New pay-per-use financing model at Dimensionics Density

The manufacturing industry is facing new challenges: Economic fluctuations, sustainability issues, scarce raw materials, rising energy prices and advancing digitalisation. The purchase of machines and the associated budgets can become a financial challenge for companies of all sizes. Nevertheless, these investments must be made in order to maintain production efficiently or to be able to process orders even when business is good. Investing in measuring equipment such as density measuring machines is also a significant investment for some companies. Thanks to our innovative offer, which is based on pay-per-use and OPEX, companies can now find flexible financing solutions for their needs.

The spread of the Industrial Internet of Things (IIoT) has created favourable conditions for so-called ‘pay-per-use’ business models. With pay-per-use, the customer no longer buys a machine, but pays a monthly fee for a certain number of hours or according to the number of measurements taken. The manufacturer assumes responsibility for maintenance during this ‘subscription’, which many companies are already familiar with from the software segment - monthly instalments instead of high one-off investments. This financing model enables our customers to react flexibly to fluctuating order situations without losing quality..

The challenges of purchasing density meters

Although calculating the ROI is an integral part of any investment and procurement process, the purchase of high-quality measuring devices is associated with a number of additional aspects, as density measuring machines have the character of a ‘non-production system’. Accordingly, the resulting added value must be clearly worked out, as experience has shown that quality can ultimately be expressed and valued in monetary terms. In order to guarantee reliable density determination at all times, regular maintenance and servicing is required in addition to the investment. In addition, the complexity of administration and limited financial flexibility can represent further obstacles.

In this context, the Industrial Internet of Things (IIoT) has created favourable conditions for innovative business models, such as the pay-per-use model. The widespread availability of data from production means that the use and utilisation of machines can also be tracked very precisely. This also makes usage-based billing possible. This is why we also offer our customers a pay-per-use model as the optimum solution: They only pay when density measurements are carried out.

We would like to take this opportunity to revisit two important terms that are frequently used in the financial world and are very valuable in this context: Capex and Opex.

CAPEX, OPEX, pay per use in machinery

While OPEX (Operational Expenditures) summarises current operating expenses, Capex refers to capital expenditures, such as machinery, equipment or buildings, which are used to expand or improve the business. These expenses are usually amortised over several years and reported as fixed assets in the balance sheet.

OPEX therefore refers to ongoing operating costs such as salaries, rent, energy and other costs that are directly related to maintaining the company's ongoing operations. These expenses are usually recognised in full as an expense in the same year and therefore reduce profit.

CAPEX refers to capital expenditure such as the purchase of density measurement machines, which is often a financial challenge. CAPEX is an important key figure on the balance sheet. CAPEX costs increase the assets recognised in the balance sheet, which are depreciated over the long term.

The pay-per-use model enables companies to pay a monthly fee for the time actually used rather than purchasing machines. This concept allows greater flexibility in the allocation between OPEX (Operational Expenditures) and CAPEX (Capital Expenditures). By using the pay-per-use model, companies can reduce the investment sum to such an extent that it is no longer recognised as a CAPEX investment, but can be taken into account as OPEX due to the flexible and demand-dependent nature of the costs.

Successful applications of the pay-per-use model:

The pay-per-use model is not a new idea and already existed before the advent of the Industrial Internet of Things. Examples include contract manufacturers in the electronics industry who carry out assembly work or bottling companies that fill and package drinks on behalf of beverage brands. Pay-per-use models are also becoming more common outside of production facilities, such as lift manufacturers who keep their lifts and charge their customers a variable annual fee based on usage, resulting in lower overall costs.

There are already successfully established pay-per-use models in the manufacturing industry, such as Kaeser's Sigma Air Utility. Instead of high acquisition costs, customers pay a monthly fee to ensure a reliable supply of compressed air, while Kaeser takes over the monitoring and maintenance of the equipment. https://www.kaeser.de/unternehmen/presse/pressemitteilungen/l-sigma-air-utility.aspx

Another example is the ‘pay-per-part model’ developed by TRUMPF Machine Tools for laser cutting machines, in which customers pay a pre-agreed price for each cut sheet metal part.https://www.trumpf.com/filestorage/TRUMPF_Master/Corporate/Press/Press_releases/2020_21/Corporate/20201014-PR-relayr/20201014-PM-TRUMPF-und-Munich-Re-pay-per-part.pdf

Dimensionics Density and the pay-per-use model:

Dimensionics Density has introduced the pay-per-use model to offer companies a cost-effective solution for automatic density measurement. Companies can use the density measurement machines on a subscription basis instead of purchasing them. This enables a lower initial investment and flexible adaptation to changing business requirements. In addition to the ability to react flexibly to the order situation and current requirements, the pay-per-use model also allows more flexibility in accounting for the machine. The machine is not procured as an asset, but rather the measurement is billed as a demand-based service by the quality assurance department, which allows these costs to be recognised as OPEX.

Advantages of the pay-per-use model for machines for automatic density determination:

1. Scalability: Companies can increase or decrease the measurement capacity as required. This enables flexible adaptation to changing production requirements.
2. No hidden costs: The pay-per-use model usually includes all costs for maintenance, calibration, training and support. This gives you transparent budget planning and avoids unexpected costs.
3. Access to high-quality technology: The pay-per-use model gives you access to high-quality density meters without having to make large investments. You remain competitive and can carry out high-quality measurements.
4. Efficient use of resources: Apart from a small monthly basic fee, users of the pay-per-use model only pay for the measurement time they actually use, thereby optimising their use of resources. This allows them to control their costs and improve their financial efficiency.
5. Expertise and support: Companies using the pay-per-use model have access to an experienced team of experts to assist with the installation, training and maintenance of the density meters. This ensures smooth operation.

Conclusion

The Dimensionics Density pay-per-use model offers companies a cost-effective and flexible density measurement solution. Companies can utilise high-quality technology, maintain their financial flexibility and focus on their core competencies. The advantages of the pay-per-use model allow them to avoid costs associated with the management and maintenance of measuring devices and to flexibly adapt their entire cost structure to the order situation at any time.

If you are interested in this financing model, you can arrange an online meeting with Philipp Prüße at the following link.