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Article

Product-Service Systems for Circular Supply Chain Management: A Functional Approach

by
Nicolas Haber
1 and
Mario Fargnoli
2,*
1
Department of Mechanical and Aerospace Engineering, Sapienza University of Rome, Via Eudossiana 18, 00184 Rome, Italy
2
Engineering Department, Universitas Mercatorum, Piazza Mattei, 10, 00186 Rome, Italy
*
Author to whom correspondence should be addressed.
Sustainability 2022, 14(22), 14953; https://doi.org/10.3390/su142214953
Submission received: 12 October 2022 / Revised: 8 November 2022 / Accepted: 10 November 2022 / Published: 11 November 2022
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Abstract

:
Growing environmental concerns, as well as market competitiveness, are inciting manufacturers to optimize the performance of their products throughout their entire lifecycle. To address these objectives, manufacturing, field service engineering and customer support should be aligned and should strive towards the same end-goal. While several studies have revolved around this context, the product-service system (PSS) approach has emerged as a promising way of meeting manufacturer, customer and environmental requirements alike. Nevertheless, most of these studies revolve around the design and development of a PSS, whilst a minimal amount of research has targeted its impact from the supply chain perspective, leaving aside inventory management. Consequently, the following study utilizes functional hierarchy modeling (FHM) and the PSS concept matrix to propose solutions that make it possible to meet customer requirements and improve the environmental performance and associated costs at the same time. An application at a medical equipment manufacturer brings forward the positive effects suggested by the research and reduces the aforementioned gaps. In detail, the results show a smaller variability in the supply of spare parts combined with optimized maintenance planning, which translates into lesser costs to the manufacturer, a prolonged product life cycle and a reduced environmental impact.

1. Introduction

In today’s world, manufacturers and companies alike have recognized the limitations of providing product-based solutions and have comprehended that such an approach offers few advantages compared to their competitors [1,2]. Additionally, the idea of what constitutes manufacturing and sales objectives has to be extended to include the environmental impact of these offerings: an improved product lifecycle augments the value of the product, which leads to minimized costs, higher benefits, and a better position on the market [3,4]. To do so, the manufacturer needs to address customer requirements via a holistic value offering, i.e., product and services, and not focus solely on the physical product and its attributes [5]. Subsequently, manufacturers and businesses have been showing increasing interest in circular economy models as a viable outlet for more profitable and more sustainable outcomes in the long term [6,7]. These models enable the manufacturers to meet customer requirements on the one hand via value-creating and value-adding solutions and to reduce their environmental impact on the other [8,9].
Accordingly, addressing all these requirements at the early stages of development allows for a more effective design through better utilization of financial and human resources. Product-service systems (PSSs) have emerged in recent decades as a solution to these needs [10,11]. PSSs allow for the reduction of waste, the achievement of environmental objectives, and the maximization of the manufacturer’s profits. Additionally, PSS manufacturers adopt an eco-friendly approach from the early stages of product/service design to take into consideration ecological aspects in order to facilitate recovery, reuse, and recycling activities once the product reaches the end of its lifecycle [12]. Such a strategy coincides with a circular economy (CE) perspective which also aims to optimize resource consumption, augment productivity, and enhance the product’s performance throughout its various lifecycle stages [13,14]. Williams [15], as well as Pigosso and McAloone [16] among other researchers, brought forward the necessity of identifying the ecological effects that can take place throughout a product’s lifespan, i.e., manufacturing, distribution, use, recovery, etc., and reduce them as much as possible while hindering neither its performance nor its quality, and therefore avoid compromising customer satisfaction. More concretely, use-oriented and result-oriented PSSs have the highest potential to lead to a reduction of environmental effects as well as for “closing the loop”. Such PSS types are characterized by the product’s ownership remaining in the hands of the manufacturer, thus enabling easier end-of-life (EoL) schemes such as recycling, reuse, refurbishing, reconditioning, etc. [17]. In addition, PSSs focus on the provided services to enhance the product’s lifecycle via reduced resource consumption and more efficient product handling which results in improved environmental performance [18].
Based on the prior literature, it is deemed that the PSS approach can be beneficial in optimizing the relationships among the actors of the whole supply chain; for example, when considering the upstream supply chain, suppliers can enhance the utilization of used components or products made from recycled materials to augment the circularity [19]. The augmented relational capability between the manufacturer and the supplier can foster the development of both resources for services and reverse logistics, improving the sustainability and circularity performances of the offering [20]. Moreover, in a context where the manufacturer produces the basic product and the suppliers/retailers are asked to add further value before putting it on the market (i.e., a two-echelon scheme), the latter, thanks to their proximity to customers, can provide more customized solutions, as well as value-enhancing services, ranging from product transshipment, maintenance and repair services, upgrading, recollection, and disposal [21]. Such a relationship is strengthened in the case of technical PSS relying on the supply of services for a base product with a high net value, which involves performance-based contracts [22]. In such a context, the service providers/retailers can address the service level based on customer demand, managing new risks and uncertainties compared to traditional contracts [23]. It must be noted that these risks can even be disruptive in stock management when a global exogenous event occurs, as stressed by Michail and Melas [24,25], as well as March et al. [26].
Based on the above considerations, a key aspect of PSS solutions lies in their personalization potential where services play an important role in tailoring the offering to different customers and hence distinct needs. Furthermore, such needs can vary in time, requiring a rapid reaction from the manufacturer to ensure that customer satisfaction is maintained or indeed strengthened [27]. To meet this goal, the PSS provider should respond swiftly; for instance, an escalating need for consumables, a greater use of the product requiring an adapted maintenance schedule, an increase of the needed products, etc. require adapted supply chains to cope with similar situations [28,29]. Nevertheless, supply chain management in a PSS context, and particularly inventory and stock management, are seldom addressed. Despite the vital role of supply chains in supporting manufacturers to address their customer’s needs and requirements on the one hand, and facilitating environmentally friendly practices on the other, few studies have investigated their implementation when adopted with a PSS strategy [30,31].
As noted by Nag et al. [20], the extant literature lacks information on how to adopt a circular supply chain in a PSS context, where a circular supply chain should be intended as a supply chain whose functions, from product and services development to reverse logistics, are aimed at fostering the restoration and recirculation of the resources.
In particular, in the PSS context, while numerous studies have addressed the product and services development stage [32,33,34], research is scarce regarding the PSS aftermarket services, such as remote customer assistance, technical field service, the supply of spare parts, the supply of consumables, product recovery, etc. Xu et al. [35] underlined the little research that has been carried out on maintenance services, while traditional scheduling models foresee the provision of service resources independently. In other words, customers’ service needs should be analyzed simultaneously to reduce PSS resources [36]. To achieve such a goal efficiently the repair prioritization of the products should be based on failure analyses.
Given the importance and criticality of these matters, specifically the ‘personalized’ spare parts which necessitate ‘user-tailored’ components, reducing lead times for deliveries and interventions and the availability of safety stock have become pivotal to the success of the PSS. Additionally, used parts recuperation and product recovery depend heavily on substitution parts availability and field service reactivity [37,38]. Inadequate management and handling of these items hinder the performance of the PSS and impede the positive outcomes it was set to fulfill, causing long downtime while waiting for spare parts and lengthy logistics among other hindrances. Therefore, to mitigate these risks on the one hand and optimize environmental performances on the other, further research is needed as pointed out by Engin et al. [39]. In particular, Tseng et al. [40] have highlighted the need to focus on PSS attributes such as flexibility and operational capability. Furthermore, Labbate et al. [41], recognizing that PSS can support companies moving towards more sustainable business models, underlined the difficulties that companies face in changing their business structure, encouraging further research on these hindrances from a practical point of view.
To address these concerns, the following research is set out to answer the following research questions (RQs):
RQ1. How to manage the supply of spare parts with variable customer demand?
RQ2. How can a PSS effectively facilitate the lifecycle management of the product or its components?
In more detail, the current study aims to apply the PSS concept matrix (PSSCM) [42] by means of a functional decomposition of the PSS supply chain, focusing on the after-sales services. The choice of implementing a functional approach to analyze the PSS is based on the fact that a PSS is represented by the main and elementary functions that meet the customers’ needs when effectively combined. Accordingly, functional reasoning allows the modular decomposition of the PSS’s main function, reducing business risks and facilitating the integration process [43,44]. Such an approach was applied to a company operating in the provision of medical equipment at an international level. In this industry sector, the implementation of a PSS approach is deemed very beneficial to achieving circularity [45]. In fact, medical equipment is usually provided to hospitals and clinics in terms of services per year guaranteed by the manufacturer/provider rather than in terms of physical products purchased. These types of contracts can allow for more effective management of the product lifecycle if a PSS approach is adopted, since the ownership of the equipment is retained by the manufacturer which can foster end-of-life (EoL) strategies, as well as to optimize after-sales services [46].
In more detail, the remainder of the paper is organized as follows: the suggested research approach is introduced in Section 2. Section 3 verifies the methodology through an empirical study in collaboration with a medical equipment manufacturer. Section 4 discusses the implications of the results, while Section 5 concludes the paper.

2. Materials and Methods

The study is based on the functional reasoning approach applied to the PSS implementation to optimize supply chain activities. According to Song [47], this implies the translation of stakeholders’ requirements into PSS design requirements, i.e., shifting from the stakeholders’ domain to the functional domain. In doing so, the functional decomposition is foreseen through the functional hierarchy modeling (FHM) method, which allows engineers to bring to light the system’s functions and their mutual interdependences [48]. FHM consists of three main levels, which can be described as follows (from the top to the bottom):
  • Customer demands level,
  • Functional level,
  • Structural level.
In practice, this method consists in defining the overall objective of the analysis, and the most critical demands of customers related to such an objective. Then, the functions are defined taking into account the effects on the environment (environment-centric functions) and specifying the related solution-centric functions leading to the practical solution/s at the structural level in accordance with the following procedure that summarizes the teleological chain of the FHM approach, as proposed by Van Ostaeyen et al. [48]:
4.
Overall objective definition,
5.
Analysis of critical customers’ demand,
6.
Definition of the environment-centric function,
7.
Definition of the solution-centric function.
It must be noted that, following this approach, the performance of each solution can be measured both in terms of environmental impact (environment-centric function) and technical features (solution-centric function).
To complete the first level, since our study is based on the optimization of the supply of spare parts, we took into account information based on the following analyses:
  • An investigation of customers’ requirements based on the last two years of requests received by the company’s customer care service.
  • A failure analysis based on customers’ requests for intervention, which is aimed at optimizing the spare parts and maintenance provisions in a coordinated manner.
  • An analysis of returned units after the end of the contract, which is aimed at establishing what type of components can be restored and reused, as well as the number of materials that can be recycled.
Then, for the modelling of the functional level, the PSS concept matrix [12] is applied: such a tool represents an augmentation of the morphological matrix [49], whose aim consists in verifying the compatibility between the principles realized by physical functions and the service functions to generate an effective energy flow, material flow, and information flow along with the whole PSS lifecycle [50].
In practice, starting from its total function, the PSS must be decomposed into sub-functions, each one of which satisfies a PSS sub-principle. The structure of the PSS concept matrix is reported in Figure 1, where the total solution is represented by the optimal function principle combination, which includes the most feasible combination of the solutions of each sub-function.
At the structural level, the optimized solutions based on the customers’ needs are defined. It must be noted that at this stage both tangible and intangible elements of the PSS are defined, as well as the information flows. More specifically, this analysis focused on spare parts management and distribution. The impact on spare parts management is therefore evaluated both in terms of environmental and technical performance. In Figure 2, a scheme summarizing the proposed approach is provided, where the use of the FHM method to define the main objective of the analysis and the relevant core customer demands can be noted. The latter are the drivers for the definition of the optimal solution when applying the PSS concept matrix method.
Then, the feasibility analysis is carried out by means of the evaluation of the expected performances of the novel business solution taking into account both the environment-centric function and the solution-centric function outlined through the FHM method, which represent the goals of the structural and functional solution.
In more detail, the evaluation of the performances of the selected solutions is threefold:
  • Environmental assessment carried out using the eco-indicator method [51];
  • Maintenance operations management;
  • Stock management and spare parts inventory management, including the evaluation of distribution lead times.
In other words, and as underlined by Vezzoli et al. [52], the FHM approach can provide a clearer understanding of environmental indicators and performance measurement, allowing for the development of new typologies of options for sustainable PSS solutions. The analysis carried out by means of the PSS concept matrix can consequently provide information on the practical implementation of these solutions, supporting engineers in selecting the best alternative and verifying its essential affordance features, in line with Feng et al. [53].

3. Case Study

3.1. Overview

The subsequent case study is carried out at a manufacturer of medical equipment, i.e., in-vitro diagnostic (IVD) instruments, operating on an international scale. The instrument consists of four modules working independently. This enables the end user, i.e., laboratory technician, or medical professional, to run several tests simultaneously on the one hand, and it allows them to continue using the instrument in case of the breakdown of a module on the other. Despite a theoretical lifespan of four years, the instrument lasts on average 13 months before failures occur. Consequently, this can lead to negative environmental impacts, customer dissatisfaction, and additional or unwanted economic costs [18].
Hence, the medical sector possesses considerable potential for the implementation of circular economy policies that can reduce the environmental impact of the equipment while optimizing costs [54]. Notably, end-of-life (EoL) activities can be put in place such as product recovery for either its proper disposal or for reconditioning purposes, refurbishment, and reuse, among other purposes. This can, for instance, reduce the raw materials used and the associated manufacturing costs while increasing the lifecycle of their constituting components [55,56,57]. Furthermore, medical equipment is normally augmented by services that accompany the product throughout its lifecycle, i.e., installation at a customer site, operational qualification, supply of consumables, preventive maintenance, etc. These services are proposed by the manufacturer or authorized and qualified third parties which fall in line with the PSS ‘mentality’ where services are a fundamental part of the offering proposed by the manufacturer, i.e., the solution provider. Gao and Yao [58] have underlined the fact that a PSS business model can surpass the lifespan of a sole product.
Accordingly, a PSS where the manufacturer retains ownership of the product enables better monitoring of its state as well as of its accessories and consumables which then translates into better management of the spare part and inventory levels, as hinted at by several researchers such as Arifin and Ismail [59] and Gabriel et al. [60].

3.2. Product Presentation

The diagnostic equipment is composed of approximately three hundred components, which can be classified into the following main categories:
  • Fluidic components: parts that come into contact with the patient’s sample and are behind its mixing with reagents, control samples and other biological solutions.
  • Electro-mechanical components: responsible for the moving parts of the product, i.e., gears, motors, pressing plates, etc.
  • Structural components: mainly aluminum and stainless-steel sheets as well as plastic pieces that compose the chassis and maintain the structural integrity of the product.
  • Optical components: mainly imaging modules that serve for diagnostic purposes via the optical characteristics of the samples.
  • Consumables: cartridges that contain all the essential elements for attachment of the relevant antibodies, including reservoirs for all reagents, integrated pumping mechanisms, and an optical transducer for integrated sensing. These are the most common type of consumables for IVD products [61,62].
  • Electronics: microcontrollers and processors behind analysis intelligence.
  • Peripherals and accessories: access and control monitor, ethernet cables, ferrites, and fuses among others. In other words, the additional items needed to operate the product and ensure its correct functionality and security.

3.3. Current Market Status and Product Feedback

The manufacturer currently produces the equipment and the consumables needed for its use. The equipment is covered by a one-year warranty and maintenance service. The maintenance service includes checking the instrument for any degradation, running electronic checks, software updates, and cleaning among other things. Once the one-year maintenance service expires, the customer can extend it by establishing a maintenance contract with several options, i.e., intervention under 24 h, intervention under 48 h, and equipment replacement if repairs are off-site. Nevertheless, this is not mandatory.
We used the data from the past two years to identify the main reasons for defects and interventions (Figure 3). We also investigated the timeline when those defects took place (Figure 4). These occur sporadically, which means they require a large amount of flexibility to be addressed, notably when trying to forecast the amount of spare parts needed for a more fluid management of the inventory.
Consequently, dispatching the spare parts and having them meet their scheduled deadline is a daunting task when variability is high [63]. This can hinder the reactivity of the manufacturer on the one hand and unsettle the maintenance planning on the other. Customer satisfaction is inevitably impacted by these issues [64].
Currently, the manufacturer has a main warehouse located in Central Europe where assembly, conditioning, storage, logistics, and distribution are handled. Specifically, the integration is done via cross-docking. Crucial components and parts are kept at this warehouse and considered “off-the-shelf” items [65] to facilitate their expedition and hence reduce the intervention delays. The manufacturer is responsible for handling the request for an intervention, i.e., ordinary or extraordinary, assigning a field service engineer, scheduling a date with the customer, dispatching the needed spare parts, carrying out the installation and operational qualifications, and training the customer’s personnel when/where needed.
A customer call center is the entry point, gathering the needed information regarding the customer’s main information, the installed equipment, type of contract, preliminary diagnostic, etc. Then the call center relays this information to the field service department which sets up the intervention activity. From a geographical point of view, these activities are organized as follows
  • Customer locations within a 500 km radius are handled by the manufacturer’s team directly.
  • Customer locations outside this distance (>500 km) are handled by authorized third parties and suppliers. Peripheral (secondary) warehouses are available for this purpose (Figure 5).

3.4. The PSS Solution

With the information presented above concerning the present business model, the manufacturer is considering a change towards a more comprehensive solution that can assist in the better management of inventory and spare parts. One of the most successful forms of PSSs is the use-oriented (UO) type where the ownership of the product is kept within the manufacturer’s hands and the customer pays a fee for its use for a certain period [66]. By retaining ownership, the manufacturer provides adequate and proper training regarding the use of the equipment, carries out ordinary and extraordinary maintenance tasks, substitutes defective parts or components with qualified ones, keeps an eye on the product’s performance to identify trends and anticipate future failures, and manages EoL activities such as product recovery, recycling and reconditioning. Consequently, parts that are still working properly and pass through inspection can be utilized for the manufacturing of new products. Finally, given the monitoring of the product and its use patterns on the one hand, as well as the solidified and continuous contact with the customer on the other, the manufacturer can adapt to changing demands or unexpected breakdowns more effectively.
Regarding the activities related to the after-sales services, the logistics and distribution were evaluated: in its current state, the manufacturer is operating at a one or two-level strategy depending on the customer’s site. This can lead to unwanted delays when carrying out ordinary or extraordinary maintenance as well as end-of-life treatment as the execution of the activities depends on customer accuracy information, case-by-case processing, customer profile evaluation (type of product sales contract, additional service contracts, etc.) delays between different actions, among others [67]. Table 1 presents an extract of the key after-sales activities management and organization.
Then, the FHM method was applied to delineate the teleological chain and functional results of the PSS: in Table 2, the teleological chain of the FHM for the diagnostic instrument is reported, where the more abstract formulation of the function corresponds to the environment-centric one, while the lower level of abstraction is related to the solution-centric description [48].
Based on this, the leasing solution is defined via the application of the PSS concept matrix. A functional decomposition is initiated to define the elements needed to fulfill the overall objective, which is to provide a molecular diagnostic service, following the performance-based approach outlined by the FHM method. In Figure 6, the scheme of the functional decomposition is provided.
The functions (Fs) are delineated and decomposed into sub-functions (SFs) where the fulfillment of each leads to the achievement of the PSS’ objectives. In Table 3 an excerpt of the PSS concept matrix is provided, where the PSS enablers and providers of each sub-function are specified.
The application of the PSS concept matrix allowed us to define an alternative solution consisting in the transition from a traditional sales model towards a leasing model where the customer pays a fee for the use of the equipment over a period of time.
In detail, the manufacturer shall operate using a three-year renewable leasing contract. He supplies the equipment and training needed for its use while providing ordinary and extraordinary maintenance activities when required. This ensures proper tracking and surveillance of the equipment throughout its lease period while ensuring the use of original and qualified parts for maintenance tasks. Additionally, these tasks will be carried out by authorized personnel who are specifically trained for such purposes. This scheme enables the manufacturer to monitor the product more closely and collect the required performance information for continuous feedback.

3.5. PSS Evaluation

A six-year simulation was carried out to verify the feasibility of a PSS implementation that focused on spare parts management. In practice, this analysis was aimed at bringing to light the benefits both in terms of the reduction of lead times in providing the spare parts as well as in terms of maintenance interventions. Finally, the environmental improvements were evaluated considering the augmented flow of EoL activities.

3.5.1. Maintenance Interventions Management

In the scope of this study, the spare parts to be investigated are limited to the main ones, i.e., the most ordered components. The items were reviewed by the manufacturer’s engineers to corroborate the validity of the evaluation. In other words, they are representative of the daily tasks and hence describe the current situation and provide a sound basis for the assumptions of the PSS and comparison.
Thanks to the better monitoring of the equipment, information regarding its use is continuously communicated to the manufacturer which provides the basis for maintenance interventions. The following assumptions are made:
  • Production output: 576 equipment/year
  • Product lifespan: 3 years
  • Operational hours: 1750 h/year
  • Ordinary maintenance operations A (OMA): mainly concern software plugin updates, thorough cleaning, heat sensors, and mechanical triggers. These occur every 1500 h of use on average.
  • Ordinary maintenance operations B (OMB): mostly relate to electronic components replacement, gear replacement, thorough cleaning, sampling motor replacement, and solenoid valve replacement. They take place after approximately 4500 h of use.
  • Extraordinary maintenance operations C (EOMC): predominantly comprises the replacement of the excitation module and the replacement of the heater module. The manufacturer’s engineers estimate this occurring between 3500 and 4000 h of use on average
  • Extraordinary maintenance operations D (EOMD): commonly consist of the motherboard replacement, fuse replacement, and the replacement of the power supply components. The collected information from the manufacturer shows the incidence at nearly 5000 h of use.
The following figures show how the maintenance schedule differs between the current business model (Figure 7) and the proposed PSS solution (Figure 8).
From the maintenance planning assessment, the PSS solution brings forth the need for fewer ordinary as well as extraordinary maintenance interventions. From the data provided by the company on the equipment failure modes, it emerged that in the PSS model only three types of maintenance interventions are needed in the six-year period thanks to continuous monitoring of the equipment.

3.5.2. Spare Parts Inventory Evaluation

When analyzing the number of spare parts needed in the six-year period it is clear that it differs from one customer to another due to the variation of the failures that might occur. This requires an adaptation in terms of supply chain management and in particular the handling of spare parts and inventory levels. Given the new maintenance schedule associated with the PSS solution, it emerges that the number of spare parts varies less. As can be seen in Figure 9, with a stable manufacturing output of 576 products a year the PSS solution leads to a variation range of 2034 pieces per year instead of the 6912 pieces per year that characterize the current business solution.
Less variability in the number of spare parts needed leads to a more constant output and hence an easing of manufacturing operations where fewer components are needed. The production of these parts, as well as their management in terms of supply and logistics are reduced (Table 4) so that less time and effort are required, which can also be translated into financial and environmental terms.
Figure 10 shows the cumulative costs and economies that can be achieved. It must be noted that this evaluation was carried out considering only the cost of spare parts and their distribution from the warehouse to customers, while taxes and the cost of intervention/manual labor charges were excluded. This choice is justified by the fact that the maintenance intervention is usually performed by a field engineer/technician and this cost for the manufacturer varies largely, depending on the specific location. From the customer point of view, instead, in the current model, the maintenance interventions are sold as “all included packages”, which have fixed prices.

3.5.3. Environmental Impact

The environmental performance of the PSS was carried out using the Eco-Indicator 99 (EI99) [51]. The EI99 is a renowned and reliable lifecycle assessment tool that enables a comprehensive consideration of the product’s lifecycle stages and activities. In detail, it considers the raw materials used and their milling processes, manufacturing, transportation, maintenance, disposal, and end-of-life activities, i.e., reconditioning and recycling. The impact of these activities is expressed in damage points (Pt) which shows the damage to which the environment, resources, and humans are exposed. Furthermore, in this case the elements considered in the analysis are the impacts related to the production and distribution of spare parts, while the environmental impact due to the field engineer/technician intervention was not taken into account. Figure 11 summarizes the environmental performance of the current solution compared to its PSS alternative.

4. Discussion of Results

This case study demonstrates the advantages of shifting from a sales-oriented solution towards a leasing-based one, i.e., a PSS solution. From a broad perspective, the simulation of the PSS adoption shows a prolonged product lifespan through more reliable and planned maintenance management. The supply of spare parts, being essential for effective ordinary and extraordinary maintenance activities, is optimized as the needed parts can be planned ahead of time more accurately while reducing the variation of these components. The study shows that due to better product management and extended lifespan via a PSS implementation, the quantity of required spare parts can be reduced by 31% compared to the current model. Additionally, it emerged that spare parts variation can be reduced by 66% as a combination of more accurate forecasting on the one hand as well as the elimination of the EOMD intervention. Through a PSS leasing approach where product ownership is kept within the manufacturer’s realm, monitoring the state of the product is more effective as qualified field service engineers are carrying out the maintenance tasks and reporting back to the manufacturer’s experts. The spare parts used during these interventions are “genuine” and the ones replaced can be assessed by the manufacturer’s engineer for deterioration and degradation. This information is key for the continuous improvement of the product and its associated services.
From an environmental point of view, the PSS reduces the environmental impact by 20.6% via better management of the spare parts as well as facilitated end-of-life activities. On the one hand, the recovered product can be refurbished and hence reduce the need for new raw materials for its production. On the other, fewer spare parts are required when adopting the PSS model where the product’s performance is improved and hence less maintenance and replacements take place. Furthermore, a reduction in the number of spare parts needed is reflected in the occupied inventory space. The utilities and systems required to operate the storage are minimized leading to reduced operational and capital costs as well as an improvement from an environmental stance. This falls in line with suggestions from Darom et al. [68] and Tasdemir and Hiziroglu [69] among others. Such an undertaking can take place more effectively when implementing a PSS. The PSS, thanks to continuous monitoring of the product as well as upfront planning, enables schemes such as these, with better reliability and hence a lower risk of unforeseen circumstances or spikes in the demand of spare parts as hinted by Rosa et al. [70]. By comparison, a sales-oriented solution can bring forward similar results when the supply of spare parts and maintenance services are predetermined in the sales contract. Nevertheless, such schemes are mainly for one year as per the regulatory requirements of medical devices. This was solidified in a meeting with the manufacturer’s quality and regulatory representatives. Consequently, by aiming for a longer-term commitment by way of a PSS, this problematic is resolved.
To recap, although the results achieved are limited by the fact that they were obtained based on a simulation, they do, however, shed light on the implementation of a PSS in the medical equipment field where downtime needs to be avoided as much as possible. The associated aftersales and maintenance services are vital in meeting this request. The investigation brought forward the role of a PSS in facilitating the control of spare parts variation through product ownership retention enabling better management of the medical equipment by means of interventions carried out by the manufacturer’s teams, the use of genuine spare parts, and the continuous feedback that such a scheme provides. Every maintenance task is recorded as part of the leasing contract and the collected data regarding the equipment’s components are registered by the manufacturer’s engineers. Hence, the PSS allows better maintenance forecasting and planning which in turn can reduce the variation of spare parts. Additionally, less variation leads to less tension in the workplace as inventory levels can be optimized, logistics can be planned ahead of time, and responsiveness improved. This answers RQ1.
Furthermore, use-oriented PSSs such as the one analyzed in this study enable an easier management of the product’s lifecycle. In a conventional sales model, where product recovery and recuperation schemes are optional, the medical product is disposed of by the customer whereas numerous components and materials can be reutilized as indicated by Kleber and Cohen [71]. However, in a PSS context, the manufacturer or PSS provider is responsible for the product throughout its entire lifespan, including its EoL stage: the equipment can be recovered, evaluated, and its reusable components re-inserted into the manufacturing line. Consequently, manufacturing costs are reduced, and the environmental damage is minimized as we inch closer to waste reduction and better product lifecycle management. Hence, RQ2 is fulfilled. Lastly, this can lure new customers who may prefer reconditioned medical equipment as their prices are generally lower than new ones and can operate effectively.
From a more general point of view, the proposed approach, relying on the combination of the FHM method and PSS concept matrix, allowed us to merge the performance orientation of the revenue mechanism of the business model with the optimized integration between product and service elements. This augments the circularity of the business model fostering the adoption of performance-based PSS approaches in line with research findings highlighted by Lewandowski [72]. Moreover, the current case study demonstrates the effectiveness of the performance-oriented PSSs, which, as suggested by Van Ostaeyen et al. [51], represent in its different levels of integration the most feasible alternatives for manufacturers when shifting towards a PSS approach. Accordingly, the use of the FHM method can support manufacturers in better addressing the core customer demands consistently with the research of Dente et al. [73], while the use of the PSS concept matrix can augment the effectiveness of functional reasoning, providing more degrees of freedom for the manufacturer in the combination of physical and service elements. This confirms the effectiveness of functional reasoning when implementing PSS solutions [74], providing a more thorough example of the practical benefits that can be achieved.
Finally, it should be stressed that the outputs of this case study can reduce the research gap, outlined by different authors [75,76,77], related to the limited amount of studies regarding technical assistance and spare parts distribution in a PSS context.

5. Conclusions

Nowadays manufacturers are showing an increasing interest in circular economy models as a viable outlet for more profitable and more sustainable outcomes. Accordingly, they need to address customer requirements via a holistic value offering, which integrates products and services with the aim of providing personalized solutions capable of reducing waste, achieving environmental objectives, and maximizing the company’s profits. In such an effort, manufacturing, field service engineering, and customer support should be aligned toward the same goal. However, while numerous models for PSS development have been discussed, field service engineering is scarcely addressed by PSS literature. The current study has contributed to reducing such a research gap by focusing on customer support and spare parts management activities, which represent key elements of the supply chain management processes.
In particular, the PSS approach supported by functional reasoning was elaborated and applied in the field of medical equipment to bring forth customized solutions capable of optimizing the management of spare parts and the related maintenance interventions. The analysis confirmed the capability of the PSS approach to facilitate the control of spare parts variation enabling better management of the medical equipment by means of the interventions carried out by the manufacturer’s teams, the use of genuine spare parts, and the continuous feedback that such a scheme provides.
To sum up, the results show a reduction in the average spare parts needed from 5568 to 3840 a year (i.e., about 30% less). Thus, the PSS would lead to the consumption of only two-thirds of the quantity required in the conventional model, providing a significant improvement from the environmental point of view. Furthermore, costs related to spare parts can be reduced by nearly 52% when implementing a PSS business model. Nevertheless, these results are limited to spare parts costs and do not consider taxes and the cost of intervention/manual labor charges (e.g., field service engineers’ travelling costs).
Accordingly, from the theoretical point of view, the study augments previous research on the adoption of functional reasoning in the PSS field, providing evidence of practical benefits that can be achieved in supply chain management.
However further research is needed to overcome the case study limits by means of more refined simulations as well as the adoption of the proposed approach in different manufacturing contexts. In particular, the current study is limited to one type of medical product: more thorough results require a more extended approach to evaluate the benefits on an aggregated level. Indeed, diversification to other medical products would provide better knowledge of the impact of a PSS on a medical manufacturer’s supply chain and it would also enable a better assessment of a PSS’s applicability. Hence, practitioners and researchers are invited to further contribute to the search for an answer to the following question: is a PSS beneficial to all types of medical devices [78], and if so to what extent?

Author Contributions

Conceptualization, N.H. and M.F.; methodology, N.H. and M.F.; validation, N.H. and M.F.; writing—review and editing, N.H. and M.F. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

Not applicable.

Conflicts of Interest

The authors declare no conflict of interest.

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Figure 1. Scheme of the morphological approach.
Figure 1. Scheme of the morphological approach.
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Figure 2. Scheme of the proposed approach.
Figure 2. Scheme of the proposed approach.
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Figure 3. Returned units categorization 2020–2021.
Figure 3. Returned units categorization 2020–2021.
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Figure 4. Occurrence of defects 2020–2021.
Figure 4. Occurrence of defects 2020–2021.
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Figure 5. Spare parts management (current model).
Figure 5. Spare parts management (current model).
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Figure 6. Functional decomposition of the molecular diagnostic service.
Figure 6. Functional decomposition of the molecular diagnostic service.
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Figure 7. Maintenance interventions in the current business solution.
Figure 7. Maintenance interventions in the current business solution.
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Figure 8. Maintenance interventions in the PSS business solution.
Figure 8. Maintenance interventions in the PSS business solution.
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Figure 9. Spare parts variation in the simulation period.
Figure 9. Spare parts variation in the simulation period.
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Figure 10. Cumulative spare parts costs (excluding taxes and intervention/manual labor charges).
Figure 10. Cumulative spare parts costs (excluding taxes and intervention/manual labor charges).
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Figure 11. Environmental performance comparison.
Figure 11. Environmental performance comparison.
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Table
Table 1. Extract of the organization of the after-sales services.
Table 1. Extract of the organization of the after-sales services.
OperationOptionsCurrent State
Distribution and customer service coverageGeographical distribution
Customer type distribution
Customer importance distribution (number of installed products)		Geographical radius of 500 km
Customer and technical supportAssistance by the manufacturer’s field service technicians
Assistance by authorized third parties
Assistance by independent workshops		Assistance by the manufacturer’s field service technicians
Assistance by authorized third parties
Spare parts distributionOne level: manufacturer–central warehouse–customer
Two levels: manufacturer–central warehouse–peripheral warehouse–customer		Two levels: manufacturer–central warehouse–peripheral warehouse–customer
Table
Table 2. Teleological chain of the FHM for the diagnostic instrument.
Table 2. Teleological chain of the FHM for the diagnostic instrument.
Teleological Chain for the Diagnostic Instrument
Type of applicationProvide molecular diagnostic services
Overall objectiveEnable an efficient and reliable diagnostic service
Relevant core customer demandsNumber of services per yearIntervention time in case of malfunctioningContinuous update
Environment-centric functionKeep the number of diagnostic services near a set number
Solution-centric functionProvide a certain number of diagnostic services per year
Structural elementsDiagnostic equipment
Table
Table 3. Excerpt of the PSS concept matrix (PSSCM).
Table 3. Excerpt of the PSS concept matrix (PSSCM).
FunctionCodePSS EnablerPSS Provider
To provide molecular diagnostic serviceSF1Electronic formCustomer contact center-CustomerManufacturerThird party
SF2Customer surveySite visit-CustomerManufacturerThird party
SF3PurchasingLeasing-CustomerManufacturerThird party
SF4Periodic purchasesForecastOn-demandCustomerManufacturerThird party
SF5Manual (Instructions for use)On-site trainingRemote trainingCustomerManufacturerThird party
SF6PreventiveRisk-basedCondition-basedCustomerManufacturerThird party
…………………
SF14Replacement of all critical componentsReplacement of degraded componentsNone (no degradation noted)CustomerManufacturerThird party
Table
Table 4. Cumulative number of components needed.
Table 4. Cumulative number of components needed.
Year0123456
Current solution02880806415,55220,73623,61633,408
PSS solution02880806411,52014,40019,58423,040
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Haber, N.; Fargnoli, M. Product-Service Systems for Circular Supply Chain Management: A Functional Approach. Sustainability 2022, 14, 14953. https://doi.org/10.3390/su142214953

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