148
where (i/d) is the input or emission per unit of service delivered; e.g. the energy or
labour intensity of the service, providing a further measure of the efficiency or quality of the stock. Technological improvements usually mean that (i/d) decreases over
time. The balance between the interventions needed to operate and to replace the
stock leads to a systematic approach to defining optimal service life (Kim et al.
2003; Keoleian 2013). Combining Eqs. 7.1 and 7.7, the ratio of operating energy
(e S ) to production energy (e p ) is:
e e
e d
e p
p S
S d
S
p
S
p
/
( / )/[( / ) ( / ) ( / )]
=
×
×
(7.8)
Operating energy is thus more significant, and therefore the optimal service life is
shorter, when the material intensity (p/S) and product-service intensity (S/d) are
low; i.e. when the manufactured capital is well designed and efficiently used.
4 Economic and Social Implications
The principal of stock management is caring (stewardship) to maintain the quantity
and quality of stock. This applies to most stocks, including natural, human and
manufactured capital, and is radically different from the bigger-better-faster-safer
(fashion) thinking underpinning the industrial economy. The throughput (flow)
optimisation of production in global supply chains is replaced by asset (stock) management in the circular economy; the economic concept of value added is replaced
by the objective of value preservation. What is of interest to investors is the fact that
the return on investment (ROI) of a remanufacturing plant is usually many times
that of a plant manufacturing the same goods from scratch, due to lower capital cost.
On the other hand, the operating costs, notably labour, are typically much higher.
These differences have a number of important implications.
4.1 Business Models in the Performance Economy
The essence of the performance economy lies in producing, selling and managing
performance over time (Stahel 2010). Stock management lies at the heart of the
business model because each flow (repair or stock loss) represents a cost. The three
essential components and actors in the performance economy are shown schematically in Fig. 7.4:
1. Retained ownership of goods and their embodied resources by a manufacturer or
fleet manager; this supports objectives (1) and (2) of the priority list developed
in Sect. 3;
2. The skills and powers of an original equipment manufacturer (OEM), to support
objectives (3) to (8);
W.R. Stahel and R. Clift
where (i/d) is the input or emission per unit of service delivered; e.g. the energy or
labour intensity of the service, providing a further measure of the efficiency or quality of the stock. Technological improvements usually mean that (i/d) decreases over
time. The balance between the interventions needed to operate and to replace the
stock leads to a systematic approach to defining optimal service life (Kim et al.
2003; Keoleian 2013). Combining Eqs. 7.1 and 7.7, the ratio of operating energy
(e S ) to production energy (e p ) is:
e e
e d
e p
p S
S d
S
p
S
p
/
( / )/[( / ) ( / ) ( / )]
=
×
×
(7.8)
Operating energy is thus more significant, and therefore the optimal service life is
shorter, when the material intensity (p/S) and product-service intensity (S/d) are
low; i.e. when the manufactured capital is well designed and efficiently used.
4 Economic and Social Implications
The principal of stock management is caring (stewardship) to maintain the quantity
and quality of stock. This applies to most stocks, including natural, human and
manufactured capital, and is radically different from the bigger-better-faster-safer
(fashion) thinking underpinning the industrial economy. The throughput (flow)
optimisation of production in global supply chains is replaced by asset (stock) management in the circular economy; the economic concept of value added is replaced
by the objective of value preservation. What is of interest to investors is the fact that
the return on investment (ROI) of a remanufacturing plant is usually many times
that of a plant manufacturing the same goods from scratch, due to lower capital cost.
On the other hand, the operating costs, notably labour, are typically much higher.
These differences have a number of important implications.
4.1 Business Models in the Performance Economy
The essence of the performance economy lies in producing, selling and managing
performance over time (Stahel 2010). Stock management lies at the heart of the
business model because each flow (repair or stock loss) represents a cost. The three
essential components and actors in the performance economy are shown schematically in Fig. 7.4:
1. Retained ownership of goods and their embodied resources by a manufacturer or
fleet manager; this supports objectives (1) and (2) of the priority list developed
in Sect. 3;
2. The skills and powers of an original equipment manufacturer (OEM), to support
objectives (3) to (8);
W.R. Stahel and R. Clift