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

Problem

HeavyCo. is a major manufacturer of industrial equipment, but its service capacity is concentrated in one location. This resulted in high lead times and costs of delivering critical services such as repairs and spare parts, as most of their customers’ equipment were thinly spread in remote areas of the country. HeavyCo. sought to establish a network of authorized third-party service partners who would service HeavyCo’s equipment to reduce the lead time and costs of service. The main challenge was to identify the key levers of the service contract and establish a service partnership model that would be beneficial for both parties.

Situation

The SprintlyWorks team was engaged to accelerate progress on the topic of service expansion. The team used a time-boxed sprint to ensure that HeavyCo.’s business objectives were met. The project was carried out in three phases..

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

In Phase 1, the SprintlyWorks team analyzed HeavyCo’s business needs and identified the key levers of the service contract. This involved benchmarking industry best practices and consulting experts to develop an exhaustive list of the key components to include in a service partnership contract. The SprintlyWorks team took a deep dive into the business needs of HeavyCo. and outlined detailed requirements from the service partnership. 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

In Phase 2, the team interviewed potential service partners to understand their preferences with regards to each identified component of the service partnership. The interviews focused on the cost of the partnership, technical and marketing support, and stock management of spare parts. The insights gathered from these interviews helped to inform the service partnership model that was eventually developed.

Phase 3: Contract components based negotiation points provided

In Phase 3, a service contract with 8 key components was developed based on the negotiation points provided by the potential service partners. The contract was validated by shortlisted service partners, and a revised version was submitted to HeavyCo. The service partnership model is currently being piloted by HeavyCo, with the aim of reducing lead times and costs of delivering critical services such as repairs and spare parts, while also expanding HeavyCo’s geographical coverage and service sales efficiency process.

Results

As a result of the study, HeavyCo. initiated a pilot of the maintenance service partnership model. The time needed to reach the pilot phase of the project was cut down from 9-10 months to 2 months. The service partnership model is expected to reduce lead times and costs of delivering critical services such as repairs and spare parts, thus improving customer satisfaction. The service partnership model is beneficial for both parties as it allows HeavyCo. to expand its geographical coverage and service sales efficiency process, while also providing the service partners with technical and marketing support and stock management of spare parts.