerned with the impacts that industrial activities have on the environment, with use of the planet's supply of natural resources, and with problems of waste disposal. Industrial ecology is a young but growing multidisciplinary field of research which combines aspects of engineering, economics, sociology, toxicology and the natural sciences.
Service economy can refer to one or both of two recent economic developments:
In business analysis, PEST analysis describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. It is part of an external environment analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro-environmental factors to be taken into consideration. It is a strategic tool for understanding market growth or decline, business position, potential and direction for operations.
A biorefinery is a refinery that converts biomass to energy and other beneficial byproducts. The International Energy Agency Bioenergy Task 42 defined biorefining as "the sustainable processing of biomass into a spectrum of bio-based products and bioenergy ". As refineries, biorefineries can provide multiple chemicals by fractioning an initial raw material (biomass) into multiple intermediates that can be further converted into value-added products. Each refining phase is also referred to as a "cascading phase". The use of biomass as feedstock can provide a benefit by reducing the impacts on the environment, as lower pollutants emissions and reduction in the emissions of hazard products. In addition, biorefineries are intended to achieve the following goals:
Material efficiency is a description or metric (Mp) (the ratio of material used to the supplied material) which refers to decreasing the amount of a particular material needed to produce a specific product. Making a usable item out of thinner stock than a prior version increases the material efficiency of the manufacturing process. Material efficiency goes hand in hand with Green building and Energy conservation, as well as other ways of incorporating Renewable resources in the building process from start to finish.
A sustainable business, or a green business, is an enterprise that has a minimal negative impact or potentially a positive effect on the global or local environment, community, society, or economy—a business that strives to meet the triple bottom line. They cluster under different groupings and the whole is sometimes referred to as "green capitalism." Often, sustainable businesses have progressive environmental and human rights policies. In general, a business is described as green if it matches the following four criteria:
Precycling is the practice of reducing waste by attempting to avoid buying items which will generate waste into home or business. The U.S. Environmental Protection Agency (EPA) also cites that precycling is the preferred method of integrated solid waste management because it cuts waste at its source and therefore trash is eliminated before it is created. According to the EPA, precycling is also characterized as a decision-making process on the behalf of the consumer because it involves making informed judgments regarding a product's waste implications. The implications that are taken into consideration by the consumer include: whether a product is reusable, durable, or repairable; made from renewable or non-renewable resources; over-packaged; and whether or not the container is reusable.
Design for the Environment (DfE) is a design approach to reduce the overall human health and environmental impact of a product, process or service, where impacts are considered across its life cycle. Different software tools have been developed to assist designers in finding optimized products or processes/services. DfE is also the original name of a United States Environmental Protection Agency (EPA) program, created in 1992, that works to prevent pollution, and the risk pollution presents to humans and the environment. The program provides information regarding safer chemical formulations for cleaning and other products. EPA renamed its program "Safer Choice" in 2015.
Textile recycling is the process of recovering fiber, yarn, or fabric and reprocessing the material into new, useful products. Textile waste is split into pre-consumer and post-consumer waste and is sorted into five different categories derived from a pyramid model. Textiles can be either reused or mechanically/chemically recycled.
Product lifetime or product lifespan is the time interval from when a product is sold to when it is discarded.
Sustainable product development (SPD) is a method for product development that incorporates a Framework for Strategic Sustainable Development (FSSD), also known as The Natural Step (TNS) framework. As the demand for products continues to increase around the world and environmental factors like climate change increasingly affect policies - and thus business - it becomes more and more of a competitive advantage for businesses to consider sustainability aspects early on in the product development process.
Micro-sustainability is the portion of sustainability centered around small scale environmental measures that ultimately affect the environment through a larger cumulative impact. Micro-sustainability centers on individual efforts, behavior modification, education and creating attitudinal changes, which result in an environmentally conscious individual. Micro-sustainability encourages sustainable changes through "change agents"—individuals who foster positive environmental action locally and inside their sphere of influence. Examples of micro-sustainability include recycling, power saving by turning off unused lights, programming thermostats for efficient use of energy, reducing water usage, changing commuting habits to use less fossil fuels or modifying buying habits to reduce consumption and waste. The emphasis of micro-sustainability is on an individual's actions, rather than organizational or institutional practices at the systemic level. These small local level actions have immediate community benefits if undertaken on a widespread scale and if imitated, they can have a cumulative broad impact.
A circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products for as long as possible. CE aims to tackle global challenges such as climate change, biodiversity loss, waste, and pollution by emphasizing the design-based implementation of the three base principles of the model. The three principles required for the transformation to a circular economy are: designing out waste and pollution, keeping products and materials in use, and regenerating natural systems." CE is defined in contradistinction to the traditional linear economy. The idea and concepts of circular economy (CE) have been studied extensively in academia, business, and government over the past ten years. CE has been gaining popularity because it helps to minimize emissions and consumption of raw materials, open up new market prospects and, principally, increase the sustainability of consumption and improve resource efficiency.
An Environmental Product Declaration (EPD) is defined by International Organization for Standardization (ISO) 14025 as a Type III declaration that "quantifies environmental information on the life cycle of a product to enable comparisons between products fulfilling the same function." The EPD methodology is based on the Life Cycle Assessment (LCA) tool that follows ISO series 14040.
Resource recovery is using wastes as an input material to create valuable products as new outputs. The aim is to reduce the amount of waste generated, thereby reducing the need for landfill space, and optimising the values created from waste. Resource recovery delays the need to use raw materials in the manufacturing process. Materials found in municipal solid waste, construction and demolition waste, commercial waste and industrial wastes can be used to recover resources for the manufacturing of new materials and products. Plastic, paper, aluminium, glass and metal are examples of where value can be found in waste.
Environmental systems analysis (ESA) is a systematic and systems based approach for describing human actions impacting on the natural environment to support decisions and actions aimed at perceived current or future environmental problems. Impacts of different types of objects are studied that ranges from projects, programs and policies, to organizations, and products. Environmental systems analysis encompasses a family of environmental assessment tools and methods, including life cycle assessment (LCA), material flow analysis (MFA) and substance flow analysis (SFA), and environmental impact assessment (EIA), among others.
Yuen Kum Fai is a Singaporean academic specialising in maritime studies, strategy, and sustainable management. He is currently an assistant professor in the School of Civil and Environmental Engineering, Nanyang Technological University, Singapore. He is an appointed associate editor for Maritime Policy & Management, which is indexed by Web of Science and the flagship journal of international shipping and port research run by Taylor & Francis. In addition, he is an advisory board member for Transportation Research Interdisciplinary Perspectives owned by Elsevier. He is also an invited guest editor for the journal, Sustainability, on the special issue 'Sustainable Maritime Transportation Management and Policies', and for Maritime Policy & Management on the special issue 'Artificial Intelligence & Big Data in Shipping'. He is the recipient of the Inauguration Grant which is part of a Singapore Teaching and Academic Research Talent Scheme that aims to attract Singaporean academics to join Singapore's autonomous universities as pre-tenure assistant professors. His research interests include sustainable shipping management, service quality, supply chain integration, transport economics, and technology and innovation management. As of Sep-2020, Yuen has published over 70 international journal papers. According to Scopus, his h-index and citations are 17 and 663, respectively.
Green supply chain management (GSCM) is the consideration of environmental issues in supply chain management.
Robert Sroufe is a scholar of sustainability, integrated management, high-performance buildings, supply chain management and operations. He is the Murrin Chair of Global Competitiveness at Duquesne University and the Palumbo-Donahue Graduate School of Business. His research utilizes a systemic outlook to understand triple bottom line performance, extending TBL to the contemporary term integrated bottom line (IBL) metrics reported to internal and external stakeholders. More specifically, he focuses on the most successful systems and tools for measuring and managing the relationship between performance and the environmental, social, and financial practices of businesses. His list of publications is primarily about: how firms can create productive management systems, integrate them across business functions, and measure and manage their performance; the main drivers of sustainability; the process and importance of existing buildings becoming high-performance buildings; the UN Sustainable Development Goals; and the strategic change process that occurs during a firm's sustainable development. Michigan State University conferred him a Ph.D.
Agrowth is a concept in economic policy according to which it is preferable to be indifferent to the growth of gross domestic product when devising policies to further economic and societal progress. The reasoning behind agrowth is that GDP growth does not correlate closely with such progress.
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