Case-study

What should be the contract terms and business model for a service-partnership?

Business Development Industrial Goods Industry

Service partners Service partners

Problem

Currently HeavyCo.’s service capacity is concentrated in one location, but most of their customers’ equipment were thinly spread in remote areas of the country. This caused high lead times and costs of delivering critical services such as repairs and spare parts.

In order to develop their business further, HeavyCo. sought to establish a network of authorized service partners who could operate independently and cater to customer needs as per HeavyCo’s service policies.

Outcomes

8

Key components of service partnership model identified

1

On-going pilot test with recommended service contract model

Situation

HeavyCo. is a major manufacturer of industrial equipment, and sought to expand the geographical coverage of their service business in order to reduce the lead time and costs of service. To achieve this, HeavyCo. wanted to establish a network of authorized third-party service partners who would service HeavyCo’s equipment. HeavyCo. utilized Sprintly team to accelerate progress on the topic of service expansion. This time-boxed sprint ensured that HeavyCo.’s business objectives were met which resulted in a pilot test with a service partner.

Key research question

The key questions for the project were:

Q1: What should be the terms of this service partnership?

Q2: How to establish the service partnership model so that it is beneficial for both parties?

Our approach

Phase 1: Identification of the key levers of service contract

The Sprintly team took a deep dive into the business needs of HeavyCo. and outlined detailed requirements from the service partnership. Then the Sprintly team benchmarked industry best practices and interviewed experts to understand the nuances of the service partnership contract. Finally, an exhaustive list of the key components to include in a service partnership contract was outlined.

Phase 2: Insights about potential service-partner needs

A number of potential service partners were interviewed to evaluate their preferences regarding each identified component of the service partnership. Service partners highlighted their preferences especially with regards to the cost of the partnership, technical and marketing support, and stock management of spare parts.

Phase 3: Contract components based negotiation points provided

Based on the above study a service contract with 8 key components was developed. The contract was then validated by shortlisted service partners. Finally, a revised version of the contract was submitted to HeavyCo. Currently, Heavy Co. is piloting the service-partnership model.

Results

HeavyCo. initiated a pilot of the maintenance service partnership model. Sprintly helped HeavyCo. cut down on the time needed to reach the pilot phase of the project from 9-10 months to 2months.