Join me in a little thought experiment. I operate a shopping center. On a typical day, thousands of customers use escalators to move between floors. I need them to move swiftly and smoothly to reach the shops. If something disrupts that flow, I have unhappy customers and angry shopkeepers.

When we first built this mall, the designer and I looked at all of the options available to us for escalators. They were not cheap! The four we have cost us $200,000 each. Including assembly and installation, they totalled over $1 million*. And they continue to be expensive: an escalator service vendor visits monthly to check on lubrication, wear, and other routine items. We call them when something gets stuck in the mechanism and we need to shut it down or restart it after an emergency stop. This reactive approach means we don’t have a working escalator until they complete their work and every call-out costs us, to the tune of $100,000 per year for maintenance. Over 20 years, we estimate it’ll cost us the original $1 million plus another $2 million in service fees*. And that’s before any catastrophic failures that add significant, unanticipated, one-time costs. This is the old escalator-as-a-product model.

Suppose we were building this same shopping center concept today. Knowing what we know now, we’d do this differently. We’d enter into an escalator-as-a-service agreement where the vendor is responsible for the escalators’ installation and operation in exchange for a fixed monthly fee. The vendor forfeits part of their fee if the escalators aren't working. This means they are very interested in keeping the escalators running and trouble-free.

How can the vendor do this? It’s possible because new escalators are designed with sensors on critical components that send data to a central monitoring station. There, the data is analyzed, alarms sound when something goes wrong, and a service team is dispatched. This is called condition-based maintenance, the most common type of maintenance strategy.

T​his article appeared in the January 2023 issue of BENCHMARK