Eindhoven University of Technology MASTER Organizing … · Ing. J.A.M. (Jan) Melssen, Marel Stork Poultry processing Organizing for ... at the faculty of Industrial Engineering &

Eindhoven University of Technology

MASTER

Organizing for servitization

a case study at an original equipment manufacturer

van Meijl, T.M.H.

Award date:2012

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Download date: 25. Jun. 2018

Eindhoven, July 2012

B Eng, Mechanical Engineering—2009

Student identity number: 0722708

In partial fulfilment of the requirements for the degree of

Master of Science

in Innovation Management

Supervisors:

Dr. Ing. J.P.M. (Joost) Wouters, TU/e, ITEM

Dr. H. (Hao) Peng, TU/e, OPAC

Company supervisor:

Ing. J.A.M. (Jan) Melssen, Marel Stork Poultry processing

Organizing for servitization:

A case study at an original

equipment manufacturer

by

T.M.H. (Thijs) van Meijl

TUE. School of Industrial Engineering.

Series Master Theses Innovation Management

Subject headings: Capital goods industry, Customer Service, Organization, Industrial services

I

Abstract This master thesis describes the development of a service organization for Marel. This model describes the

different stages/ service offerings in between a “pure” product manufacturer and a “pure” service provider. In

addition the model describes the characteristics of the service product; the customer; and the organization for

each service offering specifically. The basis of the model is derived from the literature review and is extended

on the basis of findings from the case study conducted at three cases within the organization of Marel, an

original equipment manufacturer.

II

Preface This master thesis is the result of my graduation internship at Marel Stork Poultry Processing. The project is the

conclusion of the master program Innovation Management at the Eindhoven University of Technology (TU/e).

The project was supervised by the ITEM (Innovation, Technology, Entrepreneurship & Marketing) department

at the faculty of Industrial Engineering & Innovations Sciences (IE & IS).

During my internship I had the opportunity to apply my knowledge of Innovation Management and especially

my knowledge on servitization in the dynamic environment of Marel. My interest in both high-tech equipment

and the poultry business is what motivated me in conducting my internship at Marel Stork Poultry processing.

With excitement I look back on my master thesis project, especially my time at Marel Stork Poultry processing.

It has been a period of great personal development, both academically and professionally.

Although this project has been mostly an individual assignment, the completion of this project would not have

been possible without the help of a number of people. Here, I would like to take the opportunity to thank all of

them for their effort and support.

First of all, I would like to express my gratitude to my first supervisor from the Eindhoven University of

Technology, dr. ing. Joost Wouters for his constructive criticism, enthusiasm, and support. He challenged and

stimulated me to keep my drive for results high. Moreover, I would like to extend profound thanks to my

second supervisor from the Eindhoven University of Technology, dr. Hao Peng who helped me through her

useful comments and questions to develop this report.

Furthermore, I would especially like to express my gratitude to my supervisor at Marel Stork Poultry

Processing, ing. Jan Melssen. His trust in me as a person, his tremendous enthusiasm in the project, and his

sympathy is what drove me to strive for the best result. Especially, his extensive knowledge and experience and

his focus on the ‘bigger’ picture helped me to take my project to a higher level.

I would also say many thanks to my colleagues at the SG-CTS department; they created the nice working

environment, which kept me motivated.

Finally, I would like to thank my family and friends for their continuous support during my master thesis project

and study.

Thijs van Meijl,

Weert, July 2012

III

Executive summary

Introduction

Vandermerwe and Rada (1988) were the first who formulated the term “Servitization”. They defined it as, “the

process of creating value by adding services to products”. The phenomenon of servitization has received

numerous attention by academia, businesses and government, much of which is based on a belief that moving

towards services is a means to create additional value for traditional product manufacturers (Baines, Lightfoot,

Benedettini & Kay, 2009). According to Oliva & Kallenberg (2003), this transformation from product

manufacturer into service provider occurs gradually along a continuum, the “product-service continuum”. This

continuum consists of two extremes: product manufacturing firms who regard services merely as an add-on to

the product, and pure service providers who regard products merely as an add-on to the service. Within the

industrial service marketing literature various terms for these extreme points exist and received much

attention. However, the evolvement of a product offering from “pure goods” to “pure services” has received

much less attention (Evanshitsky, Wangenheim & Woisetschläger, 2011). Currently, a coherent body which

describes the characteristics of the stages in between “pure goods” and “pure services”, related to the capital

goods industry, is lacking in the academic literature. Developing such a coherent body is a necessity for making

the product-service continuum of practical business relevance and for investigating the transition into services

of manufacturing firms in the capital goods industry. Hence, there exists a gap in the servitization literature and

closing this gap will be the scientific objective of this thesis project.

To achieve the scientific objective, a single embedded case study was conducted during a research internship at

Marel. Marel is a multinational company active in the food processing industry; their activities are focused on

four divisions, namely: Poultry; Fish; Meat; and Further Processing. Marel can typically be defined as an original

equipment manufacturer (OEM). In order to make this research both practically and theoretically relevant, a

business goal that aligns with the scientific goal is developed.

Marel has recognized the importance of making the shift along the product-service continuum into services,

and defined in their service strategy that they want to transform from a product-oriented into a customer-

oriented service organization. However, as Marel expanded their business rapidly since the last years, by taking

over other companies, the relative position on the product-service continuum of the different entities within

Marel is much dispersed. In order to transform from a product-oriented service organization into a customer-

oriented service organization, it is essential to decrease these differences within the relative positions on the

product-service continuum of the entities/companies within Marel, and make the transition along the

continuum to a desired position.

In order to both contribute to the academic literature and help Marel to transform from a product-oriented

into a customer-oriented service organization, the main objective of this master thesis project is to develop a

Marel-specific “service organization model”. This model will describe the different service offerings on the

product-service continuum, and will enable Marel to identify and decrease the differences between the

relative positions on the product service continuum of the different entities within the Marel organization. This

main objective will be achieved by means of answering the following research questions:

RQ 1: Of what detailed stages does the product-service continuum consist?

RQ 2: What is the current position on the product-service continuum for the different entities within

Marel?

RQ 3: What is the desired position on the product-service continuum for the different entities within

Marel?

RQ 4: How should each entity within Marel make the transition to its desired position on the product-

service continuum?

IV

Research methodology

In order to answer the research questions, the research method is fourfold. First, a literature review is

conducted with the aim to answer research question one. This literature review investigated which steps

manufacturing companies in the capital goods industry should take and which organizational capabilities they

need to develop, in order to successfully transform from a “pure” product manufacturer into a “pure” service

provider. This resulted in a theoretical framework that describes the different service offerings on the product-

service continuum, in combination with the required organizational capabilities for each stage on the

continuum.

Second, the derived theoretical framework is tested on practical applicability within a business context, by

means of a single embedded case study (Yin, 2009). The main unit of analysis within the business context of

the capital goods industry is Marel. Within this main unit of analysis, three embedded subunits, which are

representative for the main unit of analysis, were investigated. This case study started with a within-case

analysis, aimed at acquiring in-depth knowledge about the three different cases, which resulted in a positioning

of the three cases on the theoretical framework.

Third, to test whether the theoretical framework, derived from the literature review, was applicable across all

cases and able to position the three cases correctly with respect to each, a cross-case analysis was conducted.

This cross-case analysis resulted in new underlying dimensions and improvement criteria for the theoretical

framework.

Fourth, the findings of the cross-case analysis were used as input in a discussion meeting with influential

respondents from each investigated case. The findings of the discussion meeting finally served as input for the

new “service organization model” of Marel.

Results

The literature review resulted in a theoretical framework, which was an extension of the product-service

continuum of Oliva & Kallenberg (2003). This continuum was extended with three new service offerings by

further dividing the service offerings of Oliva & Kallenberg (2003). In addition the product-service continuum of

Oliva & Kallenberg was also extended by thoroughly describing the characteristics of the different service

offerings in combination with required organizational capabilities at each stage.

The results of the case analysis revealed that the theoretical framework held relatively well for the processing

character of the equipment of case I: IC Poultry, but totally not held for the standalone character of the

equipment of case III: “old” Marel. The case study showed that for servicing standalone equipment significantly

less knowledge and organizational capabilities are required than for servicing complete processing lines; and

revealed an important underlying dimension: “type of equipment”. To incorporate the influence of “type of

equipment” in the theoretical framework, the proposition from the case-study was to add specific service

offerings for standalone equipment to the theoretical framework and position them in front of services focused

on process equipment, because servicing standalone equipment require significantly less organizational

capabilities than process equipment.

The proposition to incorporate separated service offerings for standalone equipment in the product-service

continuum was used as input for the discussion meeting. Based on this discussion meeting the new service

organization model emerged from an adaption of the framework derived from the literature. The new service

organization model is based on three underlying dimensions namely; the extent to which the supplier is in

charge of the customer’s process increases the more you shift to the right; the relationship with customer

evolves from reactive, to proactive, to partnership; and the required process knowledge increases the more

you shift to the right. In addition the vertical dimensions of the new service organization model consist of three

main categories, namely: the “product”, which describes the characteristics and knowledge directly required

for delivering a certain offering; the “organization”, which describes how the organization should look like for

delivering a certain service offering successfully to the customer; and the “customer” which describes the

profile of a customer of each service offering.

V

Conclusion

The service organization model is an extension of the product-service continuum of Oliva and Kallenberg

(2003), and consists of three main stages, which can be composed in ten sub stages. The main stages consist of:

reactive services; proactive agreements; and process performance agreements. “Reactive services” are service

offerings which are purely reactive and only initiated by a customer call and thus not scheduled. This main

stage is divided into: pre-sale product services; ad-hoc services; and reactive standalone service agreements.

The next main stage, “proactive agreements”, is characterized by service agreements which are theoretically

grounded and aimed at conducting maintenance preventively (scheduled). This stage can be divided into

agreements for standalone products and for processing equipment. The proactive agreements for standalone

products consist of a “basic proactive standalone agreement” and a “premium standalone performance

agreement”, which is also the end-point for entities merely focusing on standalone products. For entities also

offering complete processing lines to their customers, the proactive agreements in the service organization

model proceed to proactive agreements for processing lines. These service offerings follow to the agreements

on standalone equipment, as for offering service to a complete processing line you first need to have thorough

knowledge on the critical parts of each single machine in a processing line, before you can determine the

interactions between all machines in a processing line. The proactive process agreements consist of a “process

inspection agreement” and a “preventive process maintenance agreement”.

The final main stage on the service organization model is the “process performance agreement”, which is

characterized by agreements in which a certain performance level of a complete processing line is guaranteed

to the customer and offered for a fixed price. This main stage can be divided into: “basic process performance

agreements”; “extended process performance agreements”; and “premium process performance agreements”,

which is the end point of the service organization model.

To determine the position of each entity within Marel, the service organization model can be applied. To

position each entity within Marel on the service organization model, their most extended service offering

should be taken into account and compared with the characteristics described in the “product” category of the

service organization model, especially the dimension “content offering”. The product characteristics in the

service organization model, that match with the characteristics of the most extended service offering of a

certain entity, determine the current position on the model of that entity.

By means of comparing the characteristics of their customers with the characteristics described in the

“customer” category in the service organization model each entity can determine their desired position on the

model. This desired position is not fixed for each entity and can differ between market and product-groups,

because customer demands can differ between markets, which also require a different service approach. In

practice, for each entity this means that they should determine the different customer-demands that exist

within their market, and adapt their service offerings to these demands, in order to satisfy all customer

demands. If the current position is lacking behind the desired position on the service organization model, this

means that an entity should expand their capabilities.

When an entity has determined their current and desired position on the service organization model they are

able to develop an implementation plan for reaching this desired position via the same model, by means of the

categories “product” and “organization”. In practice this means that each entity compares their current


RQ 2: What is the current position on the product-continuum for the different Industry Centers; Product

Centers; Sales & Service Units; or operating companies?

RQ 3: What is the desired position on the product-service continuum for the different IC’s; PC’s; and

SSU’s?

RQ 4: How should each IC; PC; SSU; or operating company make the transition to its desired position on

the product-service continuum?

VI

capabilities with the capabilities required for their desired position on the service organization model.

Subsequently, the “product” category in the model describes which knowledge each entity should develop, and

which customer and process data it should acquire. In addition, the “organization” category describes how the

organizational capabilities of each entity should look like for successfully reaching the desired position on the

service organization model. So basically the service organization model describes guidelines on how to shift to

a desired position on the model, by means of knowledge and organizational capabilities to be developed.

Contribution

As mentioned the aim was to develop a service organization model which both helps to solve the business

problem within Marel and closes the identified gap in the literature. The contribution of this master thesis and

especially the designed service organization model is as follows:

The service organization model serves as a strategic management tool for Marel, for creating one

global service organization and transform from a product-oriented into a customer-oriented service

organization. This model serves as one universal template for the service organization of Marel and

helps the service management on both local and central level to determine the current status of their

service provision; to determine their desired position regarding services; and helps to develop a plan

to improve their service provision.

The service organization model provided thorough understanding in the different stages in between

pure goods and pure services, by extending the product-service continuum of Oliva and Kallenberg

(2003) into more detailed and specific service offerings, which enhances the exact positioning of

companies on this model.

The service organization model contributes to the academic literature by making a differentiation

between service offerings focused on standalone equipment and service offerings focused on

processing equipment, whereas the extant literature merely focused on service offerings for

processing equipment (Oliva & Kallenberg, 2003;, and Gebauer (2008). This study revealed that the

transition process in services evolves from servicing standalone equipment into servicing processing

equipment.

The service organization model contributes to the literature by linking the different service offerings to

a specific customer and organization profile. While extant research merely focused on describing one

of the three facets. The model provided insight in which service offerings are suitable for a certain

customer type and describes which organizational capabilities are required for a certain offering.

Recommendations for future research

Based on the findings of this master thesis project the following is recommended for future research:

Test the service organization model on applicability in other manufacturing companies in the capital

goods industry, in order to make the model generalizable across the entire capital goods industry.

Conduct a longitudinal study at a number of specific cases, in order to investigate whether the

transition into services really occurs along the continuum of the proposed service organization model.

Conduct a study from a customer-perspective to investigate how customers perceive the different

types of service offerings on the service organization model, in order to confirm and extend the

proposed interdependencies between the different service offerings and customer profiles.

Investigate how an organization should deal with offering the complete range of services on the

service organization model, as currently the model merely describes how the service infrastructure

should look like for each specific service offering and not specifically for the entire service

organization.

VII

Table of Contents Abstract .................................................................................................................................................................... I

Preface .................................................................................................................................................................... II

Executive summary ................................................................................................................................................ III

1. Introduction ........................................................................................................................................................ 1

1.1 Theoretical background ................................................................................................................................ 1

1.2 Business context............................................................................................................................................ 1

1.3 Problem statement ....................................................................................................................................... 2

1.4 Assignment .................................................................................................................................................... 3

1.5 Research design ............................................................................................................................................ 4

1.6 Thesis outline ................................................................................................................................................ 4

2. Literature review ................................................................................................................................................. 5

2.1 Introduction .................................................................................................................................................. 5

2.2 Methodology ................................................................................................................................................. 5

2.2.1 Coverage & search strategy ................................................................................................................... 5

2.2.2 Deliverable ............................................................................................................................................. 5

2.3 Characterization of stages on the product-service continuum ..................................................................... 6

2.3.1 Basic installed base services ................................................................................................................... 6

2.3.2 Maintenance services ............................................................................................................................ 7

2.3.3 Professional services .............................................................................................................................. 9

2.3.4 Operational services ............................................................................................................................. 10

2.3.5 The extended product-service continuum ........................................................................................... 12

2.4 Required organizational capabilities ........................................................................................................... 12

2.4.1 Required customer and process data .................................................................................................. 12

2.4.2 Required IT automation level ............................................................................................................... 13

2.4.3 Required Human Resource (HR) capabilities ....................................................................................... 13

2.4.4 Required service infrastructure ........................................................................................................... 14

2.5 Theoretical framework ................................................................................................................................ 16

3. Within-case analysis .......................................................................................................................................... 17

3.1 Introduction ................................................................................................................................................ 17

3.2 Methodology ............................................................................................................................................... 17

3.2.1 Unit of analysis ..................................................................................................................................... 17

3.2.2 Case selection....................................................................................................................................... 17

3.2.3 Data collection ..................................................................................................................................... 18

3.2.4 Data analysis ........................................................................................................................................ 18

3.3 Results ......................................................................................................................................................... 18

3.3.1 Case I: Industry Center Poultry ............................................................................................................ 18

3.3.2 Case II: Industry center Further Processing ......................................................................................... 20

VIII

3.3.3 Case III: “Old” Marel ............................................................................................................................. 22

3.4 Conclusion ................................................................................................................................................... 24

4. Cross-case analysis ............................................................................................................................................ 25

4.1 Introduction ................................................................................................................................................ 25

4.2 Methodology ............................................................................................................................................... 25

4.2.1 Unit of analysis ..................................................................................................................................... 25

4.2.2 Data analysis ........................................................................................................................................ 25

4.3 Results cross-case comparison .................................................................................................................... 25

4.3.1 Recap from within-case analysis .......................................................................................................... 25

4.3.2 Characteristics of the service offerings ................................................................................................ 25

4.3.3 Organizational capabilities in place ...................................................................................................... 27

4.4 Conclusion on cross-case comparison ........................................................................................................ 28

5. Design of the new framework (service organization model) ............................................................................ 31

5.1 Introduction ................................................................................................................................................ 31

5.2 Discussion meeting ..................................................................................................................................... 31

5.2.1 Unit of analysis ..................................................................................................................................... 31

5.2.2 Data analysis ........................................................................................................................................ 31

5.2.3 Results discussion meeting .................................................................................................................. 31

5.3 New model .................................................................................................................................................. 33

5.3.1 Horizontal dimensions ......................................................................................................................... 33

5.3.2 Vertical dimensions .............................................................................................................................. 35

5.4 Validation of the service organization model ............................................................................................. 37

5.4.1 Positioning of investigated cases on the service organization model .................................................. 37

5.4.2 Introduction of the Service Organization Model at the Global Service Managers Meeting ................ 39

6. Conclusions and reflection ................................................................................................................................ 40

6.1 Answering the research questions .............................................................................................................. 40

6.2 Managerial contribution ............................................................................................................................. 42

6.3 Academic contribution ................................................................................................................................ 43

6.4 Limitations & recommendations for future research ................................................................................. 43

References ............................................................................................................................................................ 44

Appendices ............................................................................................................................................................ 47

Appendix A: List of tables and figures ............................................................................................................... 47

Appendix B: Structure of Marel ........................................................................................................................ 48

Appendix C: Literature assessment ................................................................................................................... 49

Appendix D: Theoretical framework ................................................................................................................. 51

Appendix E: Interview guideline ....................................................................................................................... 54

Appendix F: Detailed case descriptions ............................................................................................................ 58

Appendix G: Maintenance concept ................................................................................................................... 69

IX

Appendix H: Service organization model .......................................................................................................... 70

Appendix I: Positioning of cases on service organization model ...................................................................... 73

1

1. Introduction

1.1 Theoretical background Vandermerwe and Rada (1988) were the first who formulated the term “Servitization”. They defined it as, “the

process of creating value by adding services to products”. The phenomenon of servitization has received

numerous attention by academia, businesses and government, much of which is based on a belief that moving

towards services is a means to create additional value for traditional product manufacturers (Baines, Lightfoot,

Benedettini & Kay, 2009). This urge for value-adding services in especially product manufacturing industries is

driven by three factors. First of all, customers are demanding more services, as they want to decrease risks

associated with their operations. Second is the economic factor, substantial revenue can be generated when

servicing the installed base of products with a long life cycle; services are more resistant to the economic cycles

that drive investment and equipment purchases and therefore provide a more stable source of revenue; and

the margins on services are in general higher than on products (Anderson, Fornell & Rust, 1997). Third, services

can provide a sustainable source of competitive advantage, as they are less visible, more labor dependent, and

much more difficult to imitate (Heskett, Sasser, & Schlessinger, 1997).

Despite the profit potential of services, the transition from product manufacturers into service providers is still

relatively slow and cautious. According to Oliva and Kallenberg (2003), this slow and cautious transition is

caused by the fact that for making the transition towards services, three successive hurdles need to be

overcome. First, firms should recognize the economic potential of enhancing their product with services.

Second, when the economic potential is recognized, firms should assess whether service provision is within the

scope of their competencies and if they want to enter the market. Finally, when a firm recognizes the economic

potential and decides to enter the market, it should deploy a successful service strategy, in order to sustain in

the market. If manufacturing companies overcome these hurdles, they are able to move along the product-

service continuum, proposed by Oliva and Kallenberg (2003). This product-service continuum proposes that the

transition from products into services moves gradually along a continuum with on the extremes: product

manufacturing firms who regard services merely as an add-on to the product, and pure service providers who

regard products merely as an add-on to the service. Within the industrial service marketing literature various

terms for these extreme points exist. While these extreme points on the product-service continuum received

numerous attention in the literature, the evolvement of a product offering from “pure goods” to “pure

services” has received much less attention (Evanshitsky, Wangenheim & Woisetschläger, 2011). Currently, a

coherent body which describes the characteristics of the stages in between “pure goods” and “pure services”

related to the capital goods industry is lacking in the academic literature, developing such a coherent body is a

necessity for investigating the transition along the product-service continuum of manufacturing firms in the

capital goods industry. Hence, there exists a gap in the servitization literature and this research will try to close

or limit this gap.

1.2 Business context This research is conducted during a research internship at Marel Stork Poultry Processing Boxmeer, and is

commissioned by Marel globally. Marel is a multinational company, which employs more than 3,900 employees

worldwide. Their business units are located in the Netherlands, Denmark, the United States, Iceland, Slovakia,

United Kingdom, France, Norway, and Singapore. Furthermore, Marel has offices and subsidiaries in over 30

countries and a global network of agents and distributors. The largest number of their employees is based in

the Netherlands, followed by Denmark, the United States and Iceland, with the remainder spread out across

the globe – from Brazil and several other locations in South America all the way across to Australia and New

Zealand in the Pacific. For a detailed organizational chart of Marel, Appendix B can be consulted.

Marel is a single-source provider for food processors all over the world. They are the global leader in integrated

systems for the fish and poultry industry segments, and a major provider in the meat industry. From harvesting

raw materials to packaging the final product – from standardized stand-alone units to all-inclusive integrated

turnkey systems – Marel’s products are designed to meet their customers’ every need. Their vision is to be the

customers’ choice in supplying integrated systems, products and services to the poultry, fish, meat and further

processing industries.

2

1.3 Problem statement Marel Stork Poultry Processing was formerly known as Stork PMT (Poultry processing Machinery and

Technology), which was a division of Stork Food Systems, a company active in producing equipment for the

food processing industry, especially the poultry processing, further processing, and meat industry. Due to

increasing demand from customers for better performing machines, easier maintainable machines, and

superior service, Stork PMT strongly focused on increasing its service potential, in order to stay competitive in

the food processing industry. This has resulted in making a shift along the “Product-Service continuum” of Oliva

and Kallenberg (2003) in Figure 1, from purely product manufacturer to providing service contracts. This

product-service continuum proposes that the transition from products into services moves gradually along a

continuum with on the extremes: product manufacturing firms who regard services merely as an add-on to the

product; and pure service providers who regard products merely as an add-on to the service. As this research

proceeds, this continuum will be used as a guiding topic.

Figure 1, Product-Service continuum (Oliva & Kallenberg, 2003)

In 2008, Stork Food Systems has become part of the Marel holding by an acquisition of Marel. Since Marel was

already active in the food processing industry, both companies complemented each other. Currently, Marel

consists of four main divisions or so called “Industry Centers (IC’s)”, namely Poultry; Meat; Fish; and Further

processing. These Industry Centers are responsible for innovation, sales, and services specifically geared

towards their respective industries. These industry centers are especially concerned to provision and support

of complete production lines. For specific product applications, which are specific machines in a production

line, the Industry Centers are complemented by the “Product Centers (PC’s)” such as software; slicing; skinning,

and freezing. These centers, serve all or some of the industries mentioned. The Industry and Product centers

are complemented by the Sales and Service Units (SSU’s), which provide the interface to the customers and

form the first contact. Depending on the specific requirements of the customer, invoices and orders are

handled by the SSU’s itself or passed through to the relevant Product- or Industry Centers. The relation

between the IC’s; PC’s; and SSU’s is depicted in Figure 2. For a detailed organizational chart appendix B can be

consulted.

Figure 2, Linkages between IC’s, PC’s, SSU’s and customers (Marel financial flow principles, 2012)

Basically, within Marel service is generated and offered in the SSU’s as well as in the PC’s and IC’s. As Marel is

acting globally, these SSU’s; PC’s and IC’s are represented by operating companies of Marel around the globe,

depicted by the red dots in Figure 3. These operating companies can contain an Industry Center, a Product

Center, or a Sales and Service Unit, or they can contain multiple IC’s and PC’s as well as a SSU. Furthermore,

each specific Industry Center is represented by three or four operating companies around the globe.

https://aboutus.mymarel.com/marel-organization/PublishingImages/org_chart.jpg

3

Figure 3, Representation of Marel’s operating companies around the globe

Just as Stork PMT recognized previously, Marel also recognized the importance of making the shift along the

product-service continuum. As stated in the Marel Service Vision, the company wants to support the customers

preferred balance between maximum Uptime (throughput), minimal Cost of Ownership, and Highest Yield

(performance). By applying its service strategy, the company wants to generate added value for the customer;

develop, maintain, and improve customer relationship; create a balanced service Triangle for each customer;

and most important transform from a product-oriented into a customer-oriented service organization.

However, due to recent acquisitions the position on the product-service continuum of the different IC’s, PC’s

and SSU’s worldwide is much dispersed. Some companies within Marel have made large progress in the shift

along the continuum and value service as an important attribute for organizational success. Whereas, other

companies within Marel have made very little progress in the shift along the continuum and regard service

merely as an add-on to the product. In order to transform from a product-oriented service organization into a

customer-oriented service organization, it is essential to decrease the differences within the relative positions

on the product-service continuum of the different IC’s, PC’s and SSU’s, and make the transition along the

continuum to a desired position. So, the problem statement is as follows:

1.4 Assignment The main objective of this descriptive study is to develop a Marel-specific “service organization model” which

enables Marel to identify and decrease the differences between the relative positions on the product-service

continuum of the different IC’s; PC’s; and SSU’s.

This “service organization model” will be an extension of the product-service continuum of Oliva and

Kallenberg (2003), describing the different offerings on the continuum based on their characteristics and

required organizational capabilities, specific for Marel. This should enable Marel to decrease the differences in

the relative position on the product-service continuum within the different IC’s, PC’s and SSU’s, and

successfully transform from a product-oriented into a customer-oriented service organization. By achieving this

main objective another important objective should be fulfilled, namely contributing to the academic literature.

In order to achieve the objectives, this master thesis addresses the following research questions:

Currently, the position on the product-service continuum of the different Industry Centers; Product Centers;

and Sales and Service Units of Marel worldwide is much dispersed, decreasing these differences in positions

is a necessity to successfully transform Marel from a product-oriented into a customer-oriented service

organization.


RQ 2: What is the current position on the product-service continuum for the different Industry Centers;

Product Centers; Sales & Service Units; or operating companies?


SSU’s?



4

1.5 Research design The answer of the first research question is derived from the academic literature review and consists of two

main parts, namely the identification of the different stages on the product-service continuum with their

related characteristics; and the identification of the minimal required organizational capabilities for reaching a

certain stage on the continuum. The result of this question is a theoretical framework which is an extension of

the product-service continuum of Oliva and Kallenberg (2003), describing the specific service offerings on the

continuum, with the related characteristics and required organizational capabilities.

This theoretical framework is tested on the applicability within the entire Marel organization, by means of a

single embedded case study (Yin, 2009). To be precise, this case study consists of a within-case analysis and a

cross-case analysis. The within-case analysis serves to position each case specifically on the theoretical

framework, derived from the literature review. Subsequently, the cross-case analysis investigated the

similarities and differences between the within-case analyses, and tested whether the theoretical framework is

applicable across all cases and able to position the three cases correctly with respect to each other. This cross-

case analysis resulted in improvement criteria for developing the new service organization model. This new

service organization model finally served to answer the research questions and will help Marel to transform

successfully from a product-oriented to a customer-oriented service organization.

1.6 Thesis outline This research report starts by introducing the research field, the business context and the aim of the study, by

means of stating the problem and describing the research assignment, in chapter one.

The next chapter, chapter two, describes the literature review on servitization, in which the different stages on

the product-service continuum are identified in combination with the required organizational capabilities for

making the shift along this continuum. This literature review will be concluded with a theoretical framework.

Chapter two is especially relevant for people interested in the theoretical background of the developed

service organization model.

Chapter three contains the first part of the case analysis, namely the within-case analysis. In this within-case

analysis the investigated cases are described and positioned on the theoretical framework, derived from the

literature study. This chapter is especially of use for people who want to gain understanding about the

investigated cases.

The second part of the case analysis is described in chapter four and contains the cross-case analysis. In this

cross-case analysis the cases are investigated on similarities and differences, by means of a cross-case

comparison. The aim of this chapter is to test whether the theoretical framework is applicable across all cases

and able to position the three cases correctly with respect to each other, and will be concluded with

improvement criteria on the initial theoretical framework. This chapter is relevant for people who want to gain

understanding on the extent to which the theoretical framework is applicable within the business context of

Marel.

The improvement criteria, derived from the cross-case analysis, are applied for the new service organization

model, which will be described in chapter five. The chapter is relevant for people who want to gain

understanding on the building blocks of the new service organization model for Marel.

Finally, chapter six draws conclusions on the research project, by means of answering the research questions

and the business problem, and discussing the limitations and directions for future research. This chapter is

especially relevant for people who want learn how the service organization model should be applied in

practice, and want to know to what extent this thesis project solves the business problem and the gap in the

literature.

5

2. Literature review

2.1 Introduction This chapter describes the literature review on servitization, in which the different stages on the product-

service continuum are identified in combination with the required organizational capabilities for making the

shift along the continuum. The result of this review will be a theoretical framework, describing the different

stages on the product-service continuum combined with the characteristics and required organizational

capabilities and will provide the answer to research question one:

2.2 Methodology

2.2.1 Coverage & search strategy

Since the size of the research done in the industrial service marketing literature is very large, conducting an

exhaustive review is not manageable within the time-span of this master thesis project. Therefore, the

coverage of this literature review is based on a purposive sample, which implies examining only the central or

pivotal articles in the field of industrial service marketing. To ensure that the selected articles in this review are

indeed central or pivotal in the field the following selection criteria are applied: impact factor (SNIP) > 1;

number of citations >5; and year of publication > 1995. How each article scores on these selection criteria is

described in Appendix C.

The search for relevant articles in the academic field starts with selecting appropriate search engines. For this

review the following search engines are used: ABI/Inform, Scopus, and Google Scholar. Via these search

engines the following keywords were used for searching relevant articles:

Service, service transition, product-service continuum, servitization, servicification, servicizing, good-service

continuum, after-sales service, capital goods industry, services marketing, industrial services.

Based on searching via these keywords, first the articles with a large number of citations were studied. In case

of this review important identified articles in the field of industrial service marketing are Oliva and Kallenberg

(2003), Gebauer (2008) and Baines, Lightfoot, Benedettini & Kay (2008). Via these articles the search strategy

changed into a snowballing approach, implying that via these articles relevant articles in the field are traced,

based on references and citations. For this approach the search function of Scopus is used. Via this search

engine, articles which cited a leading article can be traced, in addition these traced articles can be ranked on

number of citations and year of publication. Via this approach important leading articles and new research

avenues on these articles are traced in the literature. To ensure no important articles are forgotten, new key

words were regularly used to trace other leading articles.

2.2.2 Deliverable

This literature review aims to develop a coherent body which describes the characteristics of the stages on the

product-service continuum in between “pure goods” and “pure services”. Answering research question one

should result in a model which is an extension of the product-service continuum of Oliva and Kallenberg (2003).

This theoretical framework will identify the different service offerings on the continuum and will describe the

characteristics of each service offering, combined with required organizational capabilities for successfully

providing each service offering to the customer. Via this theoretical framework it should be possible to

determine a relative position on the continuum for a certain entity, and in addition the framework should

provide guidelines for reaching a certain position on the framework. In order to create this theoretical

framework, this chapter first describes the characterization of the different stages on the product-service

continuum followed by the description on the minimal required organizational capabilities. Finally this chapter

will be concluded with the theoretical framework.


6

2.3 Characterization of stages on the product-service continuum As mentioned, Oliva and Kallenberg (2003) were among the first who proposed that the transition from a

“pure” product manufacturer into a “pure” service provider occurs along a continuum (Figure 1).

Manufacturing firms are moving along this continuum as they incorporate more product-related services. Oliva

and Kallenberg (2003) divided the service offerings on the product-service continuum into an installed base

service space in a 2x2 matrix, with on the horizontal axis “Product-oriented services” and “End-user’s process-

oriented services”; and on the vertical axis ”Transaction-based services” and “Relationship-based services”,

displayed in Table 1. Within these axes, they defined four basic services, namely basic installed base services;

maintenance services; professional services; and operational services. These different stages on the continuum

are defined very broadly, and each stage covers a broad range of services. For instance the category

“maintenance services” covers a range from basic maintenance agreements to full maintenance contracts, in

which a certain availability of the equipment is guaranteed. Though the “installed base service space” (Table 1)

of Oliva and Kallenberg (2003) provided some insight into the stages in between pure goods and pure services;

the managerial relevance for businesses is still very limited, as the broad definition of the stages makes it

difficult for companies to position themselves correctly on the continuum. In order to make the product-service

applicable for positioning companies on it, the characteristics of the stages should be described more explicitly

and the relative distance between the stages should be decreased by adding more specific stages or service

offerings. This is also supported by Evanschitzky, Wangenheim, and Woisetschläger (2011), who mentioned

that a clear specification of stages in between pure goods and pure services is lacking in the literature.

According to them such a clear specification of stages is necessary to provide businesses a clear roadmap

towards services, for making them more successful in shifting from a pure product manufacturer into a pure

service provider. A better specification of the different stages on the product-service continuum enables

organizations to better position themselves on the continuum and enables them to specify the required

resources and capabilities for each stage more specifically, which can help them to increase the efficiency of

the service provision.

Based on this rationale, this literature review described the four stages on the continuum, proposed by Oliva

and Kallenberg (2003) and investigated for each stage whether it could be divided into more narrow and

specific phases, to increase the practical applicability of the product-service continuum.

Table 1, The installed base service space (Oliva & Kallenberg, 2003)

2.3.1 Basic installed base services

Transaction based services focused on the product

Product-oriented services are focused on product efficacy, whether the product works. From these product-

oriented services, “basic installed base service” is the most elementary form and is related to the transaction

with the customer. This service includes transport to the client, installation of the product, training, and

repairs/ spare parts on customer request. For product manufacturers who successfully want to expand their

business to basic installed base services it is recommendable to consolidate the firm’s existing service offering

under a single organizational unit. Furthermore, a monitoring system, able to assess the effectiveness and

efficiency of the service delivery, need to be developed to allow managers to realize the size of the service

market and account for the contribution of services to the firm’s operations.

These basic installed base services of Oliva and Kallenberg (2003) are similar to the “support services”

identified by Goffin and New (2001). They classified these “support services” into seven key elements, namely

installation; user training; documentation on equipment operation and maintenance; maintenance, repair and

spare parts; on-line support; possibility to purchase extended warranty; and offering the opportunity to

upgrade the equipment. In line with the “basic installed base services” proposed by Oliva and Kallenberg (2003)

and the “support services” proposed by Goffin and New (2001), Gebauer (2008) identified “after-sales service

Product-oriented services End-user’s process-oriented services

Transaction-based services Basic installed base services Professional services

Relationship-based services Maintenance services Operational services

7

providers” (ASPs). After-sales service providers create value to the end-user, by offering products at attractive

prices and guaranteeing reliable product functioning through after-sales services. In case of any failure or

breakdown, ASPs offer customers services such as spare parts, repair, inspection, a hotline, and basic training.

These after-sales service are standardized and predefined, and are priced according to the unbundling pricing

approach (Guiltinan, 1987), which implies that the price of these services is not integrated into the product. As

the study identified, ASPs operate in a highly competitive market and serve very price-sensitive customers who

only expect a properly functioning product. To survive in this market, ASPs compete through attractive prices

for products and services, driven by a focus on cost-leadership. This means concentrating on achieving

substantial economies of scale and high manufacturing efficiency, via the provision of standardized and

predefined after-sales services.

Extension to basic installed base services

Whereas Oliva and Kallenberg (2003), Goffin and New (2001), and Gebauer (2008) all positioned basic services

into one category. Frambach, Wels-Lips & Gundlach (1997) and Samli, Jacobs & Wills (1991) divided basic

services into two categories, namely “pre-sale related product services” and “post-sale related product

services”. Rationale behind this division is that service demands are different around the globe; dividing the

basic services enables manufacturers to better respond to customer’s wishes. As Frambach, Wels-Lips &

Gundlach (1997) described, pre-sale related product services are specifically relevant before the final purchase

decision of the product, in order to stimulate the purchase decision and to reduce the perceived risk of

adopting the product. These pre-sale related product services include promptness of delivery; financing

options; demonstration; training; use on trial; and installation. The price for these services is negotiated in the

product-sale and is mostly included in the product price. Post-sale related services are designed to keep the

customers satisfied with the purchase and can lead to the establishment of future sales opportunities through

mutual satisfaction. Post-sale related product services include maintenance and repair; spare-parts; product

upgrades; and on-line support, which will be paid per usage.

Because pre-sale and post-sale product services consist of significantly different service offerings and require

significantly different organizational capabilities, the proposed division of basic services into two categories, by

Frambach, Wels-Lips & Gundlach (1997) and Samli, Jacobs & Wills (1991), makes the continuum more specific.

The division into two categories (Table 2) enables services providers to define more specifically their position

on the continuum and helps them to better plan the required resources and capabilities for each category,

which enables them to respond more specifically and efficiently to customer demands.

Table 2, Division of “basic installed base services”

Basic installed base services / support services / after-sales service providers

Pre-sale related basic product services Post-sale related basic product services

Promptness of delivery

Financing options

Demonstration

User-training

Use on trial

Installation

Maintenance & repair on customer- request

Spare-parts

Product upgrades

On-line support / help desk

2.3.2 Maintenance services

Relationship based services focused on the product

Once product-manufacturers are active in service provision and deliver “basic installed base services” the first

transition which occurs according to Oliva and Kallenberg (2003) is from transaction-based to relationship-

based services focused on the product. This will change the way the service is priced from a mark-up for labor

and parts every time a service is provided, to a fixed price covering all services over an agreed period.

Relationship-based services focused on the product, take the form of maintenance contracts, priced in terms of

operational availability and response time in case of failure. Examples of these “maintenance services” are

preventive maintenance; condition monitoring; spare parts management; and full maintenance contracts. To

make these services “tangible” to the customer or end-user, pricing should be done on the basis of equipment

8

availability. Customers should be convinced that outsourcing their maintenance practices results in higher

equipment availability. In order to competitively price the equipment availability, service providers should

estimate the customer’s equipment’s operating risk. So, pricing will be based either on the opportunity cost of

machine failure, or the traditional maintenance cost for the end-user’s maintenance organization. Providing

“maintenance services” requires the service organization to create a global service infrastructure that is

capable of responding locally to the requirements of the installed base. Internally, this requires the service

provider to build a well-functioning service organization, which is capable to measure customer satisfaction,

employee satisfaction, and business success. Externally, the organization should establish itself in the market as

an active player with a reputation for actively seeking out opportunities and delivering on promises made.

In line with the “maintenance services” identified by Oliva and Kallenberg (2003), Gebauer (2008) identified

“customer support providers” (CSPs). Whereas, the objective of after-sales service providers is to react to

product-failures and breakdowns at the customer as soon as possible, the aim of customer support providers

(CSPs) is to prevent breakdowns of the product in the first place. CSPs bundle their services into customized

packages according to customer needs, which will be paid by the customer according a fixed price. Examples of

services elements are preventive maintenance, spare parts management, and full maintenance contracts. As

CSPs strongly invest in product and service differentiation, they are able to create sustainable competitive

advantages and a less intensive competitive situation. Customer relationship with the aim to optimize the

customer’s operations is essential for CSPs.

Extensions to maintenance services

Just as Oliva and Kallenberg (2003) and Gebauer (2008), Windahl and Lakemond (2010) described

“maintenance offerings” in their study. In addition to Oliva and Kallenberg (2003) and Gebauer (2008), they

distinguished maintenance offerings based on the degree of customer dependency on the supplier. This implies

offering maintenance contracts ranging from simple maintenance contracts, based on annual or bi-annual

inspection and service of machinery, to full-service performance contracts where the maintenance function is

outsourced to the service-provider and a certain system-uptime is guaranteed. These full performance

contracts require the service-provider to have a flexible global service infrastructure capable of responding

quickly to customer-needs, and in the most extreme case employees of the service-provider will be based

permanently on the customer’s site performing maintenance. This distinction in maintenance contracts is what

Kowalkowski, Kindström & Brehmer (2011) defined as “Safety inspection Service Level Agreement (SLA)” and

“High-end preventive maintenance SLA”. Safety inspection SLAs include contracts on equipment inspection;

functionality testing; safety function testing; and related maintenance conducted at fixed moments per time

period, for a fixed price. These basic or Low-end SLAs are highly standardized and performed via a trans-

national service infrastructure with central guidelines, which need to be adapted locally, in order to maintain

an efficient, yet flexible local service network.

High-end preventive maintenance SLAs are comprehensive service bundles. For a fixed price per time period,

the customer receives preventive maintenance; corrective maintenance and repair; free spare parts; and

emergency breakdown response. This can be extended to full-performance SLAs, guaranteeing a certain system

availability, which can require to base service-employees permanently on customer-site. So basically the high-

end maintenance SLA can be further divided into a medium maintenance contract, aimed at delivering

preventive maintenance, corrective maintenance, and spare parts for a fixed price per time-unit, and high-end

maintenance contracts. These high-end maintenance contracts guarantee a certain system availability for a

certain price, the daily maintenance in this case is conducted by the customer’s crew while all preventive and

corrective maintenance is outsourced to the manufacturer. Performing high-end SLAs require a trans-national

service infrastructure where locally leveraged and globally linked innovation is critical in order to quickly

respond to customer-needs. Furthermore, skilled service employees and the design of high-quality products

that minimize maintenance related operations and spare parts usage is essential to be successful in high-end

SLAs, according to Kowalkowski, Kindström & Brehmer (2011).

As offering “Safety inspection SLAs or Low-end SLAs” requires different organizational capabilities than offering

“High-end Service Level Agreements”, the division of maintenance contracts into Low-end SLAs and High-end

SLAs of Kowalkowski, Kindström & Brehmer (2011) is a good extension to “maintenance services” proposed by

Oliva and Kallenberg (2003) and enables service providers to define more specifically their position on the

9

continuum. This can be defined even more specifically by dividing “high-end” maintenance SLA’s into

“medium” and “high-end” maintenance contracts. Therefore I divided maintenance services into three

categories displayed in Table 3.

Table 3, Division of “maintenance services”

Maintenance services / Customer support providers

Low-end maintenance contract Medium maintenance contract High-end maintenance contract

Contract for a fixed price for fixed

moments per time period, including:

Equipment inspection

Functionality testing

Safety-function testing

Related maintenance.

Maintenance contract for fixed price

per time period, including:

Preventive maintenance

Corrective maintenance & repair

Free spare parts

Emergency breakdown response

Performance maintenance contract,

guaranteeing a certain system

availability for a fixed price.

Daily maintenance (cleaning etc.)

conducted by customer.

All other maintenance outsourced

to manufacturer.

2.3.3 Professional services

According to Oliva and Kallenberg (2003) firms are able to expand their service offering once the core

functionality of the service organization has been set and when they are successful in providing maintenance

services. From the relationship-based services focused on the product, the transition on the horizontal

dimension of the Installed base service space in Table 1 can be made. This changes the focus of the value-

proposition to the end-user from product efficacy, to the product’s efficiency and effectiveness within the end-

user’s process. Moving along this dimension makes the customer’s process central to value-proposition, where

the offered product becomes a part of it. Services focused on the end-user’s process related to the transaction

are called “professional services” and include for example process-oriented engineering; process-oriented

R&D; spare parts management; and process-oriented consulting. Shifting to a focus on the end-user’s process

implies shifting the emphasis of the business from machine manufacturer to “solution provider”. Professional

services can be used as part of a pre-sale effort as well as a service to continuously support and improve the

utilization and effectiveness of the installed base. Establishing process-centered services requires the

organization to develop a professional service infrastructure and expand the current global service

infrastructure with the required HR and knowledge management capabilities. Furthermore, consulting

capabilities in combination with a “new” distribution network need to be developed.

Serving as a “development partner” (DP) is a service strategy indentified by Gebauer (2008), which is strongly

related to the “professional services” of Oliva and Kallenberg (2003). DPs deliver value to the customer by

providing R&D services to support customers to achieve outstanding process performance. Examples of these

services are process-oriented R&D; engineering; and process- and business- oriented consulting. As R&D and

consulting services are difficult to imitate, sustainable competitive advantage can be created which makes it

more difficult for competitors to catch-up.

In line with Oliva and Kallenberg (2003) and Gebauer (2008), Kowalkowski, Kindström & Brehmer (2011)

identified “process optimization” as a service offering. They defined process optimization as “offering technical

expertise, such as engineering skills and ICT tools, to solve a specific problem related to the customer’s

industrial production process”. As delivering professional services requires a strong customer-supplier

relationship, extending to this service offering mostly will be done once the product manufacturer is successful

in providing maintenance contracts. So providing professional services to improve the customer’s operation

processes seems a logical successive step once operating in maintenance services and a relationship is

developed. Although, providing professional service seems a logical successive step, I don’t regard it as a

distinct service offering on the product-service continuum, because I think this service will be integrated in the

other service offerings on the continuum, and becomes more present and evident when a company proceeds

along the continuum. So, this stage identified by Oliva and Kallenberg (2003) is not applied as a distinct stage

on the theoretical framework, but included in the other offerings on the framework.

10

2.3.4 Operational services

Operational services and outsourcing partners

The final stage in Oliva and Kallenberg’s Installed Base service space (2003), are relationship-based services

focused on the end-user’s process and is called “operational services”, which yields the “pure service

organization”, an organization that assumes operating risks and takes entire responsibility of the end-user’s

process. Providing “operational services” includes taking over an end-user’s maintenance and process

operations. In the most extreme case, physical ownership of the processing equipment is at the service

provider, while the customer pays a fixed fee per process output. According to Oliva and Kallenberg (2003), the

transition to this service offering should only be made when the service organization has established itself

successfully in the maintenance and professional services market.

In line with Oliva and Kallenberg (2003), Gebauer (2008) identified serving as an “outsourcing partner” (OP) as

a service strategy. The goal of outsourcing partners is to assume the operating risk and full responsibility for

the customer’s operating processes. The value proposition of OPs is based on reducing the customer’s capital

employed and managing the corresponding risks. In this case the OP takes over the end-user’s operations,

maintenance, and corresponding risks, while being paid for performance, which makes OPs “pure” service

providers. In the extreme case the OP also takes over physical ownership of the customer’s operations.

According to Gebauer (2003), outsourcing partners operate in a highly competitive environment, with

customers who are strongly interested in reducing operating risks and capital employed.

Extensions to operational services

Whereas, Oliva and Kallenberg (2003) and Gebauer (2008) both recognized operational services or outsourcing

partners as the “end point” on the product-service continuum. They made no clear distinction between the

division of physical ownership of the processing equipment, in contrast with many authors in the academic

literature who actually made this distinction, like Windahl and Lakemond (2010) did. Windahl and Lakemond

(2010) divided operational services into “operational offerings” and “performance offerings or fully-fledged

integrated solutions”. Both offerings imply taking over end-user’s process operations and related maintenance,

where the physical ownership is at the customer with operational offerings and where the physical ownership

remains at the supplier or service-provider with performance offerings.

Operational offerings

In case of operational offerings the entire process operations and related maintenance is taken over by the

service-provider, while the physical ownership of the processing equipment is at the customer, this enables the

customer with the opportunity to focus on its core businesses while still not being too closely tied to the

service-provider. In line with these “operational offerings” of Windahl and Lakemond (2010), Davies, Brady &

Hobday (2007) proposed the concept of “systems seller/ integrator”. According to them, systems sellers take

over responsibility for systems, previously used by the customer’s organization, as part of their total

operational activities, such as inventory control; production control systems; and machine tools; while the

customer still maintains ownership of the processing equipment. In the “pure” form the system seller is

responsible for the whole system design; interface and component specifications; product development and

product design of individual components; the integration of components into a system; and the provision of

services to operate and maintain a system during its life cycle (Mattson, 1973). This in contrast with a systems

integrator, a systems integrator still takes over responsibility of the customer’s total operational activities, but

does not perform all the related activities in-house. Instead the systems integrator, in its ‘pure’ form

outsources the production and service processes to a third party and performs the systems integration part in-

house. Figure 4, visualizes the distinction between a systems seller and a systems integrator approach.

As systems sellers currently are outsourcing more simple activities and systems integrators start producing and

performing more critical components, clear distinctions between both approaches are disappearing and a more

complex pattern of organizational forms is emerging, combining elements of systems selling and systems

integration. Although this disappearance of clear distinctions between both approaches, the concept of taking

over end-user’s operations and maintenance processes, while maintaining the physical ownership of the

equipment at the customer remains the same for both approaches.

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Figure 4, Distinction between “systems seller” and “systems integrator” visualized (Davies, Brady & Hobday, 2007)

Performance offerings / fully-fledged integrated solutions

As mentioned, the other component of operational services identified by Windahl and Lakemond (2010) are

“performance offerings or fully-fledged integrated solutions”. In a fully-fledged integrated solution, the

supplier retains ownership of the equipment and increases the value for the customer by reducing the

customer’s costs and risks related to operations and maintenance, and enabling the customer to focus on its

core business and create new and more competitive offerings (Windahl, 2007). This implies that the buyer or

customer pays according to the level of usage or in relation to obtained cost savings, and thus the integrated

solution becomes a running expense for the customer rather than an investment.

This concept of integrated solutions has been identified be several scholars in the academic literature, in the

form of different definitions. So did Kumar & Kumar (2004) indentified the concept of “functional product

contracts” and defined it as a level of service which provides customers with access to a technology, rather

than with the ownership of the equipment. Stremersch, Wuyts & Frambach (2001) defined the concept of “full

service” as ‘a comprehensive bundle of products and / or services that fully satisfies the needs and wants of a

customer related to a specific event or problem’. Rolls-Royce defined integrated solutions as “Power by the

Hour”, which is redefined as “performance-based logistics (PBL)” by Doerr, Lewis & Eaton (2005). According to

them, this concept involves the supplier retaining the ownership of the capital asset, and being paid according

to usage, whilst incurring the costs of maintenance and provision of spares. Finally, Stahel (1998) identified the

concept of “Product Service System (PSS), which is centered on selling performance instead of selling goods.

Baines et al. (2007) restated this PSS approach for industrial applications as “a special case in servitization,

which values asset performance or utilization rather than ownership, and achieves differentiation through the

integration of product and services that provide value in use to the customer”.

Dividing “operational services”

Whereas Oliva and Kallenberg (2003) and Gebauer (2008) defined “operational services” and “outsourcing

partners” as the most advanced stage on the product-service continuum, they made no clear distinction

between the division of physical ownership of the processing equipment. Because maintaining the physical

ownership of the processing equipment requires different organizational capabilities and additional resources

than the case where the physical ownership is at the customer, splitting the “operational services” of Oliva and

Kallenberg (2003) into two categories, where in one category the ownership is at the customer and in the other

category the ownership is at the supplier, is a reasonable extension of the final stage on the product-service

continuum, and enables companies to determine their position on the continuum more specifically. This

division is displayed in Table 4.

Table 4, Division of “Operational services”

Operational services / Outsourcing Partners

Operational offerings Performance offerings /integrated solutions

Taking over end-users operational processes and

related maintenance, where the physical ownership of

the processing equipment is at the customer.

Similar concepts in literature:

Systems seller / integrator (Davies, Brady & Hobday, 2007)

Taking over end-users operational processes and related

maintenance, where the physical ownership of the processing

equipment maintains at the supplier.

Similar concepts in identified in literature:

Functional product contracts (Kumar & Kumar, (2004).

Full service (Stremersch et al., 2001)

Power by the Hour / PBL (Doerr et al., 2005)

Product Service Systems (Baines et al. 2007)

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2.3.5 The extended product-service continuum

This paragraph described the stages on the product-service continuum identified by Oliva and Kallenberg

(2003), and the similarities and extensions proposed in the literature. The stages on the product-service

continuum can be divided into four main stages, proposed by Oliva and Kallenberg (2003), namely “basic

installed-base services”; “maintenance services”; “professional services”; and “operational services”. Based on

the literature review these stages are further divided in order to make the relative distance between the

different stages smaller, which makes it easier to identify a position on the continuum for a specific company.

The newly identified stages are displayed Figure 5. The characteristics related to each stage are displayed in the

complete theoretical framework in Appendix D, together with the organizational capabilities which will be

identified in the next paragraph.

2.4 Required organizational capabilities According to Evardsson (1997), three distinct service components need to be managed to successfully develop

and deploy services, namely the “service concept”, the “service system”, and the “service process”. The

“service concept” reflects how the customer needs are satisfied in the form of the content of the service

offering or service package. This first service component of Evardsson (1997) is covered in the theoretical

framework in Appendix D, by the different service offerings on the product-service continuum with the related

characteristics, described in the previous paragraph.

The second component is the “service system”, which consists of those resources that are required for the

service concept to be realized. Basically this component describes which organizational capabilities are

required for successfully developing and deploying the different service offerings, and will be discussed in this

paragraph. According to Evardsson (1997), the service system consists of four subsystems, namely: the

employees / human resources; the data access; the organizational structure; and the automation of the

administrative support systems. Each of these subsystems will be discussed for each specific service offering in

this paragraph by respectively using the definitions: human resource capabilities; customer and process data;

service infrastructure; and the IT automation level.

The “service process” is the third components which need to be managed for successfully developing and

deploying services, according to Evardsson (1997). Basically this component entails the process of how a

service concept is developed and offered to the customer, by means of the service system. This component will

be covered by the application of the complete theoretical framework in Appendix D, resulting from the

literature review, which describes the different service offerings with the related characteristics (service

concept) and the required organizational capabilities (service system).

2.4.1 Required customer and process data

As a company proceeds along the product-service continuum, the required amount of data of the customer’s

processes, operations, and machinery increases significantly. To determine the required data for each offering,

the most advanced service offering on the continuum, “performance offerings”, is reflected first. As the most

advanced stage requires the largest amount of data, it is relatively straightforward to downscale the required

data for the other offerings on the continuum. As for the most advanced stage, “performance offerings”, a

certain process performance is guaranteed to the customer, the required data for this offering will be based on

the performance indicators offered to the customer. To be precise the required data will be based on the

classification of maintenance performance indicators of Campbell (1995). This classification in performance

indicators exists of measures of equipment performance (availability, reliability and overall equipment

effectiveness); measures of cost performance (labor and material cost of maintenance); and measures of

process performance (ratio of planned and unplanned work, and schedule compliance). In order to measure

each of these performance indicators a certain amount of data is required, which is displayed Table 5. The data

displayed in this table is partly derived from interviews within Marel and partly from the Key Performance

Indicators (KPI)’s specified in the master thesis project by Van Stratum (2006) at former Stork PMT. Besides the

data required for the performance measure, also installed base data is required to deliver “performance

offerings”. This installed base data includes contract conditions per customer; machines in place per customer;

parts per machine; and maintenance history per machine and part at the customer. All this required data is

13

incorporated in the theoretical framework in Appendix D and specified for each offering on the product-service

continuum.

Table 5, Required data per performance measure category

Measures of equipment performance Measures of cost performance Measures of process performance

Failure modes machine Cost structure of spare parts Ratio of planned / unplanned work

Criticality per failure Cost of interventions per part

(inspection, repair, overhaul)

Schedule compliance

Critical parts per machine Cost of failure modes Time measures (Van Stratum 2006)

- Operations time - Manufacturing time - Equipment uptime - Equipment downtime - Order delivery time - Visit diagnose time - Downtime waiting parts - Call diagnose time - Software problem solving time

Failure probability per part Cost / benefit preventive maintenance

Machine critical failure rate Inventory costs

Condition per part (status system) Transportation costs

2.4.2 Required IT automation level

Besides that the required amount of data increases as a company proceeds along the continuum, also the

required level of IT automation and integration of application systems increases. As Tsang (2002) mentioned,

when offering performance services, information should be accessible in real time to all employees who play a

direct role in affecting the service performance tracked. Furthermore, there should be a seamless integration

of major processes within the organization. These major processes include financial supporting system;

maintenance management system; work-order control systems; inventory control; purchasing systems; and

R&D systems. The development process to a totally integrated and automated Information Technology (IT)

structure is described within the IT literature as the IT-maturity model. Veger (2008) developed an IT maturity

model in his master thesis project, based on the CBDI model of Sprott (2007). Veger’s model (2008) classifies

the IT maturity of a company in six categories, namely siloed; experimental; applied; integrated;

institutionalized; and network. In the “siloed” stage, all company departments apply domain specific

application systems, and there exist no standards for systems integration. In the “experimental” stage, some IT

architects are starting to experiment with the development of application services and orchestration of

business processes. In the next stage, the “applied” stage, integration of application systems is applied to

business critical processes. In the “integrated” phase the application systems are integrated within IT and the

development and use of application services is formalized as policies. In the “institutionalized” phase the

application services for integrating the application systems are institutionalized within the organization and are

the standard for application development. In the final stage, the “network” phase, the application systems are

not only fully integrated within the company, but are also fully integrated with the customer’s application

systems.

The described IT maturity process of Veger (2008) has similarities with the servitization process and is applied

to determine the minimal required level of IT maturity per offering on the product-continuum. This is described

in the characteristic “IT automation level” in the theoretical framework in Appendix D.

2.4.3 Required Human Resource (HR) capabilities

Just as that the required IT maturity level increases if companies proceed along the product-service continuum,

also the interactions among customers and services employees and the required knowledge intensity increases

when proceeding along the continuum. For example delivering “performance offerings” requires extensive

interactions with the customer in combination with a large required pool of employees with high knowledge

intensity. Because “performance offerings” is the most extensive service offering on the product-service

continuum, less extensive service offerings require gradually less employees and lower knowledge intensity. To

distinguish between the offerings on the continuum, the required HR capabilities for each offering are based on

the required “organizational functions” to create, deliver and sell services and the required “knowledge

intensity”.

14

Organizational functions

To create, deliver and sell services to the customer, certain organizational functions are required. According to

Gibson, Ivancevich, Donnely, and Konopaske (2006) to create, deliver and sell services, the functions sales;

delivery; development; controlling; planning; marketing; pricing; and human resource management are

required. As primarily these functions are required for all offerings on the continuum, a distinction between the

service offerings is made on the basis of whether organizational functions are required locally near to the

customer or could be maintained globally at the headquarter or business unit. To illustrate this, for “pre-sale

and post-sale product services” merely a sales function is required in the local market and the other functions

can be performed from a central location. While for simple services most of the organizational functions can be

performed centrally, the provision of “performance offerings” requires the sales, delivery, development,

controlling, planning and HRM functions, such as recruitment, retainment and training to be performed locally,

in order to be able to perform according to the specified service level. As basically all the functions are minimal

required to be present centrally, merely the functions required to be performed or stationed locally are

described in the model for each service offering in Appendix D. The required amount of employees per

organizational function depends on the size of the market and the type of service offering, and can be

determined on the basis of the service revenues generated in a certain market and the related size of that

market.

Knowledge intensity

Within the identified organizational functions required to create; sell; and deliver services, the service delivery

function can be further divided on the basis of the required knowledge intensity level. According to Neu &

Brown (2005) the required knowledge intensity level for service delivery differs per service offering, and can be

distinguished into a 1st

, 2nd

, and 3rd

level of knowledge intensity. The delivery of first-level services requires only

basic service skills, whereas third level service entails specialized service skills such as behavioral competencies,

technical expertise, and customer-focused attitudes. The second level knowledge intensity is positioned in

between the basic skills for first service level and the sophisticated skills for the third service level.

Kucza and Gebauer (2011) linked the required knowledge intensity level to the different service offerings on

the product service-continuum. According to them 1st

level knowledge intensity is applicable to basic services,

such as cleaning; simple repair; and basic administrative service. 2nd

level service knowledge is applicable to

services as preventive maintenance; on-site diagnosis; and cost benefit analysis. Finally the 3rd

level knowledge

level intensity is applicable to full service & maintenance contracts and inspection services, according to Kucza

and Gebauer (2011). The applicability of the different knowledge levels for the different service offerings is

incorporated in the theoretical framework in Appendix D.

2.4.4 Required service infrastructure

According to Gebauer, Edvardsson, Gustafsson, and Witell (2010) the organizational structure includes the

organizational distinctiveness and proximity of the service organization to the customer. Organizational

distinctiveness represents the degree to which the service business unit is established as a distinct business

unit with corresponding profit-and-loss responsibility (Oliva & Kallenberg, 2003). Service organization proximity

to customers is the extent to which external customers are aware of the service organization and can identify

appropriate points of contact. In addition, proximity to customers also reflects the geographic density of the

global service infrastructure, which is related to the spare parts inventory control policy. Based on these

characteristics of the organizational structure, Kucza and Gebauer (2011) conducted multiple qualitative case

studies among 16 Western European business-to-business manufacturing companies (or capital goods

manufacturing companies), with the aim to investigate how these companies can configure their global service

approach. Their study revealed four recurrent patterns in global service approaches namely: integrated and

ethnocentric; integrated and polycentric; separated and polycentric; and separated and geocentric global

service approach. In these global service approaches, ethnocentric means home-country oriented; polycentric

means host-country oriented; and geocentric is worldwide.

Integrated and ethnocentric service structure

The first pattern identified by Kucza and Gebauer (2011) is the integrated and ethnocentric global service

structure. This definition implies that in this service structure the service organization is integrated as a cost

15

center in the business unit for products (services are included in the product price), and that the service

organization is coordinated from the home-country or centrally. Locally, the central organization is supported

by sales agents or subsidiaries that are controlled by the central organization and only have the authority to sell

products and provide pre-sale product-service. The central organization provides the post-sale product-service.

Reflecting this service structure approach on the theoretical framework in Appendix D, this structural

configuration is the minimal requirement for providing pre- and post-sale services, because both the

organizational distinctiveness and the proximity to the customer are low.

Integrated and polycentric global service structure

An integrated and polycentric global service structure is the second pattern identified by Kucza and Gebauer

(2011). In this structure the service organization is still incorporated in the business unit for products as a cost

center. However the coordination of the service organization is polycentric, implying that the sales agents or

subsidiaries operate as relatively independent units, having control of product sales; the provision of 1st

and 2nd

level service support, including basic services for the installed base and a few maintenance services; and the

initiation of local warehouses. Extensive 3rd

level service delivery is still performed by the central unit. So

compared to the first organizational approach, besides that the local organizations are better represented and

have more authority, this approach not only focuses on basic installed base service, but also included some

maintenance services. Comparing the characteristics of this global service structure with the required human

resources capabilities, described in the previous paragraph this organizational structure is the minimum

requirement for providing low-end en medium maintenance contract in Appendix D.

Separated and polycentric global service approach

The third global service approach identified by Kucza and Gebauer (2011) entails the separated and polycentric

global service approach. This approach differs with the integrated and polycentric approach by the

characteristic that at the central level the service organization is separated from the business unit of products.

This implies that the service organization functions as a separated business unit with its own profit-and-loss

responsibility, and is responsible for service development, spare parts logistics, and 3rd

level service support

functions. The business unit for products remains control of the product-related functions. At the local level,

the subsidiaries still operate relatively autonomous and are still responsible for both product and service

business, despite the separation of these businesses at the central level. However, cost transparency between

product and service business makes it possible to report profitability and product or service revenue to the

central business unit. The service delivery is organized similarly as in the integrated and polycentric global

service approach. Because in this service structure both the proximity to the customer and the organizational

distinctiveness is high, it is possible according to Oliva and Kallenberg (2003) to offer high-end maintenance

contracts (Appendix D)

Separated and geocentric service approach

Although the separated and polycentric service structure has a separated service organization and reaps profits

from service provision. The financial success of this approach may be limited by low synergies and efficiency,

due to the high-autonomy of the local subsidiaries. A separated and geocentric service approach would be a

better approach according to Kucza & Gebauer (2011). The aim of this approach is to enhance the product and

service business and control service cost through a collaborative approach between both central business units

(products and services) and the local subsidiaries. This is achieved by setting up regional “service hubs” per

continent (e.g. North America, Europe, and Asia) instead of having local subsidiaries and warehouses in each

local market. This reduces the working capital costs in the local markets, but still enables quick delivery times

by using express deliveries. So these hubs take over the role of subsidiaries in small local markets, and provide

2nd

level service support and spare parts directly. However in large markets, at large customers the local

subsidiaries are still present and delivering 1st

level services. The central location still maintains the support of

3rd

level service delivery. This supply chain approach can be viewed as a multi-echelon supply with a central

warehouse and multiple regional warehouses. Only large subsidiaries in local markets are maintained and keep

some emergency stock. By allowing for lateral transshipments between the regional warehouses, the inventory

related costs can be decreased even further (Kranenburg, 2006).

16

Besides decreasing the capital employed and the inventory related costs, the service hubs also facilitate the

information flow with the central service organization. Based on these information flows, the service hubs can

make appropriate decisions on the degree of standardization of the service offer in order to balance between

the transferability of services across market organizations and customization for individual clients. The

managers of the central service organization and the local subsidiaries are typically part of the hub

management team. This enables the manufacturing company to recruit and develop the best employees

anywhere in the world for key positions across the global service network.

Due to the increased organizational distinctiveness and efficiency of the separated and geocentric service

approach, manufacturing companies are able to efficiently deliver “operational services” (Appendix D).

Therefore this organizational structure is a minimal requirement for providing these services.

2.5 Theoretical framework This chapter described the different service offerings on the product-service continuum, which resulted in an

extended version of the product-service continuum of Oliva and Kallenberg (2003). In addition, this chapter

described the required organizational capabilities for each service offering on the product-service continuum,

based on the required customer and process data; the IT automation level; the human resource capabilities;

and the service infrastructure (Evardsson, 1997). The result of this chapter is a theoretical framework which

describes the characteristics of the different service offerings on the product-service continuum in combination

with required organizational capabilities for each service offering. Figure 5 depicts the general outline of the

theoretical framework, by describing merely the horizontal and vertical dimensions of the model. For the

complete and filled-in version, Appendix D can be consulted.

Main stages Basic installed base services Maintenance services Operational services

Sub stages Pre-sale product services

Post-sale product services

Low-end maintenance contract

Medium maintenance contract

High-end maintenance contract


Performance offerings

Content offering

Delivery of service

Value proposition

Relationship

Pricing

Division of

ownership

Service agreement

Market / customer

Customer/ process

data

IT automation level

HR capabilities

Service

infrastructure

Figure 5, General outline of theoretical framework

Characteristics

Minimal required organizational capabilities

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3. Within-case analysis

3.1 Introduction This chapter aims to investigate whether the theoretical framework derived from the literature (Appendix D) is

applicable within the business setting of Marel. To be precise, this chapter investigates via a within-case

analysis whether the theoretical framework is applicable for identifying the position on the product-service

continuum consistently for the different investigated cases within Marel. The results of the within-case analysis

will be used in the cross-case analysis in the next chapter to find patterns of within-group similarities and

differences.

3.2 Methodology

3.2.1 Unit of analysis

For testing the theoretical framework, empirical data is collected using a single embedded case study approach

(Yin, 2003), supported by following the case study guidelines of Eisenhardt (1989). Single embedded case

studies are focused on a single case, consisting of multiple units of analysis in order to find consistent patterns

of evidence across units. This case study is conducted within the context of the capital goods industry,

characterized by original equipment manufacturers (OEM) producing capital intensive equipment. The main

unit of analysis within this context is the entire Marel organization. The subunits of analysis within Marel are

the different entities present in the organization (IC’s; PC’s; and SSU’s). By investigating multiple subunits a

representation for the main unit of analysis, Marel, is derived.

3.2.2 Case selection

The selection of cases within the main unit of analysis, Marel, is based on theoretical sampling (i.e., cases are

chosen for theoretical, not statistical reasons, Glaser & Strauss, 1967). The purpose of theoretical sampling is to

choose cases which are representative for the entire Marel organization, and which are likely to support or

extend the theoretical framework in Appendix D. Within Marel cases can be divided in the four Industry

Centers (IC’s); the Product Centers (PC’s); and the Sales and Service units. To choose relevant cases, the criteria

type of equipment; relative number of customers; relative installed base value per customer; and heritage

were applied and scored in Table 6. Reflecting the scoring in Table 6, two polar cases can be identified, namely

Case I IC Poultry, which is characterized by servicing process equipment of a relative small number of large

customers; and Case III, “Old” Marel, which is characterized by servicing standalone equipment of a relative

large number of small customers. As case in-between the polar types, case II IC Further Processing is chosen,

which is characterized by servicing process / standalone equipment of a relative medium number of medium-

sized customers. By reflecting these three cases a representative sample of the main unit of analysis, Marel, is

derived, which is likely to support or extend the theory.

Table 6, Case selection

IC Poultry IC FP IC Meat IC Fish SSU’s PC’s

Type of

equipment

Process Process/

standalone

Standalone Standalone Standalone Standalone

Relative nr. of

customers

Small Medium Large Large Large Large

IB value per

customer

Large Medium Small Small Small Small

Heritage Stork PMT Stork Titan &

Townsend

Marel &

Townsend

Marel Marel Marel

Case I:

IC Poultry

Case II:

IC FP Case III: “Old” Marel

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3.2.3 Data collection

The investigation of cases is based on collecting both qualitative and quantitative data. In order to make

triangulation of results possible and obtain stronger evidence, multiple data collection methods were applied,

namely qualitative semi-structured face-to-face interviews and observations; and quantitative archival sources

& documentation (Eisenhardt, 1989).

Semi-structured interviews

For each case two types of respondents were interviewed, namely service area managers who are responsible

for service provision in a certain area; and service managers who are responsible for the entire service

provision of a business unit. Within each case, respondents, from preferably different locations, were added

until theoretical saturation (the point at which incremental learning is minimal because researchers are

observing phenomena seen before, Glaser & Straus, 1967) was reached, this ranged from three to five

respondents per case. The respondents were interviewed face-to-face, via a semi-structured guideline focused

at the characteristics in the theoretical framework (Appendix D). The aim of this approach is to cover the

characteristics of the theoretical framework, while minimizing the influence on the answers of the

respondents. In order to enhance the analysis of the data, interviews were audio taped with the respondent’s

permission. The interview guideline is presented in Appendix E.

Archival sources & documentation

Data obtained from the interviews is checked for accuracy with data from archival sources and documentation

related to the service provision within a case. Checked documentation forms are maintenance contracts;

preventive maintenance schedules; maintenance concepts; and other relevant documents related to service

provision of the cases. Sources for this type of evidence were Marel’s intranet environment; the company

archive; and the respondents which provided additional documentation.

Observations

During my internship at Marel, informal observations and conversations provided a large amount of relevant

information. Information which was basically used to gain insight in the organization’s structure and processes.

This gained insight helped me to form and select relevant cases and interviewees a priori.

3.2.4 Data analysis

The aim of the within-case analysis is to become intimately familiar with each case as a stand-alone entity. The

purpose is to derive unique patterns from each case, which helps to position each case on the theoretical

framework in Appendix D. The process of within-case analysis started with writing transcripts of the interviews,

which resulted in a large amount of unstructured data. In order to make the interview transcripts more clear

and structured, main points from transcriptions are collected and applied to position each case on the

theoretical framework for each characteristic specifically. These main points are incorporated in the results, in

which for each case the main points are described and coupled to a position on the theoretical framework. The

detailed description of the cases is placed in the Appendix F. Finally the within-case analysis resulted in a

positioning of all three cases on the theoretical framework.

3.3 Results This paragraph concisely describes the characteristics of the most extended service offering and the

organizational capabilities in place for each case, and how each case is positioned on the continuum. For a

detailed description of the three cases the Appendix F can be consulted.

The aim of positioning each case on the continuum is to check whether the theoretical framework in Appendix

D is applicable for the business setting of Marel. The underlying theoretical assumption of the theoretical

model is that each case should score for all the vertical dimensions in roughly the same column.

3.3.1 Case I: Industry Center Poultry

The IC Poultry has originated from Stork PMT and is especially focused on providing complete systems for

processing poultry, especially broilers, turkeys, and ducks. In this business type most customers buy complete

processing lines from one supplier. As all the machines in this process are linked to each other, the failure of

19

one machine has a direct effect on the operations of the entire processing line. In addition, the processing

plants start shifting to almost continuous processing, which characterizes the poultry processing business

typically as a process-oriented industry. Projects offered by this IC are within Marel typically characterized as C

& D projects, (Marel Financial Flows, 2012). As the equipment of IC Poultry entails mostly complete processing

lines, the customer base consists typically of a small number of large customers.

The sources of data used for analyzing case I are displayed in Table 7.

Table 7, Data sources of Case I: IC Poultry

Data collection

Documents: Service contracts; Maintenance concept; and Maintenance definitions

Service Manager IC Poultry Boxmeer

Service Area Manager France, IC Poultry Boxmeer

Service Area Manager Benelux, IC Poultry Boxmeer

Service Area Manager United Kingdom, IC Poultry Boxmeer

Vice President After Market Sales Service, IC Poultry Gainesville (US)

Characteristics of the service offering

This paragraph describes concisely the service offerings provided to the customer, by assessing each

characteristic of the service offering. A detailed description of the case is provided in the Appendix F. Within

the IC Poultry basically four service offerings can possibly by delivered to the customer, namely Installation of

equipment; Reactive / Ad-hoc services; Service contracts; and Service agreements. The description of the

different service offerings is displayed in

Table 8. These service offerings with their characteristics consistently emerged during all the interviews and

were supported by the documentation on service contracts and agreements. As Oliva & Kallenberg (2003)

designed their product-service continuum from a perspective that reflects the required capabilities and

transformation patterns emergent when shifting to services, the most extended service offering of case I is

assessed for positioning each case on the theoretical framework in Appendix D. This is also supported by the

respondents who mentioned that the position on the product-service continuum should reflect the most

extended service offering a company is capable to deliver to their customers.

As can be derived from

Table 8, the most extended service offering within case I: IC Poultry, is a service agreement. This offering is

characterized by designing customer-specific preventive maintenance schedules (PMS) for the complete

processing line, supported by inspection or maintenance visits at pre-defined moments per year. The value

proposition of this offering is that it aims to prevent system-breakdowns and subsequently sustain process

performance. The relationship with the customer can be characterized as proactive and moderately extensive,

aimed at delivering service preventively before a breakdown occurs instead of reactively after a breakdown

occurred. Service agreements can be priced in a fixed price during a specified period, including a pre-defined

number of spare parts and inspection visits; or can be invoiced afterwards when the service is delivered to the

customer. The latter is most applied within the IC Poultry.

Table 8, Service offerings within Case I: Industry Center Poultry

Service offerings Description

Installation Installation of machinery or equipment, negotiated in the product sale (responsibility of sales).

Ad-hoc service Service or spares parts delivered to the customer, purely on the basis of customer request.

Service contract Predefined nr. of inspection visits on machine or process performance per year, resulting in report

with recommended maintenance & spare parts (can be paid up front in fixed price; or can be

invoiced afterwards when the service is delivered).

Service agreement Preventive Maintenance Schedule (PMS) with inspection visit.

PMS with inspection visit and maintenance included:

- Totally conduct overhaul at customer.

- Or supervise overhaul conducted by the maintenance crew of the customer.

- Possibility to include a number of predefined spare parts for a fixed price.

20

Organizational capabilities in place

The paragraph briefly reflects the organizational capabilities of case I: IC Poultry, on the basis of the service

infrastructure; the human resource capabilities; and the customer / process data; and the IT automation level.

For a detailed case description Appendix F can be consulted. The service infrastructure of IC Poultry can be

characterized as centralized. The service provision to the customer is arranged around six service clusters,

operated from Boxmeer. Each cluster represents a certain market region, and is controlled from a central

location in Boxmeer, just as the provision of service engineers to the customer. Only in large markets some

engineers and sales agents are located. The knowledge level of engineers varies from assistant engineers, who

have very basic knowledge, to consultants who are experts on the entire service and operations of entire

processing plants.

The available customer and process data within IC Poultry can be characterized as moderately extensive. IC

Poultry has a PLM system in place which registers product-specific data, and since recently also customer-

specific installed base data. Critical parts in the machine and process are identified and coded via the A-E

coding system developed within Poultry and described in Appendix F. Via this coding system overhaul kits can

be composed, and used as input for the preventive maintenance schedules. By using these schedules in

combination with their ERP system, IC Poultry can determine the required spare parts, the required

maintenance, and the resulting service costs during a certain period relatively accurate. However these

estimated costs are still not exactly, because IC Poultry is currently not measuring process performance data

and statistical data on component failures, as they still regard this as the responsibility of the customer. As

mentioned, within this case basically two major IT systems are in place, namely PLM for product-specific data

and the ERP system SAP for business process data. Between these systems a lot of linkages are present;

however both systems are not linked into one interface yet. The start of this integration is planned for the end

of the year, with the implementation of a Customer Relationship Management (CRM) system. Basically Poultry

is starting to integrate their IT systems into one interface, which characterizes their IT automation as “applied”

(Veger, 2008).

Positioning on the theoretical framework

Based on the characteristics and organizational capabilities described above, the position of case I: IC Poultry is

scored on each characteristic of theoretical framework and displayed with the black crosses in Table 13. The

characteristics “Service Level Agreement” and “customer type” are not included in the framework. Because

during the interviews it became clear that the category SLA was implicitly mentioned in the content of the

offering, and that the category customer type was defined too vague to position a service offering well. To

incorporate “customer type” in the model it has to be defined more specifically. Besides these dimensions

which are not included, some respondents also recommended to reconsider the dimensions “delivery of

service”; “division of physical ownership”; and “HR capabilities”, because these dimensions didn’t add sufficient

value or were not defined properly.

When considering the positioning in the framework for case I: IC Poultry (the black crosses in Table 13) it can

be concluded that theoretical framework holds relatively well for the industry setting of IC Poultry, meaning

that the characteristics of IC Poultry’s most extended service offering, medium maintenance contract, match

with the organizational capabilities, except for the dimensions “pricing” and “service infrastructure”. According

to the respondents, the pricing of the offering totally depends on the wishes of the customer, and therefore

does not add much value to the model. The service infrastructure however, deviates significantly from the

recommended infrastructure in the literature. In the literature they recommend a decentralized structure,

while IC Poultry manages to deliver their services successfully with a centralized structure. This deviation is

remarkable and will be further investigated in the cross-case analysis.

3.3.2 Case II: Industry center Further Processing

The IC Further Processing has originated from Stork Titan and Townsend, and especially concentrates on

equipment for the further processing of white meat; red meat; fish; potatoes; vegetables; as well as meat

substitutes. Their machinery can typically be divided into three main categories, namely forming; coating; and

heat processing. Forming machinery is equipment which forms products, to make hamburgers, kip nuggets etc.

Coating machinery is equipment aimed at coating products. And heat processing machines are basically large

21

ovens or fryers. These machines are mostly stationed in a processing line. However, within FP little complete

processing lines are sold and the machines are mostly stationed in lines of competitors. Furthermore the

output of FP machinery does not typically have a major influence on the technological function of the following

machines, which characterizes this machinery more as stand-alone.

The sources of data used in this case are displayed in Table 9.

Table 9, Data sources of case II: Industry center Further Processing

Data collection

Documents: Service contracts

Service Manager IC FP Boxmeer

Service Area Manager IC FP Boxmeer

Service Area Manager IC FP Boxmeer


Within IC FP basically three types of service offerings can be delivered to the customer, namely Installation of

equipment; Reactive/ Ad-hoc services; and Service contracts. These service offerings with their characteristics

consistently emerged during all the interviews and were supported by the documentation on service contracts

and agreements. The description of these service offerings is displayed in Table 10.

As explained in the previous case, the most extended service offering will be used for positioning each case on

the theoretical framework (Appendix D), for IC FP this is the service contract. This offering is characterized by

offering a pre-defined number of inspection visits, per time period, on the machine or process performance,

resulting in an inspection report with recommended maintenance and spare parts. Within the case IC FP, these

service contracts are offered for a fixed price and paid up-front by the customer. The value proposition of this

offering is that it provides the customer insight in the performance of their equipment, linked to

recommendations on how to increase performance. The relationship with the customer is shifting from a pure

reactive approach to a more proactive approach in this case, aimed at preventing instead of correcting failures.

Table 10, Service offerings within case II: IC Further Processing


Installation Installation of machinery or equipment, negotiated in the product sale (responsibility of sales).

Ad-hoc service Service or spares parts delivered to the customer, purely on the basis of customer request.

Service contract Predefined nr. of inspection visits on machine or process performance per year, resulting in report

with recommended maintenance & spare parts (paid up front in fixed price).


The service infrastructure of IC Further Processing can be characterized as mainly centralized. Their service is

arranged around three major clusters, operated from Boxmeer, representing each a certain market region in

the world. Only in some large markets small offices with sales agents and engineers are located. The knowledge

level of engineers varies from assistant engineers, who have very basic knowledge, to senior service engineers

who are highly experienced in maintenance and overhauls. As the service organization of IC FP is still relatively

young, the majority of the engineers are still assistant engineers.

The available customer and process data within case II: IC FP can be characterized as relatively limited. They

recently started identifying critical parts in their equipment, by implementing the A-E coding, and coded

approximately 50% of their machinery in PLM. For these coded machines overhaul kits are developed, but still

no preventive maintenance schedules are developed. This implies that they are not able to identify failure

modes of their equipment, also because they are not registering any process performance data at the

customer. Therefore their cost performance data is also still limited to only the cost structure of spare parts in

the ERP system. The installed base data of IC FP is also relatively limited; basically only new machines are

registered, though it is still not registered in a standardized system like PLM.

22

Within IC FP basically two IT systems are present, namely PLM for product-specific data and the ERP system

SAP for business process data. Besides these systems there are still a number of other application systems

present, which are limited integrated and this characterizes the automation level as “siloed” (Veger, 2008).


Based on the characteristics and organizational capabilities described above, the position of case II: IC FP is

scored in the same table as case I (Table 13) and is displayed with the red dots. From this positioning can be

concluded that the characteristics of IC FP’s most extended service offering, the low-end maintenance contract

match relatively good with the organizational capabilities in place, though the organizational capabilities are

lacking slightly behind. This lacking behind can be clarified by the fact that the majority of the service offerings

of IC FP are still ad-hoc services, which can still be managed with limited organizational capabilities.

During the interviews some respondents recommended to reconsider the dimensions “delivery of service”;

“division of physical ownership”; and “HR capabilities”, because these dimensions didn’t add sufficient value or

were not defined properly. They also recommended reconsidering the designation of maintenance contracts,

because customers react aversely to contracts and low-end sounds cheap. A suggestion to this would be basic,

extensive, and premium.

3.3.3 Case III: “Old” Marel

From origin Marel is a company which expanded its operations by acquisitions of competitors or related

companies in the market. This has resulted in a much decentralized organizational network consisting of

companies each with their own specific knowledge about a certain machine or machine category, mainly in the

poultry; meat; and fish processing industry. As the organizational network of “old” Marel is much

decentralized, the equipment offered to the customer is mainly consisting of stand-alone machinery, and very

little integrated processes. Within Marel the equipment of case III: “old” Marel is typically defined as A&B

projects (Marel Financial Flows, 2012). As the equipment in the market are mainly stand-alone machines, the

customer-base of case III consists typically of a large number of small customers.

The sources of data used in this case are displayed in Table 11.

Table 11, Data sources of case III: “Old” Marel

Data collection

Documents: Service level agreement templates, Financial flows

Managing director Marel Denmark (former managing director service Marel)

Corporate service advisor Sales and Service Units (SSU’s)

Director of customer service Gardabaer

Technical Manager SSU Benelux

Service Manager Marel Oss


The service offerings of case III: “old” Marel can broadly be divided into three categories, namely pre-sale

product services like installation, demonstration, and training; Ad-hoc / break-fix service; and Service Level

Agreements (SLA’s) on both hardware and software, which both consists of several gradations. The description

of the service offerings is displayed in Table 12. All the interviews yielded roughly the same categories in

service offerings, though there were some slightly differences in the execution of these service offerings.

On the same rationale as discussed in the previous two cases, also in this case the most extended service

offering will be used for positioning case III on the theoretical framework (Appendix D). For “old” Marel this is

the Service Level Agreement (SLA). Basically within case III each agreement with the customer is defined as a

SLA. The SLA’s are characterized as an agreement in which a pre-defined number of services can be delivered

for a fixed price. The most extended SLA consists of an agreement in which a customer pays a fixed price per

time unit covering all planned and breakdown maintenance; all spares parts; and a guaranteed response time.

The value proposition of this offering is that the customer has a clear view of the maintenance costs and in

addition he has a guaranty that either the machine failure is fixed within a reasonable time or he will be

financially compensated. Though the most extended SLA is an all costs covering agreement, the relationship

23

with the customer is still characterized as reactive. The service delivery to the customer is still mainly initiated

by a customer call, in case of a machine failure or performance issue.

Table 12, Service offerings within Case III: “old” Marel


Installation,

demonstration,

training

Pre-sale product services, which include installation of the equipment, demonstration on usage,

and training. These offerings are negotiated in the product-sale but are the responsibility of the

service department.

Ad-hoc / break-fix

service

Service or spares parts delivered to the customer reactively, purely on the basis of customer

request.

Service Level

Agreement (SLA) on

hardware

Umbrella of all services that can be offered to the customer and included in an agreement and

offered for a fixed price, consists of the following variants for hardware:

24/7 emergency breakdown response included: Agreed response time help desk and on-site.

Planned maintenance: Inspection visit with planned maintenance included.

Breakdown maintenance: Maintenance related to breakdowns included.

All spares included: all spares for planned and breakdown maintenance included.

Service Level

Agreement (SLA) on

software

Standard software maintenance: service pack and software upgrades

24/7 software emergency response: 24/7 helpdesk function, with agree response time included.

On-site software support: planned and breakdown on-site software maintenance included.


The service infrastructure of case III: “old” Marel can be characterized as mainly decentralized. The service is

mainly provided by the local offices, called SSU’s. These entities operate as independent units and sell

machines, SLA’s, and provide 1st

line and 2nd

line support to their customers (Kucza & Gebauer, 2011). For 3rd

line support the SSU’s are backed-up mainly by the Product Centers. Each of these product centers has its own

field of experience and is especially focused on a specific functional area; this implies that the knowledge of a

complete industry is still decentralized among the different product centers. According to the respondents, a

strong central back-office in which the complete knowledge of a certain industry is present is lacking within

case III:”Old Marel”.

The available customer and process data within this case can be characterized as very limited and dispersed.

They have not coded or identified critical parts of their machines; they have not registered their installed base

data properly; and they hardly measure any process performance data at the customer. As their knowledge on

critically parts is very limited, their SLA’s have little theoretical foundation. The cost structure of their SLA’s is

therefore merely based on historical data. The reasoning within case III is that they can lose money on some

SLA’s, but by offering a large amount of SLA’s the risks of losing money will be decreased and this makes the

SLA’s on average profitable.

Within “old” Marel a number of different ERP systems are in place, namely Navision; Microsoft Dynamicx AX;

or no ERP system at all, in addition there is still no PLM system in place. Within these application systems, there

exists little or limited integration, which characterizes the IT automation level of case III as “siloed” (Veger,

2008).


On the basis of the characteristics and organizational capabilities described above, the position of case III: “old”

Marel is scored in Table 13, and indicated with the green stars. From this positioning can be concluded that the

characteristics of case III’s most extended service offering, the high-end maintenance contract, totally does not

match with the organizational capabilities in place. Based on the content of the offering, case III is at high-end

maintenance contracts, while the organizational capabilities and the relationship with the customer are merely

at post-sale product services. These differences are remarkable and it seems that either the case is assessed

not sufficiently; or that there are some underlying dimensions which are not incorporated in the theoretical

framework in Appendix D, but do have a large influence on the positioning on the framework. What these

influencing dimensions are will be investigated in the cross-case analysis in the next chapter.

24

Table 13, Positioning of cases on the continuum

Main stages Basic installed base services Maintenance services Operational services








Characteristics

Content offering • X *

Delivery of service * • X

Value proposition • X *

Relationship * • X

Pricing X • *

Ownership equipment

• X *

Organizational capabilities

Available data *• X

IT automation level * • X

HR capabilities *• X

Service infrastructure X• * Total scores Case III: 1 Case I: 2

Case II: 4 Case III: 4

Case I: 1 Case II: 6

Case I: 7 Case III: 1

Case III: 4

Goodness of fit = ( scores in column highest score – scores outside column highest score) / total scores {(7 + 6 + 4) – (1+2+4+4+1+1)} / 30 = 0.133

X = Case I: IC Poultry = 0.4 • = Case II: IC Further Processing = 0.2 * = Case III: “Old” Marel = -0.2

3.4 Conclusion

The within-case analysis studied three cases within Marel, namely case I: IC Poultry; case II: IC Further

Processing; and case III: “old” Marel. The aim of this within-case analysis was to position each case on the

theoretical framework in Appendix D and check whether the characteristics of the most extended offering

matched with the organizational capabilities in place at each case. For the theoretical framework to be correct

the organizational capabilities in place should match with the characteristics of the most extended service

offering of each case. In practice this means that a case should score in the same column in Table 13 for each

dimension. To check the correctness of the model a goodness-of-fit measure was applied. To come to this

measure, first each scored item in Table 13 was assigned with a score of 1, subsequently all scores were added

and specified per case and service offering, which resulted in a specification of the score of each case in a

certain service offering. Based on these scorings, the goodness-of-fit is determined by subtracting the highest

score a case has for a certain service offering (the underlined score in Table 13) with the scores outside that

column and then divided by the total possible score. This resulted in a number between -1 and 1, in which 1

represents the maximum amount of fit. The application of this scoring resulted in a goodness-of-fit of 0.133 for

the complete theoretical framework, which is relatively low, meaning a weak fit. For the specific cases I to III,

the goodness-of-fit was respectively 0.4; 0.2; -0.2, which implies that the model holds relatively well for case I:

IC Poultry but fits very poor for case III: “old” Marel. These differences in goodness of fit for the specific cases

and the relatively low overall fit can have two possible explanations. First, it is possible that the cases do not

have managed their business very well and are underperforming in their service provision. Or second, it is

possible that the theoretical framework is not correct and lacked to incorporate some underlying dimensions

which do have an impact on the positioning of the cases on the framework. However, as the within-case

analysis merely focused on the specific cases, it not possible at this stage to exclude one of the explanations for

the low goodness-of-fit of the theoretical framework. To exclude one of the two possible explanations a cross-

case analysis was conducted and described in the next chapter.

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4. Cross-case analysis

4.1 Introduction This chapter investigates the similarities and differences between the within-case analyses described in the

previous chapter, by means of a cross-case comparison. The aim of this chapter is to test whether the

theoretical framework is applicable across all cases and able to position three cases correctly with respect to

each other. This chapter will be concluded with statements on the applicability of the model across the cases,

accompanied with improvement criteria and dimensions.

4.2 Methodology


The unit of analysis is similar to the one described in the previous chapter. Meaning that the case study is

conducted within the context of the capital goods industry; the main unit of analysis within this context is the

entire Marel organization; and the subunits of analysis within Marel are the three identified cases.

4.2.2 Data analysis

As the previous chapter positioned each case specifically on the theoretical framework in Table 13 via a within-

case analysis, this chapter compares the position of the cases via a cross-case analysis. The cross case analysis

compares the different cases on the characteristics of the service offerings and the organizational capabilities

in place (vertical dimensions theoretical framework Table 13). Within these categories the cross-case analysis

looks for within-group similarities coupled with intergroup differences. The aim of this approach is to prevent

to reach premature conclusions and identify new categories or dimensions which have an influence on the

positioning on the theoretical framework. By means of this cross-case analysis will be checked whether the

horizontal dimensions (service offerings) and vertical dimensions of the framework are correct, or should be

supplemented with new dimensions.

4.3 Results cross-case comparison

4.3.1 Recap from within-case analysis

The within-case analysis tested whether the characteristics of the most extended service offerings of each case

matched with the organizational capabilities in place. From Table 13 can be concluded that for case I: IC Poultry

the characteristics of the service offerings matched relatively well with the organizational capabilities in place,

but that for case III: “old Marel” the organizational capabilities lacked significantly behind the most extended

service offering. Reflecting Table 13, case III is positioned more to the right than case I; while case I has

significantly more advanced organizational capabilities. This is remarkable and it seems that either the cases

have not managed their business very well; or that the theoretical framework is not correct and lacked to

incorporate some important underlying dimensions. Investigating what the cause for the low good-of-fit is, will

be the aim of chapter.

4.3.2 Characteristics of the service offerings

Content offering

The range of service offerings across the cases follows roughly a similar pattern, by evolving from installation

services, to ad-hoc services, to a number of maintenance agreements. This is in line with the pattern identified

in the theoretical framework (Appendix D) in which service evolve from pre-sale, to post-sale product services,

to maintenance agreements, in which several gradations are possible. Though the range of service offerings

across the cases follows roughly the same pattern, the type of equipment the service offerings are focused on

differs significantly. Within case I: IC Poultry, the services are offered to complete processing lines, which can

be characterized as almost continuous processes. These processing lines consist of multiple machines, in which

all machines are integrated and are all influencing each other. Servicing these complete processing lines

requires the field service engineers to have thorough knowledge on the interactions between the different

machines in the line; they should know exactly what the influence of a certain operation is on the end-product.

26

In addition to that, maintenance should be conducted preventive, as breakdowns of a processing line a very

costly and should be prevented. Within case III: “old” Marel, the respondents all state that their services are

offered to mainly standalone equipment. These are relatively simple standalone machines, which mostly have a

pre-defined input and output and are not integrated in a processing line. Servicing this type of equipment

merely requires basic knowledge on the specific standalone machine and not on the complete processing line

like is the case within IC Poultry. Case II: IC FP is positioned in between both cases and is offering a combination

of standalone equipment and processing lines.

Delivery of service

The respondents across the three cases all indicate that this category does not add much value, because it will

be discussed implicitly in the dimensions “content offering” and “relationship”, though this dimension still

yields a remarkable difference between the cases. The service delivery of IC Poultry and IC FP both matched

with the content of the offering, however for case III: “old” Marel these dimensions did not match. The theory

indicates that offering high-end services implies that the supplier is delivering service almost continuously and

proactively to its customers, while “old” Marel is still delivering their service reactively, mainly on customer

request. Reason for this is that case III has limited knowledge on the critical parts in their machinery, which

disables them for offering services proactively. Besides to that, breakdowns of standalone equipment is less

critical than breakdowns of a processing line, which allows case III to deliver services merely reactive.

Relationship

For this dimension the same deviation within case III: “old” Marel occurs as with the previous dimension. In this

case the literature indicates that the relationship with the customer should be extensive, while within case III

the relationship is merely-product based. Reasons for this are the lack of thorough knowledge on service, and

the large number of small customers. The installed base of “old” Marel is namely characterized as consisting of

a large number of small standalone-customers, according to the respondents within this case it is more difficult

and less cost efficient to form an extensive relationship with a large number of customers. In contradiction,

case I: IC Poultry is characterized by a relative small number of large process-customers, which are more easy

to form an extensive relationship with. Customers within case II: IC FP can be characterized as medium-sized in

between both cases, and lend themselves also for forming a relationship with.

Value proposition

At first sight the value proposition in Table 13 seems to match with the content of the service offering for all

cases. However, digging deeper reveals a significant difference. Within IC FP and IC Poultry the value

proposition is both focused on complete processing lines, by giving insight in the process performance; and

preventing system-breakdowns and sustaining system performance, respectively. While at “old” Marel the

value proposition is focused on a single standalone machine, by guaranteeing a certain response time for a

single standalone machine, instead of for a complete processing line.

Pricing

The pricing dimension turned out to less relevant during the interviews, because it totally depends on the

wishes of the customer how the service is priced, and in addition the pricing dimension is also implicitly

incorporated in the content of the offering.

Ownership of the equipment

Similar as to the pricing dimension, this dimension also does not add much value as separate dimension on the

framework, because it is also implicitly incorporated in the content of the offering.

Conclusion on cross case comparison on characteristics of the service offering

The cross case comparison on the characteristics of the service offering is summarized in Table 14. The

dimensions “pricing” and “ownership of the equipment” are excluded from the table, because they did not add

significant value. The cross case comparison identified some important differences and yielded two new

dimensions. The most important difference identified is the type of equipment to which the service is offered

to, this dimension is not accounted for in the theoretical model but seems to have a major influence on the

27

framework. The type of equipment has a direct effect on all the other dimensions, but especially on the

required knowledge and the relationship with the customer. Servicing standalone equipment requires

significantly less knowledge than servicing complete processing lines, furthermore the combination with a large

number of small customers results in a more reactive service approach for standalone equipment.

4.3.3 Organizational capabilities in place

Available customer & process data

The approach to capture process/ equipment data is similar within IC Poultry and IC Further Processing;

however IC FP is just in an “infant” stage while IC Poultry has captured extensive process data. Both cases

identify their critical parts on the basis of A-E coding (Appendix F) and develop overhaul kits and preventive

maintenance schedules on the basis of this (not yet possible within IC FP). The aim of this approach is to build a

theoretical foundation for the service offerings and service the customer’s equipment preventively and

proactively. In addition the coding system also serves to identify the cost structure of the service offerings. This

coding approach is not present within case III: “old” Marel, basically there is no format for identifying critical

parts in place and knowledge on critical parts is very limited. This also clarifies the reactive service approach of

case III, because without identification of critical parts it is not possible to conduct preventive maintenance and

offer services proactively. In addition, according to respondents within IC Poultry it is not possible to offer high-

end maintenance contracts for processes without identification of critical parts, because breakdowns are very

costly and should be avoided by preventive maintenance. However, for standalone equipment of “old” Marel it

shows that it is possible to offer high-end contracts without identification of critical parts, though this will

always be a reactive approach.

IT automation level

Within the IT automation level there are little differences between the three cases. In all the cases the

automation level is relatively limited, though within case I: IC Poultry it is slightly more advanced than in the

other cases.

HR capabilities

Respondents across all cases indicated that this dimension is important, but is defined too vaguely in the

theoretical framework. Although it is defined too vaguely, it still identifies some important differences between

the cases. As can be derived from Table 13, case III made more progress to the right than case I and is at high-

end maintenance contracts while their HR capabilities are at post-sale product services, which is significantly

less than the organizational capabilities of case I. This difference can also be clarified by the type of equipment

serviced. As discussed, for servicing standalone equipment significant less knowledge is required than for

servicing a complete processing line. This implies that also the HR capabilities for servicing standalone

equipment can be less extended than for servicing complete processing lines.

Service infrastructure

The applied service infrastructure is similar for case I: IC Poultry and case II: IC FP; both cases apply a

centralized infrastructure, in which the service provision is arranged around service clusters, operated from

Boxmeer, and representing a certain market region. The respondents within both cases indicate that the

combination of a relative small to medium number of customers and a proactive service approach allows them

to provide services centrally. Reason for this is that by conducting service preventively and proactively the

supplier can plan their service provision more efficiently and is not dependent on breakdowns at the customer,

which allows the supplier to operate service centralized. This in contradiction to case III: “old” Marel, which

applies a decentralized infrastructure. According to the respondents within this case, a decentralized

infrastructure is a necessity for servicing the large amount of small customers reactively. As within “old” Marel

service delivery is mostly initiated with a customer call, the service demand is less predictable and urges for a

decentralized structure.

The service infrastructure applied within the cases is different as proposed in the literature by Kucza & Gebauer

(2011), in which a reactive service provision is coupled to a centralized structure and a proactive approach is

coupled to a decentralized structure. Across the cases the opposite pattern occurred, a decentralized structure

28

in this case is related to a reactive service approach and a centralized structure is coupled to a proactive service

approach.

Conclusion on cross-case comparison on organizational capabilities

The cross-case comparison on the organizational capabilities is summarized and added to Table 14. Similar as

with the cross-comparison on the characteristics of the service offering, in this cross-case comparison also the

influencing factor “type of equipment” emerged. It shows to be that for servicing standalone equipment

significant less customer & process data is required and that the HR skills can be limited to basic knowledge on

servicing standalone equipment. In addition a decentralized service approach is a necessity in this case.

Table 14, Cross-case comparison

Dimensions framework

Case I: IC Poultry Case II: IC Further Processing Case III: “Old” Marel

Characteristics of the service offerings

Content offering Focused at complete processing lines

Focused on a combination of standalone and process lines

Focused on single standalone machines

Required process knowledge

Extensive process knowledge required

Basis process knowledge required

Basic standalone knowledge is sufficient, no process knowledge required

Delivery of service At planned moments At planned moments On customer request

Relationship Proactive Starting to be proactive Reactive

Customer characteristic

Small number of large customers with high IB value

Medium number of medium sized customers

Large number of small customers with little IB value

Value proposition Prevent process breakdowns, and sustain process performance.

Provide insight in process/ standalone performance

Guarantee response time of a single standalone machine.

Organizational capabilities

Available customer & process data

Coding system for identifying critical parts in place + overhaul kits and preventive maintenance schedules

Coding system for identifying critical parts in place + overhaul kits for 50% of machinery

No format for identification of critical parts in place.

IT automation Applied Siloed Siloed

HR capabilities Advanced engineering skills in place for service complete processing lines knowledge on interactions between machines

Basic knowledge on servicing standalone/ process equipment

Basic engineering skills on servicing standalone equipment


Centralized Centralized Decentralized

4.4 Conclusion on cross-case comparison As mentioned in the introduction, the aim of this chapter was to investigate whether the theoretical

framework in Appendix D is applicable across all cases and able to position the three cases correctly with

respect to each other. From the within-case analysis can be concluded that the theoretical framework holds

relatively well for case I: IC Poultry, as the organizational capabilities matched with the characteristics of the

most extended service offering (Table 13). However, the theoretical framework shows to deviate significantly

for case III: “old” Marel. This deviation can be clarified by the influencing factor, “type of equipment”, identified

in the cross-case analysis. The initial theoretical framework (Table 13) is implicitly designed from a process-

oriented perspective, as the product-service continuum of Oliva & Kallenberg (2003) was applied as guideline,

which did not incorporated standalone equipment. From the cross-case comparison can be concluded that the

type of equipment has an influence on all the dimensions in the model and especially on the required

knowledge level; the required customer & process data; the required HR capabilities; and the relationship with

the customer. It shows that for servicing standalone equipment significant less process knowledge, customer &

process data, and corresponding less advanced human resource capabilities are required. In addition a reactive

relationship with the customer shows to be satisfactory in this case. As servicing standalone equipment

requires significantly less capabilities than servicing a complete processing line, it is not fair to score both types

equipment on the same theoretical framework. This is also emphasized by the IC Poultry Service manager, who

states that “On the basis of their service offerings “old” Marel seems to be further on the continuum than IC

Poultry, however on the basis of their organizational capabilities they lack significantly behind IC Poultry and

29

should therefore be positioned lower on the continuum”. Critical reflection of the horizontal dimensions on the

framework is therefore necessary.

The initial theoretical framework in Appendix D is based on the product-service continuum of Olivia and

Kallenberg (2003), who based their continuum on two underlying dimensions, namely “user’s process

orientation” and “customer interactions”. The first dimension defines that by moving along the continuum the

service offering shifts from product-oriented services to “user’s processes oriented services” (i.e. a shift from a

focus on ensuring the proper functioning and/ or customer’s use of the product, to pursuing efficiency and

effectiveness of end-user’s processes). The second dimension defines that by moving along the continuum the

nature of the customer interaction shifts from transaction-based to relationship-based (i.e. a shift from selling

products, to establishing and maintaining a relationship and eventually a partnership with the customer).

Based on these underlying dimensions of Oliva and Kallenberg (2003), it makes sense to add some new service

offerings, focused on standalone equipment to the initial theoretical framework and position them in front of

the service offerings focused on processes, like displayed with the orange column in Figure 6. Based on this

reasoning the service offerings on the theoretical framework will evolve from pre-sale product services; to

post-sale product services; to standalone product agreements (reactive and proactive); to low-end, medium,

and high-end maintenance contracts for processing lines; to operational offerings; and finally performance

offerings, like displayed in Figure 6. This positioning of standalone-service offerings in front of process-service

offerings is in line with both of the underlying dimensions of the product-service continuum of Oliva &

Kallenberg (2003). Namely the first premise of Oliva & Kallenberg (2003) is that the continuum shifts to

process-oriented service, by eventually taking over customer’s processes. As services for standalone products

merely focus on a part of the customer’s process and not the entire processes of the customer, it is more

logical to position standalone services in front of process services. This is supported by the statement of the

managing director of Marel Denmark, who stated: “The extent to which you are able to shift to the right end of

the continuum depends on the extent to which you are in charge of the customer’s process”. With standalone

products you are definitely not in charge of the customer’s process, which makes it logical to position the

standalone services in front of the process services.

The second premise of the product-service continuum of Oliva & Kallenberg (2003) is that the interaction with

the customer shifts from product-based, to relationship, to eventually a partnership. As the cross-case analysis

revealed that with the standalone equipment of case III: “old” Marel the interaction with the customer is

merely characterized as product-based and with the process equipment of case I: IC Poultry the interaction

with the customer is characterized as a proactive relationship, it makes sense to position standalone services in

front of process services. This is also supported by the corporate service advisor SSU’s, who stated that: ‘”old”

Marel wants to shift from reactive to preventive and proactive maintenance in future, in order to build a

relationship with the customer and increase customer satisfaction”. This indicates that the standalone service

of “old” Marel is less advanced than the process service of IC Poultry, and should therefore be positioned in

front of process-services. This is also supported by the “maintenance concept” (Appendix G) Marel decided to

implement globally, in which the management proposed that the maintenance provision should shift from

reactive maintenance, to proactive maintenance, to continuous improvements. In addition to the statement of

the corporate service advisor SSU’s, the director of customer service Marel Gardabaer, stated that: “besides

shifting to proactive services for standalone equipment, Marel also wants to become full-line supplier in the

future”. This supports the new division in service offerings and at the same time identifies a new underlying

dimension for the framework, namely required process knowledge. As the service offerings in Figure 6 shift

from standalone services to process services it implies that the required process knowledge increases the more

you shift to the right-end of the continuum.

To conclude this chapter, the cross case analysis revealed an important underlying factor, namely “type of

equipment”. To deal with this factor, a new service offering, service agreement for standalone products, is

added to theoretical framework in Figure 6. This adapted framework is based on three underlying dimensions:

namely the extent to which the supplier is in charge of the customer’s process; the relationship with the

customer; and the required process knowledge. These identified underlying dimension in combination with the

proposed framework in Figure 6, will be discussed with respondents from all three cases in a discussion

meeting and will yield a new service organization model for Marel. The outcome of this discussion meeting and

the resulting service organization model for Marel is discussed in the next chapter.

30

Main stages Basic installed base services

Service agreements for standalone products

Maintenance services for process equipment

Operational services



Reactive agreement

Proactive agree-ment

Low-end maintenan-ce contract

Medium maintenan-ce contract

High-end maintenance contract



Relative importance of tangible goods

Relative importance of services

Figure 6, Theoretical framework with new stages

31

5. Design of the new framework (service organization model)

5.1 Introduction The cross-case analysis described in the previous chapter proposed a revision of the horizontal dimensions of

the theoretical framework, depicted in Figure 6. In this revision separated service offerings, focused on

standalone equipment, are added to the framework and placed in front of service offerings focused on

complete processing lines. This new framework is based on three underlying dimensions: namely the extent to

which the supplier is in charge of the customer’s process; the relationship with the customer; and the required

process knowledge. This implies that by shifting to the right end of the continuum, the supplier becomes more

in charge of the customer’s processes; the relationship shifts from reactive, to proactive, to partnership; and

the required process knowledge increases. This new framework (Figure 6) and the underlying dimensions is

discussed in a discussion meeting with a respondent from each case, with the aim to obtain consensus on the

horizontal and vertical dimensions of the framework.

Basically this chapter describes the outcome of the discussing meeting and subsequently discusses the

horizontal and vertical dimensions of the resulting new service organization model for Marel. This chapter will

be concluded with a validation of the new service organization model.

5.2 Discussion meeting


The main unit of analysis is similar as discussed in the previous chapter, which is the entire Marel organization.

The subunits of analysis in this case are three influential respondents, representing each one of the three cases.

By selecting an influential respondent (a service manager) of each case and combining them in a shared

discussion session, rich information and feedback is obtained which ensures that the new model is applicable

across all the three cases. In addition the discussion meeting also helps to gain support and commitment from

all the three cases, which helps to accelerate the implementation process of the new model across Marel.

Besides three respondents from the cases also a marketing expert and a business consultant joined the

discussion meeting, in order to obtain input from other expertise fields. The attendees of the discussion

meeting are depicted in Table 15.

Table 15, Attendees discussion meeting

Attendees discussion meeting

Service manager IC Poultry Boxmeer representing Case I: IC Poultry

Service manager IC Further Processing Boxmeer representing Case II: IC FP

Service Manager Marel Oss representing Case III: “old” Marel

Marketing employee Marel

Senior business consultant service

Researcher discussion leader

5.2.2 Data analysis

The revised theoretical framework (Figure 6) together with the identified underlying dimensions of the new

model served as input for the discussion meeting. The meeting first focused on reaching consensus about the

horizontal dimensions of the framework, by discussion thoroughly the opinion of all the attendees. After

reaching consensus on the horizontal dimensions of the framework, the vertical dimensions to be implemented

into the new model were discussed. The discussion meeting resulted in recommendations for the horizontal

and vertical dimensions of the new framework, which are used as input for developing the new service

organization model of Marel.

5.2.3 Results discussion meeting

Horizontal dimensions

In general the attendees of the discussion meeting agreed on the proposed underlying dimensions and the

positioning of standalone services in front of services focused on processes (Figure 6) but still had some good

32

recommendations. Their first advice was to especially emphasize the underlying dimension of customer

interaction in the service offerings, and link it to the maintenance concept (Appendix G). Because Marel

decided to implement this maintenance concept globally and wants to shift their service approach from

reactive to proactive to continuous improvement, the attendees regard this as the leading underlying

dimension of the new framework.

The second advice concerned the incorporation of standalone services as a separate service offering. According

to the attendees of the discussion meeting, service offerings for standalone equipment should be divided

further into multiple service offerings. One reflecting reactive standalone service agreements, in which service

agreements are limited theoretically grounded and delivered reactively to the customer (current state within

case III: “old” Marel. One service offering reflecting “basic proactive service agreements” on standalone

equipment, in which the service agreement is theoretically grounded on the basis of identification of critical

parts (A-E coding) and the development of overhaul kits and preventive maintenance schedules. And finally

one service offering reflecting “premium proactive standalone service agreements” in which the performance

of a single standalone machine is guaranteed to the customer. At the same time this service offering is the end

point for entities purely offering standalone machinery to their customers. The attendees emphasize that this

end-point should be emphasized explicitly on the continuum, because otherwise entities merely focusing on

standalone machinery can never reach their end point on the continuum.

Finally the attendees of the discussion meeting recommended reconsidering the designation of the service

offerings on the framework, in order to make it more “customer friendly” and representative for the

corresponding service offering.

The recommendations for improvements of the theoretical framework, derived from the discussion meeting,

are summarized in the Table 16.

Vertical dimensions

In general the attendees of the discussion meeting agreed on most of the vertical dimensions, applied in the

initial theoretical framework (Appendix D), and recommended to divide these dimensions into three

categories: namely product; customer; and organization. The “product category” should describe the

characteristics, directly related to the service offering (the product), and the capabilities/ knowledge required

for offering this service product successfully. By means of this categorization the product category can be

applied to determine the position of a certain entity on the framework.

The “customer category” should describe the characteristics and customer profile of a customer of a certain

service offering. Basically it should describe how a customer of a certain service offering looks like. This

category can be used to determine the desired position on the framework of a certain entity.

Finally, the “organization category” should describe which organizational capabilities are required for delivering

a certain service offering successfully. Basically this category describes how the service organization should

look like, in order to be able to deliver a certain service offering to the customer. In combination with the

product category, this category can be applied to determine how a certain entity can shift from their current

position on the continuum to their desired position.

For making this categorization successful, the attendees of the discussion meeting advised to reflect each

vertical dimension on the initial theoretical framework (Appendix D) critical on usefulness and add new

dimensions when necessary. The recommendations on the vertical dimensions are added to the summarization

in Table 16.

Table 16, Recommendations on improvements of the theoretical framework

Recommendations for developing the service organization model

- Use maintenance concepts as most important underlying dimension of the model.

- Incorporate multiple standalone service offering: reactive; basic proactive; and premium proactive.

- Highlight end-point standalone service offerings with a separate scale on the service organization model.

- Reconsider designation of service offerings, to make it more “customer friendly” and representative for the offering.

- Categorize the vertical dimensions in a “product category”; a “customer category”; and an “organization category”.

- Reflect usefulness of each vertical dimension critically and add new dimensions when necessary.

33

5.3 New model Based on the findings of the case study and the discussion meeting, this paragraph described the new service

organization model, of which a general outline is displayed in Figure 7. For a detailed and complete version of

the service organization model, Appendix H can be consulted. This new framework is an extension of the initial

framework, derived from the literature review in Appendix D and incorporated the recommendations derived

from the discussion meeting and additional information from the literature. First, this paragraph describes the

horizontal dimensions of the service organization model, (i.e. the service offerings), followed by an explanation

of the vertical dimensions of the model.

5.3.1 Horizontal dimensions

The new categorization of the main and sub stages of the service organization model is displayed in Appendix

H. Major differences with the initial theoretical framework in Appendix D is the reshuffling in the main stages

and the incorporation of three new sub stages related to stand-alone service offerings. Besides to these

adaptations, the stages are renamed, and a new scale is added, which reflects the end-point for companies

merely focusing on standalone equipment.

Reactive services

The main stage “reactive services” contains service offerings which are purely reactive, implying that they are

only initiated by a customer call, mostly when a machine breakdown has occurred and thus is not scheduled.

This main stage is comparable to corrective maintenance in the maintenance concept of Marel (Appendix G).

“Pre-sale product services” is the same category as applied in the initial theoretical framework (Appendix D),

and contains services which are specifically relevant before the final purchase decision of the product and

include installation; demonstration; and user-training for new equipment.

“Ad-hoc services are similar to post-sale product services, applied in the initial theoretical framework

(Appendix D), and contain services in which there is no agreement with the customer in place. These services

are provided purely on customer request and consist of product support; spare parts; and product upgrades.

“Reactive standalone service agreement” is the first new category, and entails a service agreement on

standalone products, consisting of a number of predefined levels offered for a fixed price. As these agreements

are limited theoretically grounded, they merely can be offered reactively to the customer and are initiated by a

customer call when a breakdown has occurred. Within Marel this category typically entails Service Level

Agreements for A&B projects (Marel financial flows, 2012), offered by case III: “old” Marel.

Proactive agreements

Proactive agreements are characterized by service agreements which are theoretically grounded and aimed at

conducting maintenance preventively (scheduled), in order to prevent breakdowns; maintain machine and

process performance; and increase supply-chain efficiency by a better planability of spare parts and human

resources. This main stage is comparable to proactive maintenance in the maintenance concept of Marel

(Appendix G).

The first sub stage in proactive agreements is the “basic stand-alone service agreement” which is also a new

stage added to the initial theoretical framework (Appendix D) and can be defined as a proactive agreement on

Reactive services Proactive agreements Performance agreements

Product

Customer

Organization

Figure 7, General outline service organization model

34

standalone machinery, which can be customized according to customer needs. This service offering contains

overhaul kits based on A-E coding ; inspection visits on machine performance; preventive maintenance

schedules on the standalone machine; and the possibility to include maintenance and spare parts for a fixed

price. In this service offering no performance agreement on the standalone equipment is in place.

The “premium proactive standalone performance agreement” is the final stage for standalone equipment and

contains a performance agreement on standalone equipment. This agreement is offered for a fixed price and

includes: machine performance & response time guarantee; maintenance conducted by the supplier; all spares

parts; and the possibility to retain the ownership of the machine at the supplier and pay a certain fee per

machine output. For entities merely offering standalone equipment to their customers this is the end point on

the product-service continuum, as they do not offer complete processing lines. In order to make clear for

entities merely offering standalone equipment that this is the end-point on the continuum for them, a new

scale is added to the service organization model in Appendix H.

For entities offering complete processing lines to their customers, the continuum proceeds to a “process

inspection agreement”. This service offering follows to agreements on standalone equipment, as for offering

service to a complete processing line you first need to have thorough knowledge on the critical parts of each

single machine in a processing line before you can determine the interactions between all machines in a

processing line. The service offering “process inspection agreement” is similar to the “low-end maintenance

contract”, described in the initial framework (Appendix D), and contains an agreement on a planned number of

process performance inspections. Each inspection visit results in an inspection report with recommended

maintenance and spare parts, and is based on A-E coding and overhaul kits.

The sub stage “preventive process maintenance agreement” is similar to the medium maintenance contracts in

the initial theoretical framework, and consists of an agreement on preventive maintenance of processing lines.

This agreement entails a customer-specific preventive maintenance schedule (PMS), combined with a planned

number of inspection visits on PMS compliance, and the option to include maintenance and PMS spare parts

for a fixed price.

Process performance agreements

The main stage “process performance agreements” is characterized by agreements in which a certain

performance level of a complete processing line is guaranteed to the customer and offered for a fixed price. As

these service offerings are offered for a fixed price to the customer, it should be the aim of the supplier to

guarantee process performance for the minimal maintenance costs. This is comparable with continuous

improvement in the maintenance concept of Marel (Appendix G).

The sub stage “basic performance agreement” in the service organization model (Appendix H) is similar to the

high-end maintenance contract, applied in the initial theoretical framework (Appendix D), and is defined as a

process performance agreement on preventive maintenance of a processing line. This fixed price service

offering includes a process availability and uptime guaranty; conduction of preventive maintenance by the

supplier; and all spare parts (expect for breakdown and consumables). Daily/ operational maintenance is still

conducted by the customer in this agreement.

The “extended process performance agreement” is similar to the operational offerings, described in the initial

theoretical framework (Appendix D), and is characterized as a process performance agreement on the entire

maintenance of a processing line. This agreement is offered for a fixed price to the customer, and includes a

process availability and up-time guaranty; conduction of entire maintenance by the supplier (preventive &

operational); and all spare parts.

The final sub stage on the service organization model in Appendix H is the “premium process performance

agreement” which is similar to performance offerings described in the initial framework, and characterized by

an agreement in which the ownership and maintenance responsibility is at the supplier and offered for a

certain fee per output. To be more specific, in this agreement the supplier gives a performance and output

guaranty; conducts the entire maintenance (operational and preventive); provides all spare parts; retains the

ownership of the equipment, and offers this to the customer for a certain fee per process output. At this stage

the customer pays according to the level of usage and the offering becomes a running expense rather than and

investment, the supplier has become a “pure” service provider in this case.

35

5.3.2 Vertical dimensions

Major difference between the vertical dimensions in the new service organization model (Appendix H) and the

vertical dimensions in the initial theoretical framework (Appendix D), is the categorization in the categories

product; customer; and organization. Relevant dimensions from the initial framework are reshuffled in these

categories and supplemented by new relevant vertical dimensions.

Product

This category describes the characteristics directly related to the service offering and the capabilities/

knowledge required for offering each service product to the customer. This category can be applied for

assessing the relative position of a certain entity on the continuum, by means of comparing the dimensions

described in the framework (Appendix H) with the characteristics of the most extended service offerings of a

certain entity, and thus can help to answer research question two:

The dimension “content offering” is similar to the dimension applied in the initial theoretical framework

(Appendix H) and describes how each service offering is composed. On the advice of the attendees from the

discussion meeting, this dimension also describes how each service offering is theoretically grounded, and how

each service offering is specifically characterized within the Marel organization.

“Maintenance character” is a new dimension to the model, which is directly related to the maintenance

concept in Appendix G and is added on the advice of the attendees from the discussion meeting. This

dimension describes the maintenance character of each offering, and shifts from reactively, to proactively, to

continuous improvement.

“Knowledge level” is also a new dimension to the model and is based on one of the underlying dimension

identified in the cross-case analysis, namely “required level of process knowledge”. This dimension describes

the general knowledge level required for offering each service offering, this level increases the more you

proceed to right.

The dimension “customer and process data” is similar to the dimension applied in the initial theoretical

framework (Appendix D). Based on the previous dimension “knowledge level” this dimension describes

specifically what data on the customer and process is required to deliver each service offering to the customer.

Difference with the initial description in theoretical framework (Appendix D), is that in this description the

customer and process data are described more in general and are focused on the most important aspects.

“End responsibility of process performance and output” is a new dimension to the model and is based on one

of the underlying dimensions of the product-service continuum identified by Oliva & Kallenberg (2003), namely

the shift from “product-oriented services” to “user’s processes oriented services”. Implying that the more you

shift to the right to more the supplier becomes in charge of the customer’s processes. In the category

“performance agreement” in Appendix H the supplier has become completely responsible for the process

performance.

Directly related to the previous dimension is the dimension “percentage service revenue of total revenue”,

which is also new to the model. This dimension describes that as you shift to the right, the percentage of

service revenue increases and will eventually become 100% when the supplier retains the ownership of the

equipment for the “premium process performance agreement”.

Customer

The main category “customer” in the service organization model in Appendix H describes the characteristics

and the profile of a customer of a certain service offering. Basically it describes how a customer of a certain

service offering looks like. The dimensions within this category are mainly derived from the cross-case analysis

and the discussion meeting, and can be applied to determine the desired position on the framework of a

certain entity, and thus can help to answer research question three:




SSU’s?

36

The dimension “value proposition to the customer” is similar to the one applied in the initial framework

(Appendix D) and describes how each service offering delivers value to the customer.

“Degree of risk aversion of the customer” is a new dimension, which is derived from the discussion meeting

and an additional meeting with a marketing specialist at Marel. This dimension reflects that the more a

customer shifts to the right, the more risk-averse he becomes, and finally he wants to shift all risk to the

supplier by means of a guaranteed performance. This is supported by Windahl & Lakemond (2010), who

described that the more a customer shifts to the right-end of the continuum, the more dependent on the

supplier he becomes.

The “criticality of the supplier’s service for customer’s business / dependency on the supplier” is also a new

dimension to the service organization model. It describes that the more a customer shifts to the right on the

model, the more dependent on the supplier he becomes, as the responsibility of the process performance is

shifting from the customer to the supplier.

The dimension “customer-supplier relationship” is similar to the one applied in the initial framework and is one

of the underlying dimensions of the product-service continuum, identified by Oliva & Kallenberg (2003), namely

the shift in the nature of the customer interaction from transaction-based to relationship-based. This

dimension describes that as a customer moves to the right-end of the model, the relationship evolves from

reactive, to proactive, to finally a partnership. This evolution in relationship is supported by Johnson & Selnes

(2004) in their research.

“Price sensitivity of the customer” is a new dimension to the model and is directly related to the customer-

supplier relationship. When the relationship with the customer is reactive, the customer does not feel

connected to the customer and just wants to acquire service for the lowest price. In contradiction to the case

where the customer has a partnership with the supplier, in this case the customer is totally convinced of the

added value of the supplier, and weighs the added value of the supplier higher than the acquisition costs of the

service offering. The customer focuses on total cost of ownership in this case.

The “number of customers and Installed Base value per customer” is a new dimension to the model, identified

via the cross-case analysis. This dimension reflects that when proceeding to the right-end, the number of

customers decreases, while the installed base value per customer increases.

“Customer type” is similar to the dimension applied in the initial framework (Appendix D), and adapted on the

basis of the findings of the cross-case analysis and the discussion meeting. It describes the customer profiles

related to each service offering.

Organization

The final category in the vertical dimensions of the service organization model in Appendix H is the

organization. This category describes which organizational capabilities are required for delivering a certain

service offering successfully. The description is based on the five dimensions of the “Star” model of Galbraith

(2002), namely strategy; processes; structure; people; and rewards. In combination with the product category,

this category can be applied to determine how a certain entity can shift from their current position on the

continuum to their desired position, and thus answer research question four:

The strategy of the organization is reflected by the dimension “revenue model” which is a new to the initial

framework in Appendix D. This dimension describes what the strategy for generating revenue is at each stage

of the service organization model.

Processes of the organization are reflected by the dimension “criticality of spare parts availability / supply chain

reliability and IT automation level (Veger, 2008)”. The criticality of spare parts availability increases the more

the organization shifts to the right-end of the model, and becomes highly critical when the availability of a

complete processing line is guaranteed to the customer. Directly related to this is the IT automation level,

which should be highly automated and linked to the IT systems of the customer in the final two stages of the

service organization model in Appendix H.

The structure of the organization is characterized by the dimensions “service infrastructure” and “channel

responsible for service delivery”. The dimension service infrastructure applied in the initial theoretical



37

framework was based on the research of Kucza & Gebauer (2011), and is adapted on the basis of the findings of

the case-analysis. In the new model, the service infrastructure shifts from decentralized, to regional, to

centralized, to on customer-site. The dimension “channel responsible for service delivery”, reflects which

entities within Marel are responsible for the provision of a certain service offering to the customer.

The category people is reflected by the dimensions “knowledge/ skills” and “HR strategy/ Importance HR” in

the service organization model in Appendix H. These dimensions are created from the adaption of the

dimension “HR capabilities” in the initial framework (Appendix D) on the basis of findings from the case study.

When the supplier shifts to the right-end of the service organization model, the required knowledge and skills

of the employees increase. As the knowledge of the employees increases, the economic value of the

employees also increases, because they have obtained a large amount of customer-specific data, implying that

the more a supplier shifts to the right the higher the importance of human resources becomes.

The final dimension of the organization category in the service organization model is the “rewards” dimension.

This dimension describes how the service units and employees within each main stage on the service

organization model (Appendix H) should be rewarded, and shifts from rewarding on EBIT (Earnings before

interest and tax), to rewarding on generated revenue, to rewarding on contract performance.

5.4 Validation of the service organization model The validation of the newly developed service organization model in Appendix H is twofold, namely by

positioning the investigated three cases on the new model; and by introducing the service organization to all

the global service managers of Marel during the global service managers meeting.

5.4.1 Positioning of investigated cases on the service organization model

To validate the derived service organization model, all the three investigated cases will be positioned on the

new model on the basis of the within-case analysis, described in chapter three. As described, the premise of

the initial theoretical framework (Appendix D) was that the characteristics of the most extended service

offering should match with the organizational capabilities in place, this is also the premise for the new service

organizational model (Appendix H) to be correct. This implies that each case should score for the categories

“product” and “organization” in roughly the same column. The category “customer” does not have to match

with the other two categories, as this category indicates the desired position in the future and not the current

position. In addition for the model to be valid, it should also be able to position the three cases correctly with

respect to each other. In addition, for the service organization to be valid it should be able to answer the

research questions:

The answer to RQ 1 can be directly derived from the service organization model (Appendix H). However for

answering the other three research questions, each case should be positioned specifically on the model. The

positioning of the three investigated cases, on the basis of the case-analysis and the discussion meeting is

displayed in Appendix I and will be discussed below by answering research question two, three, and four for

each case specifically.

Case I: Industry Center Poultry Boxmeer

From the “product” category in Appendix I can be concluded that case I: IC Poultry is at the position of

“preventive process maintenance agreement”, on the basis of their most extended service offering. This is in





SSU’s?



RQ 2: What is the current position on the service organization model for Case I: IC Poultry?

38

line with the organizational capabilities in place, as the product and organization category score roughly in the

same column, which validates the positioning for case I.

From the scoring of IC Poultry in the “customer” category, assessed via the case-analysis and the discussion

meeting, can be concluded that the customers of the most extended service offering of Poultry are tending to

shift to demanding process performance agreements. Because for these most extended service offerings, IC

Poultry scores in Appendix I on the border between “preventive process maintenance agreement” and “basic

process performance agreement”, especially for the dimensions “customer type”; “price sensitivity”;

“dependency on the supplier”; and “degree of risk aversion”.

As described, the desired position of IC Poultry is at “basic process performance agreement”, to shift from the

current position “preventive process maintenance agreement” to this position, a number of steps has to be

undertaken. The main step is the development of their knowledge level up to a level in which they possess

complete knowledge on critical parts in the processing line (condition based monitoring & statistical process

control); complete knowledge on the total cost structure of the performance agreements; and complete

process knowledge on how to optimize the maintainability of the process and the related cost. Basically IC

Poultry should shift to conducting maintenance at the optimal moment, while increasing or maintaining uptime

and yield and minimizing cost of ownership. For the organization of case I: IC Poultry it means that they should

increase the knowledge of the employees, and aim to retain these people; increase the IT automation level to

institutionalized or networked; position Marel engineers on-site; increase the supply-chain efficiency; and

reward service units and employees on contract performance.

Case II: Industry Center Further Processing

Based on the positioning of IC FP in the product category in the table in Appendix I can be concluded that the

current position of IC FP for their most extended service offering is at “basic proactive standalone service

agreements”. This is also relatively good in line with the characteristics of the organization, except for the

service infrastructure, in which they are already at the level of “process inspection agreements”.

From the positioning in the customer category in Appendix I can be determined that the customers of the most

extended service offering of Case II: IC FP start demanding process inspection agreements, which makes this

the desired position for IC FP.

In order to shift to “process inspection agreements”, IC FP should undertake a number of steps. The main step

with respect to the service product is that they should identify the critical components in all their equipment,

and code them according to the A-E coding method. Subsequently they should develop overhaul kits and

preventive maintenance schedules (PMS). When all equipment is coded and overhaul kits and PMSes are

developed, knowledge on interactions between machines in a processing line can be developed, accompanied

with PMSes for processing lines. With respect to the organization, IC FP is already centralized and should

increase the knowledge level of their engineers, and their IT automation level.

Case III: “Old” Marel

From the positioning in the product category in Appendix I can be derived that the current position of “old”

Marel is at “reactive standalone agreements”, as the case-analysis revealed that their service offerings are

limited theoretically supported and still have a reactive/ break-fix focus.

RQ 3: What is the desired position on the service organization model for Case I: IC Poultry?

RQ 4: How should Case I: IC Poultry make the transition to its desired position?

RQ 2: What is the current position on the service organization model for Case II: IC Further Processing?

RQ 3: What is the desired position on the service organization model for Case II: IC Further Processing?

RQ 4: How should Case II: IC Further Processing make the transition to its desired position?

RQ 2: What is the current position on the service organization model for Case III: “Old” Marel?

39

From the dimensions “degree of risk aversion”; “dependency on the supplier”; “price sensitivity”; and

“customer type” in the customer category can be determined that the desired position of Case III: “old” Marel

is at proactive standalone service agreements. As their customers demand for a proactive service approach in

which their equipment is serviced preventively instead of reactively.

To shift to proactive standalone service agreements, “old” Marel should build a theoretical foundation to their

service agreements, by identifying critical parts of their equipment on the basis of A-E coding. Based on this

coding they should develop overhaul kits and preventive maintenance schedules. Regarding the organization,

the shift to proactive standalone service agreements, implies that they should increase the knowledge of their

employees; start integrating their IT systems; shift to a regional service structure; and reward service units and

employees on the basis of generated revenue instead of on EBIT.

Conclusion on validation by positioning of cases on the service organization model

The first premise for validation of the model is that the position of the most extended service offering should

match with the organizational capabilities in place. Reflecting the three cases on this premise, can be

concluded that the model holds for this premise, because in all three cases the characteristics of the product

match with these of the organization in Appendix I. This is supported by the goodness-of-fit measure of the

service organization model, which increased from 0.133 to 0.81. For the cases specifically the goodness-of-fit

increased to 0.86; 0.57; and 1 for respectively case I; II; and III. For case II the goodness-of-fit is still moderate,

as case II contains both properties of a provider of standalone equipment and of processing lines. For

calculating this measure only the category “product” and “organization” were taken into account, because the

“customer” category reflects a future position which does not have to be in line with the characteristics of the

product and organization.

The second premise is that the cases should be positioned correctly with respect to each other, on the basis of

the organizational capabilities in place. From Appendix I can be concluded that this premise also holds, because

the case with the least advanced organizational capabilities, “old” Marel, scores most to the left; the case with

the most advanced organizational capabilities, IC Poultry, scores the most to the right; and the case in

between, IC FP, is also positioned in between both cases.

Third premise for validating the service organization model is that it should be able to answer the research

questions. As reflected above, the model turned out to be able to answer the research questions for all three

cases.

As described, the three premises of the service organization model hold, which validates the service

organization model in Appendix H for these premises.

5.4.2 Introduction of the Service Organization Model at the Global Service Managers Meeting

The central management of Marel expressed their confidence in the service organization model and decided to

implement the model globally across the service organization of Marel and to create awareness during the

global service managers meeting. At this meeting, service managers from the entire Marel organization were

present with the aim to develop strategies to enhance their service provision. During this meeting the service

organization model was presented to the service managers. The assignment for the service managers was to

implement this model at their own service entities, by means of positioning their entity on the model and using

it to develop a strategy for continuous future service development.

The confidence of the general management in the model and their decision to implement the service

organization model globally emphasizes the practically applicability of the model and validates the model for

usage within the entire organization.

RQ 3: What is the desired position on the service organization model for Case III: “Old” Marel??

RQ 4: How should Case III: “old” Marel make the transition to its desired position?

40

6. Conclusions and reflection This master thesis studied the implications of servitization for the service organization of an original equipment

manufacturer, in this study Marel. The research started by introducing the topic, the business context and the

research problem. On the basis of this problem statement, a literature review was conducted with the aim to

explore the stages on the product-service continuum with the required organizational capabilities. This

literature review resulted in a theoretical framework that describes the different stages in service offerings,

with the required organizational capabilities for each stage. To test this framework on practicable applicability,

the model was tested in single-embedded case study at Marel. In a within-case analysis in-depth knowledge

about three different cases within Marel was acquired, which resulted in a positioning of the three cases on the

theoretical framework derived from the literature review. To test whether this theoretical framework was

applicable across all cases and able to position the three cases correctly with respect to each other, a cross-

case analysis was conducted. Via this cross-case analysis it turned out to be that the model did not

incorporated the influence of the type of equipment and merely focused on process equipment. To incorporate

the influence of standalone equipment, the theoretical framework was adapted into a Marel-specific service

organization model, on the basis of the findings of the cross-case analysis and a discussion meeting with

respondents from all the three cases. On the basis of this new service organization model, this chapter answers

the research questions; reflects to what extent this thesis solves the business problem; describes the

contribution of this thesis for the academic literature; describes the limitations of the study; and concludes

with recommendations for future research.

6.1 Answering the research questions As described in the assignment, the main objective of this descriptive study is to develop a Marel-specific

“service organization model” which enables Marel to identify and decrease the differences between the

relative positions on the product-service continuum of the different IC’s; PC’s; and SSU’s, by means of

answering the research questions. The answer to these questions will be provided in this paragraph.

The service organization model displayed in Appendix H is an extension of the product-service continuum of

Oliva and Kallenberg (2003), and consists of three main stages, which can be composed in ten sub stages. The

main stages consist of: reactive services; proactive agreements; and process performance agreements.

“Reactive services” are service offerings which are purely reactive and only initiated by a customer call and thus

not scheduled. This main stage is divided into: pre-sale product services, which are directly related to a new

product sale; ad-hoc services, which are purely provided on customer request and in which no agreement with

the customer is in place; and reactive standalone service agreements, which are service agreements on

standalone equipment which are limited theoretically grounded.

The next main stage, “proactive agreements”, is characterized by service agreements which are theoretically

grounded and aimed at conducting maintenance preventively (scheduled). This stage can be divided into

agreements for standalone products and for processing equipment. The proactive agreements for standalone

products consist of a “basic proactive standalone agreement”, in which maintenance is conducted preventively

on the basis of preventive maintenance schedules, but with no performance guaranty; and a “premium

standalone performance agreement”, in which maintenance is conducted preventively and performance is

guaranteed for a fixed price. Within this standalone performance agreement it is possible to retain the

ownership of the equipment at the supplier. This is also the end-point for entities merely focusing on

standalone products and is indicated with the first triangle in the service organization model (Appendix H). For

entities also offering complete processing lines to their customers, the proactive agreements in the service

organization model proceed to proactive agreements for processing lines. These service offerings follow to the

agreements on standalone equipment, as for offering service to a complete processing line you first need to

have thorough knowledge on the critical parts of each single machine in a processing line, before you can

determine the interactions between all machines in a processing line. The first proactive process agreement is

the “process inspection agreement”, which is an agreement on a planned number of process performance


41

inspections. The other proactive process agreement is the “preventive process maintenance agreement” which

is an agreement on preventive maintenance of a complete processing line, based on preventive maintenance

schedules.

The final main stage on the service organization model in Appendix H is the “process performance agreement”,

which is characterized by agreements in which a certain performance level of a complete processing line is

guaranteed to the customer and offered for a fixed price. This main stage can be divided into: “basic process

performance agreements”, in which the preventive maintenance is conducted by the supplier, with a

guaranteed process performance; “extended process performance agreements”, in which the entire

maintenance is conducted by the supplier, with a guaranteed process performance; and “premium process

performance agreements”, which is an agreement in which the ownership of the equipment and the

maintenance responsibilities are at the supplier and offered for a certain fee per process output to the

customer. The premium process performance agreement, represent the end-point on the service organization

model (Appendix H).

The determination of the current position on the service organization model (Appendix H) is based on the

characteristics of the most extended service offering an IC; PC; or SSU is delivering to their customers. This is

because the current position should reflect the capabilities a certain entity has in place for delivering service to

their customer. The most advanced service offering of an entity reflects the most extended service an entity

can deliver to their customer on the basis of their capabilities in place. To be concrete, to position each IC; PC;

and SSU on the service organization model (Appendix H), their most extended service offering should be taken

into account and compared with the characteristics described in the “product” category of the service

organization model (Appendix H), especially the dimension “content offering”. The product characteristics in

Appendix H, that match with the characteristics of the most extended service offering of a certain entity,

determine the current position on the model of that entity.

Because it was not possible within the time span of this thesis project to position each different IC; PC; and SSU

on the model, the positioning is only conducted and validated for the investigated cases and is described in

paragraph 5.4. This positioning for the different cases serves as an illustration for the service managers of the

different entities on how they can position their organization on the service organization model themselves.

This is supported by the introduction at the global service managers meeting, in which the service organization

model is introduced and applied by the different service managers. This should enable each IC; PC; and SSU to

position themselves on the service organization model.

By means of comparing the characteristics of their customers with the characteristics described in the

“customer” category in the service organization model (Appendix H), each IC; PC; and SSU can determine their

desired position on the model. This desired position is not fixed for each entity and can differ between market

and product-groups, because customer demands can differ between markets, which also require a different

service approach. In practice, for IC’s; PC’s; and SSU’s this means that they should determine the different

customer-demands that exist within their market, and adapt their service offerings to these demands, in order

to satisfy all customer demands. If the current position is lacking behind the desired position on the service

organization model, this means that an entity should expand their capabilities. As an illustration on how to

determine the desired position, the desired position for the three investigated cases is determined in

paragraph 5.4.

When an IC; PC; or SSU has determined their current and desired position on the service organization model

(Appendix H), they are able to develop an implementation plan for reaching this desired position via the same

model, by means of the categories “product” and “organization”. In practice this means that each entity




SSU’s?



42

compares their current capabilities with the capabilities required for their desired position on the service

organization model in Appendix H. Subsequently, the “product” category in the model describes which

knowledge each entity should develop, and which customer and process data it should acquire. In addition, the

“organization” category describes how the organizational capabilities of each entity should look like for

successfully reaching the desired position on the service organization model. So basically the service

organization model describes guidelines on how to shift to a desired position on the model, by means of

knowledge and organizational capabilities to be developed. Paragraph 5.4 serves as an illustration to this, and

describes how each investigated case could shift from their current to their desired position.

6.2 Managerial contribution As mentioned, the current organization of Marel originated from a number of acquisitions, from which the

acquisition of Stork PMT and Townsend Further Processing was the most recent and largest one. Due to this

heritage, the service approach of the entities within Marel (IC’s; PC’s; and SSU’s) differs significantly; this is also

revealed in the case analysis, in which IC Poultry turned out to have a strong proactive and preventive service

approach while “Old” Marel turned out to have a reactive service approach. These differences in service

approach limit Marel to create one-face of the service organization to the customer. Since Marel stated in

their service strategy that they want to transform from a product-oriented in customer-oriented service

organization, the different service approaches within Marel should be limited to one global service approach to

the customer. In addition, to transform into a customer-oriented service organization the shift into services

should be made, implying that all entities should shift to the right on the product-service continuum. In this

context the developed service organization model (Appendix H) is a useful management tool for helping Marel

to transform from a product-oriented into a customer-oriented service organization. By implementing this

model globally, one universal template for the range of services within Marel is created. Subsequently

positioning all the entities on this service organization model provides Marel insight in the current status of

their service provision. Based on this current status, the service organization model can be applied to create a

benchmark for future service provision of the entire Marel organization. At the local level, each entity within

Marel can apply the model to develop their own strategy and plan for reaching their desired position on the

service organization model in the future. As all entities within Marel apply the same service organization model

for developing their service provision, one global approach to services will be created, which helps Marel to

transform from a product-oriented into a customer-oriented service organization.

In general the created service organization model serves as a strategic management tool for creating one

global service organization and transform from a product-oriented into a customer-oriented service

organization. Once global awareness is created for the service organization model, the application of the model

follows an iterative cycle (Figure 8), which can be applied on both local and central management level, and

leads to continuous service improvement. This cycle starts with the determination of the current position on

the service organization model, followed by the determination of the desired position on this model, based on

the demands in the market and the current capabilities in place. Once a current and desired position is

determined, a plan or strategy for service improvement should be developed and conducted. The conduction

of the improvement plan should be followed by a check on whether the current position on the service

organization model has improved. At this point the iterative cycle starts over again, leading to continuous

improvement of services and the creation of one global service organization with one-face to the customer.

Determine

current position

Determine desired future position

(based on market demands and

current capabilities)

Develop strategy /

plan for service

improvement

Conduct strategy

/ plan

Figure 8, Cycle for application service organization model

43

6.3 Academic contribution Within the industrial marketing management literature numerous attention has been paid to investigating the

extreme points on the product-service continuum; especially the “pure” service offerings have received much

attention (Galbraith, 2001; Davies, Brady, & Hobday, 2007; Baines et al, 2007; Windahl & Lakemond, 2010).

However, the evolvement from a product offering into a “pure” service offering has received much less

attention (Evanshitsky, Wangenheim & Woisetschläger, 2011). Oliva and Kallenberg (2003) and Gebauer (2008)

made a start in describing the evolution into services, but remain superficial by roughly describing the stages in

the transition process from a product provider into a service provider. As most companies in the capital goods

industry are in the starting phase of servitizing their businesses, the extant academic literature is of little

practical relevance for businesses, as it lacked to describe explicitly what precise service offerings exist in

between pure goods and pure services and what capabilities are required for offering each service offering to

the customer. This thesis project bridged the gap between the theoretical conceptualization and the practical

relevance for businesses, by means of the designed service organization model (Appendix H). The academic

contribution of this thesis project is as follows:

First, the service organization model provided thorough understanding in the different stages in between pure

goods and pure services, by extending the product-service continuum of Oliva and Kallenberg (2003) into more

detailed and specific service offerings, which enhances the exact positioning of companies on this model.

Second, the service organization model contributes to the academic literature by making a differentiation

between service offerings focused on standalone equipment and service offerings focused on processing

equipment, whereas the extant literature merely focused on service offerings for processing equipment (Oliva

& Kallenberg, 2003;, and Gebauer (2008). This study revealed that the transition process in services evolves

from servicing standalone equipment into servicing processing equipment.

Third, the service organization model contributes to the literature by linking the different service offerings to a

specific customer and organization profile. While extant research merely focused on describing one of the

three facets. The model provided insight in which service offerings are suitable for a certain customer type and

describes which organizational capabilities are required for a certain offering.

6.4 Limitations & recommendations for future research One major limitation of this study and the service organization model is that it is only applied in the business

context of Marel, and thus can only be generalized for the entire Marel organization and not for all Original

Equipment Manufacturers (OEMers). In order to test whether the service organization model is also applicable

for other OEMers and generalizable for all manufacturers of capital goods, the model should be tested in a

variety of new cases, representing the capital goods industry.

The second limitation is that this study is of a cross-sectional character and reflected cases at different stages

on the product-service continuum in order to describe the transition process from a product manufacturer to a

service provider. However, this does not confirm whether the transition to a service provider really occurs

along the scale of the proposed service organization model. The conduction of a longitudinal case study is

preferable to investigate for a number of cases whether the transition process really occurs via the service

organization model.

Thirdly, another limitation of this study is its focus from a supplier perspective. A more thorough study of

Marel’s customers and how they perceive different types of service offerings could possibly provide further

insights into the evolvement of service offerings along the service organization model (Appendix H). In addition,

such a study could confirm and extend the interdependencies between the different service offerings and

customer profiles.

Fourthly, more research is needed on how an organization should deal with offering the complete range of

services on the service organization model, as currently the model merely describes how the service

infrastructure should look like for each specific service offering and not specifically for the entire organization.

The separated and geocentric global service approach of Kucza and Gebauer (2011) could serve as a possible

organization structure for servicing the entire range of service offerings on the service organization model. This

approach shows similarities with the IC and SSU structure within Marel, and needs further research on

applicability within Marel, in order to optimize the global service infrastructure and supply chain.

44

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47

Appendices

Appendix A: List of tables and figures Figure 1, Product-Service continuum (Oliva & Kallenberg, 2003) ........................................................................... 2

Figure 2, Linkages between IC’s, PC’s, SSU’s and customers (Marel’s financial flow principles, 2012) .................. 2

Figure 3, Representation of Marel’s operating companies around the globe ........................................................ 3

Figure 4, Distinction between “systems seller” and “systems integrator” visualized (Davies, Brady & Hobday,

2007) ..................................................................................................................................................................... 11

Figure 5, General outline of theoretical framework ............................................................................................. 16

Figure 6, Theoretical framework with new stages ................................................................................................ 30

Figure 7, General outline service organization model .......................................................................................... 33

Figure 8, Cycle for application service organization model .................................................................................. 42

Figure 9, Implementation of service coding into the maintenance concept ........................................................ 59

Table 1, The installed base service space (Oliva & Kallenberg, 2003)..................................................................... 6

Table 2, Division of “basic installed base services” ................................................................................................. 7

Table 3, Division of “maintenance services” ........................................................................................................... 9

Table 4, Division of “Operational services” ........................................................................................................... 11

Table 5, Required data per performance measure category ................................................................................ 13

Table 6, Case selection .......................................................................................................................................... 17

Table 7, Data sources of Case I: IC Poultry ............................................................................................................ 19

Table 8, Service offerings within Case I: Industry Center Poultry ......................................................................... 19

Table 9, Data sources of case II: Industry center Further Processing ................................................................... 21

Table 10, Service offerings within case II: IC Further Processing .......................................................................... 21

Table 11, Data sources of case III: “Old” Marel..................................................................................................... 22

Table 12, Service offerings within Case III: “old” Marel ........................................................................................ 23

Table 13, Positioning of cases on the continuum ................................................................................................. 24

Table 14, Cross-case comparison .......................................................................................................................... 28

Table 15, Attendees discussion meeting ............................................................................................................... 31

Table 16, Recommendations on improvements of the theoretical framework ................................................... 32

Table 17, Service parts coding .............................................................................................................................. 58

Table 18, Service infrastructure of Case I: IC Poultry ............................................................................................ 61

Table 19, Available customer process data at IC Poultry Boxmeer....................................................................... 62

Table 20, Organizational functions IC Further Processing .................................................................................... 64

Table 21, Available customer process data of IC Further Processing Boxmeer .................................................... 65

Table 22, Organizational function “old” Marel companies ................................................................................... 67

Table 23, Available customer process data within the “old” Marel companies ................................................... 68

48

Appendix B: Structure of Marel

Des Moines

Oss

Seattle

Nørresundby

Baud

Management board

Sigstein Gretarsson Theo Hoen Erik Kaman

COO CEO CFO

Industry Centers (IC)

Profit Centers

Product Centers (PC)

Profit Centers

Manufacturing Centers (MC) & production unit

Cost Centers

IC Poultry

A. de Weerd

IC Further Processing B. Hardenbol

IC Meat

D. Wilson

IC Fish Gunnarsson

Boxmeer

Gardabaer

Aarhus & Bornholm

Gainesville

Iceland (Gardabaer) - Innova - Inspection - Grading - Key tech

UK - High speed slicing (Norwich) - End of line (Colchester)

Singapore - Freezing

Slovakia (Nitra, PU) - Conveyor belts

Netherlands - Overhead transportation (Boxmeer) - Meat harvesting (Oss)

USA (Des Moines) - Skinning

Sales and Service Units (SSU) Revenue Centers - Australia & New Zealand - Benelux - Japan - Brazil - China - Columbia - Slovakia - Chile - Denmark - Germany - France - Iceland - Italy - Mexico - Norway - Poland - Romania - South Africa - Russia - The Philippines - Uruguay - Spain & Portugal - Thailand & Vietnam - United Kingdom & Ireland - United States & Canada

Support Centers (SC)

Cost Centers

Finance

IT

HRM

Legal support

Procure-ment

Denmark (Aarhus & Bornholm) - Innova - Multibatching - Portioning

49

Appendix C: Literature assessment

Reference 1 2 3 4 5 Number of

citations

Impact factor

(SNIP)

Anderson, E.W., Fornell, C. and Rust, R.T. (1997) ** ** * 250 2.146

Baines, T.S., Lightfoot, H.W., Benedettini, O. and Kay, J.M. (2009) ** * ** ** 18 1.116

Baines, T.S., Lightfoot, H.W et al. (2007) *** * * * 118 1.238

Brax, S. (2005) * *** ** 47 1.648

Davies, A. (2004) * * *** 100 1.916

Davies, A., Brady, T., Hobday, M. (2007) ** *** * 55 2.367

Doerr, K., Lewis, I. and Eaton, D.R. (2005) **

Evanschitzky, H., Wangenheim, F. and Woisetschläger, D.M. (2011) * * * * 7 2.367

Fortuin, L. (1988) *** 47 3.772

Frambach, R.T., Wels-Lips, I. and Gundlach, A. (1997) ** * *** 40 2.367

Gebauer, H. (2008) *** ** ** ** 37 2.367

Gebauer, H. Fleisch, E. and Friedli, T. (2005) * *** ** 62 2.180

Goedkoop, M., van Halen, C., Te Riele, H. and Rommens, P. (1999) **

Goffin, K. and New, C. (2001) ** * 33 2.548

Guiltinan, J.P. (1987) ** 5.869

Heskett, J.L., Sasser, W.E. and Schlesinger, L.A. (1997) * * *

Kowalkowski, C., Kindström, D. and Brehmer, P. (2011) *** * ** ** 2 1.440

Kucza, G. and Gebauer, H. (2011) * ** *** ** 0 1.440

Kumar, R. and Kumar, U. (2004) * ** * 21 1.440

Kutucuoglu, K.Y. Hamali, J. Irani, Z. Shart, J.M. (2001) *** 46 2.548

Lohman, C., Fortuin, L. and Wouters, M. (2004) *** 92 3.772

50

Mattson, L.G. (1973) * ** 34 2.367

Oliva, R. and Kallenberg, R. (2003) *** * *** *** 234 2.154

Samli, A.C., Jacobs, L.W. and Wills, J. (1992) ** * 19 2.367

Stahel, W. (1998) ** * * *

Stremersch, S., Wuyts, S. and Frambach, R.T. (2001) ** * ** * 50 2.367

Vandermerwe, S. and Rada, J. (1988) ** * * * 111 2.180

Van Stratum, M.E.L. (2006) * ***

Windahl, C. (2007) *** ** *

Windahl, C. and Lakemond, N. (2010) *** ** ** 7 2.367

Notes: Key themes: 1 = Service offerings and general characteristics

2 = Market and customer environment

3 = Organizational structures, transformations, and capabilities

4 = Service strategies

5 = Performance measurement

Coding key themes: *** =” focus on”; ** = “detailed discussion of”; * = “refers to”

51

Appendix D: Theoretical framework

Main stages Basic installed base services Maintenance services (contracts) Operational services






Operational offerings Performance offerings / integrated solutions

Characteristics

Content offering - Financing option - Demonstration - User-training - Installation - Use on trial Services are standardized and pre-defined

- Maintenance & repair

- Spare parts - Product upgrade - Online support /

help desk Services are standardized and pre-defined

- Equipment inspection

- Functionality testing

- Safety-function testing

- Inspection report with recommendations

Highly standardized

- Preventive maintenance advise & inspection

- Included spare-parts

- Emergency breakdown response

- Access to help-desk

Bundled into customized packages according to customer needs

Performance maintenance contract: - Guaranteeing a

certain system availability for a fixed price.

- Daily maintenance conducted by customer.

- Preventive maintenance completely outsourced to manufacturer.

Take over end-user’s operations and related maintenance: - Certain process

output is guaranteed to the customer.

- Entire maintenance and operations is outsourced to the manufacturer

Take over end-user’s operations, related maintenance, and ownership of the processing equipment: - Certain process

output for a certain price is guaranteed to customer.

- Equipment is owned and operated by manufacturer.

Delivery of service Before and on moment of delivery, negotiated in product-sale

On customer request At fixed moment per time unit.

At specified moments per time unit or in case of system failure.

Continuously when necessary

Continuously Continuously

Value to user (value proposition)

Reduction of perceived risk of adopting product

Quick delivery of spare parts and services

Provision of insight in the systems performance and recommendations of system improvement

Provision of preventive maintenance advise and inspection on this to prevent breakdowns

Prevents product- failures and guarantees a certain system-availability and response time in case of failure

Reduces operating risks and enables customer to focus on core-business

Reduces customer’s capital employed and relating risks and enables customer to focus on core-business

Customer-supplier relationship

Transaction –based focused on the product

Reactive Proactive approach to extend service business

Moderate extensive Extensive, one or two persons stationed permanent on site

Partnership, service engineers become part of the organization

Partnership, service provider becomes operator

Pricing to the customer

Pay per option, negotiated in product-sale

Pay per usage Fixed price for fixed inspection moments per time unit

Fixed price for fixed nr. of preventive maintenance actions,

Fixed price, guaran-teeing a certain system availability per time-

Pay for process performance

Pay per process output

Relative

importance of

tangible goods

Relative

importance

of services

52

included spares per time unit.

unit, including all preventive maintenance +spares

Division of physical ownership

At customer At customer At customer At customer At customer At customer At supplier

Service (Level) Agreement (SLA)

none none Offering a certain amount of system performance checks per time unit.

Offering a certain amount of preventive maintenance checks, including spare parts.

Guaranteeing a certain system availability per time unit

Guaranteeing a certain process output per time unit

Guaranteeing a certain process output per time-unit for a specified price

Customer type Customers that want to decrease the perceived risk of adopting a product or system.

Customer who do not see the added value of a maintenance contract, or are not willing to pay for a certain contract.

Customers who have their own daily maintenance, but want to ensure system is still running properly

Customers who have their own daily maintenance, and want to sustain their system performance.

Customers who don’t have own maintenance, and want to decrease operational risk, and want to have a guaranteed system performance in a low competitive market

Customers focusing on core-business, risk averse in highly competitive market

Customer focusing on core-business, risk averse in highly competitive market and want to reduce capital employed. More attractive in times of recession.

Minimal required organizational capabilities

Customer /process data

- Order / product specifications - Data on how to operate the system

- Machines delivered to the customer - Parts in the machine - Costs of required spares, maintenance

- Contract conditions - Machines delivered to the customer - Parts in the machine - Critical parts in machine - Costs of providing inspection visits and related maintenance - Maintenance history of machine

- Contract conditions - Machines delivered to the customer - Parts in the machine - Critical parts in machine - Maintenance history of machine - Costs of providing preventive maintenance - Costs of expected failure parts

- Contract conditions - Machines in process (also competitors) - Parts per machine - Maintenance history per part in system - Failure probability per part in system - Critical parts per machine - Failure modes and related criticality - Status critical parts (CBM) - Consequences of failure (operational and financial) - Unambiguous performance measures - Process time registrations - Cost structure per part - Cost of intervention - Cost – benefit



53

preventive maintenance


preventive maintenance - Total cost price of operating system per chicken

IT automation level Siloed No integration between domain specific application systems

Applied Start of integration of business critical processes.

Integrated within IT and integration of systems are formalized in company policies

Institutionalized within the entire organization and has become a standard

Networked Company application systems are integrated with customer’s systems

HR capabilities Required organizational functions to be performed locally

- Sales (stationed locally) - 1

st & 2

nd level service delivery

- Sales (stationed locally) - 1

st, 2

nd & 3

rd level service delivery

- Sales (stationed locally)

- 1st

level service delivery (on customer site)

- 2nd

level (locally) - 3

rd level service

delivery - Controlling - HRM


- 1st


- 2nd

level (locally) - 3

rd level service

delivery - Controlling - Development - HRM


- 1st


- 2nd

level (locally) - 3

rd level service

delivery - Controlling - Development - HRM - Pricing

Service infrastructure Required local and global service infrastructure

Integrated and ethnocentric service structure:

- Central provision of services - Sales offices or agents located locally to sell

products

Integrated and polycentric service structure: Central organization

- Provide 3rd

level service delivery support - Central warehouse and spare parts logistics

Local subsidiaries - Sell products and services - Provide 1

st and 2

nd level service to the

customer - Stock and deliver spare parts to the

customer, provided by the central organization.

Separated and polycentric service structure: Central organization: - Service unit has own profit-and-loss responsibility - 3

rd level service

delivery support - Central warehouse and spare parts logistics Local subsidiaries: - Local warehouse - Provide 1

st and 2

nd

service delivery support to customer

Separated and geocentric service structure: Central organization: - Service unit has own profit-and-loss responsibility - Central warehouse - 3

rd level service delivery support

Regional organization: - Located regional at strategic positions - Regional warehouse with spare parts logistics, providing spares to customers and local subsidiaries. - Facilitate information flows between central and local organization. -2

nd level service delivery support.

Local subsidiaries: - Only maintained in large markets or at large customers. - Stock emergency parts - Provide 1

st level service delivery support

54

Appendix E: Interview guideline Name respondent:

Function:

Department:

Legal entity:

Country:

Determination current and desired position on the product-service continuum

1. Could you describe the range of services you currently offer to your customers?

2. Do you offer service contracts or service agreements to your customers? And how do you define

them? (offering a specified number of services per time-unit for a specified price)

No question 3

Yes question 5

3. What kinds of services are offered in this case? Are they pre-sale or post-sale related?

Pre-sale product services (financing, demonstration, user training)

Post-sale product services (maintenance, repair, spares, helpdesk)

4. Do you include services in the product-sale? And could you describe how these services look like?

5. How are these services priced to the customer? (Are they priced per usage, or are they priced for a

fixed price for a specified number of services?) control question

Pay per usage correct

Fixed price for a specified nr of services per time unit question 5

6. Could you describe the content of the contracts you offer to the customer?

7. Do you guarantee a certain system-uptime or system availability in the contracts with your customers,

and are you sued or fined for not achieving these performance guarantees?

No Can you describe the services you offer in this case?

Inspection visits (fixed price for specified for specified nr of visits) low-end maintenance contract

Preventive maintenance, corrective maintenance, included spares (fixed price for fixed nr of

preventive maintenance action + specified nr of spares) medium maintenance contract

Yes question 8

8. How are these services priced? (Are they priced per usage, or are they priced for a fixed price for a

specified number of services?) control question

Pay per usage question 3

Fixed price for a specified nr of services per time unit correct

9. Do you also take over end-user’s maintenance and operations?

Partly (only preventive maintenance) high-end maintenance contract

55

Entirely question 9

10. Who has the ownership of the processing equipment?

Customer Operational offering

Supplier Performance offering

11. How are the service contracts, for which a certain system up-time or availability is guaranteed to the

customer, priced to the customer?

12. Do you also offer services without any contract or agreement? question 3

13. Could you specify the number of customers per service offering and the division of service revenue per

offering. (in numbers or percentages) (proof?)

14. What is the total size of your market/ cluster, in service revenue? And service revenue/ per IB value in

market.

15. How do you describe the relationship with your customers? Is there a difference within the different

offerings?

16. What do you think that the desired position on the continuum will be for your organization within 2, 5,

and 10 years? And why? (What do customers expect from you, within a certain time span?)

Determination reachable position on the continuum (on the basis of the organizational capabilities

in place)

1. Could you describe how the local and global service infrastructure of your cluster look like?

a. Are there local subsidiaries/ offices in place? And what is their function?

b. Are services provided locally? What level of service support 1st

level (basic service), 2nd

level (preventive maintenance), and 3rd level (full maintenance).

c. Are spares stocked locally?

d. Are there also regional (continental) service hubs in place? And what is their function?

(Warehousing, service provision, training).

e. Operates the service organization as a separated service unit, with its own profit and loss

responsibility?

Organizational functions Central Regional Local

Service provision

- 1st

level (basic)

- 2nd

level (preventive main)

- 3rd

level (operational support)

Warehouse function

Sales

- Products

- Services

Own profit-and-loss responsibility

2. What is the role of your organization in the global service structure? (IC, PC, SSU, or agent?)

3. What kind of Human Resource capabilities (functions), related to services, does your organization has

in place? And which of these HR capabilities are locally in place?

a. Which departments are in place?

56

b. Of which functions does each department consist?

c. How many employees are employed per function?

Departments Functions Number of employees

Sales

Product salesman

Service salesman

Service provision (field engineers)

Assistant engineer (little experience, low skilled service provision)

Service engineer (skilled in overhaul, installation and standard maintenance)

Senior service engineer (high experience in overhaul, installation and specific maintenance)

Specialist (high experience in managing installation projects and optimizing customer’s processes.

Controlling

Field engineer planning

Service manager/ coordinator

Spare part manager/coordinator

Structural service support

Coach (responsible for structural support activities)

Business consultant (in depth knowledge of production and service challenges within the sector)

Structural support employee (concerned with specific projects related to service support)

Human resource management

Recruitment (responsible for recruiting new employees)

Administration (administration of working hours of employees)

Training (training of new engineers and employees)

4. What kind of customer and process data is available and how is this data registered, obtained, and

updated?

a. What installed base data do you have?

b. What performance data do you have for the machines and processes at the customer?

c. What cost performance data do you have?

d. What measures do you have on process performance (time registrations)?

IB data Equipment performance data

Cost performance data Process performance data (time registration)

Machines at customer Critical parts per machine (coded in A-E coding)

Costs structure spares (cost price & margin) (coded in price categories?)

Visit diagnose & maintenance time

Parts per machine Preventive maintenance schedule

Costs of maintenance and inspection visits

- Call response time - Order delivery time

Contract conditions Failure modes per machine and process with related criticality

Value machines at customer

Operations time

Parts in machine and process per customer

Failure probability per part Costs of failure modes (direct & indirect)

Manufacturing time

Maintenance history per machine and per part

Machine / process critical failure rate

Costs / benefits of preventive maintenance

Equipment uptime

Condition of critical parts in the process (remote conditioned maintenance)

Total cost structure maintenance contracts

Equipment downtime

Total cost structure of operating processing system during lifetime

System availability

57

- System costs - Maintenance cost - Operations cost

5. To what extend is the access to the data described above automated and integrated into one

interface? (Could you describe the data retrievement process?)

Integration/ automation level Check

Siloed: No integration and automation in data access

Applied: Integration of business critical process, little automation (multiple interfaces)

Integrated: Formally automated and integrated into one interface, (but still multiple in use)

Institutionalized: Totally automated into one interface as a company standard.

Networked: Totally automated interface with company, customers, and suppliers.

58

Appendix F: Detailed case descriptions

Case I: IC Poultry

Service provision

Maintenance concept

The processing equipment of poultry is characterized by its high mechanical character, leading to a service

character which consists of a large amount of wear and tear parts. This demands extensive maintenance,

especially in the high capacity production plants. In order to deal with different service demands from

customers, Stork Poultry Processing Boxmeer introduced a maintenance concept several years ago, with the

aim to shift from providing corrective maintenance to providing more proactive maintenance. The rationale

behind this is to increase service revenue; secure spare parts business; improve service logistics; and most

important increase customer satisfaction. Within Marel Stork Poultry Processing the maintenance concept is

defined as “the complete set of operational guidelines to keep a system (equipment or software) in a condition

to perform its intended functions and consists of Corrective maintenance, Proactive maintenance, and

Continuous improvement plans”. Basically via this concept Marel Stork Poultry processing wants to shift from

providing reactive/corrective to proactive maintenance with continuous improvement plans. Appendix G

displays the maintenance concept with its related definitions. Corrective maintenance can be regarded as a

non-scheduled maintenance activity, and can consist of a complete breakdown of a processing line, or

significant loss of process performance. Proactive maintenance can be viewed as scheduled maintenance, and

can be divided into operational maintenance, preventive maintenance, and predictive maintenance.

Operational maintenance is aimed at maintaining performance by performing 1st

line maintenance, such as

lubricating, correct cleaning, and replacing wear parts like knifes timely. Preventative maintenance consists of

performing preventative overhauls in order to prevent a process breakdown. Predictive maintenance has as

goal to predict a maintenance activity, in order to perform it at the right time, with the aim to reduce the

amount of spare parts usage. The final step in the maintenance concept is continuous improvements, and is a

system maintenance strategy to continuously improve the performance of the system.

In order to implement this maintenance concept, Stork Poultry Processing coded the parts of their machines,

indicating the maintenance character of a certain part or assembly within a machine structure, in order to

develop overhaul kits. The coding consists of five categories ranging from A to E and their description and

corresponding color code are displayed in Table 17. Based on these service codes, three overhaul kits are

developed within poultry, namely small; major; and total overhaul packages. Small overhaul kits consist of A

and C parts; major overhaul kits consist of A, C, and D parts; and total overhaul kits consist of A, C, D, and E

parts. B-parts are not included in the overhaul kits because they have no predictive character and are therefore

always advised to the customer to have on stock. The three overhaul kits are applied within Marel Stork Poultry

processing to design customer-specific preventive maintenance schedules (PMS), which are a guideline for

performing periodic maintenance during a given lifetime of a certain machine, or machine structure. So

basically a PMS describes for customer-specific machines which overhauls need to be conducted at a certain

date for a certain machine assembly.

Table 17, Service parts coding

Service codes Definition

A parts Consumable parts: make direct contact with the product to be processed and exercise an immediate

effect on the technological operation of the machine. These are parts that must be replaced

regularly.

B Parts Breakdown parts: parts or assemblies of parts that, when they become defective make the

production difficult or impossible.

C Parts Small overhaul parts: parts that are subject to wear. These parts will generally have to be replaced a

minimum of once every 2 years and a maximum of 4 times per year to safeguard the correct

operation of the machine.

D Parts Major overhaul parts: see C parts, however with an interval of 1 to 3 years.

E parts Condition-dependent overhaul parts: parts that are subject to wear and tear and will be added to an

59

- Ec parts - Er parts

overhaul package depending on their condition at the time of inspection (usually replaced during a

total overhaul.

Condition-dependent E part, for which the condition can be assessed during inspection.

Reset E parts, for which the condition cannot be assessed during inspection, these parts will

therefore only be exchanged during a total overhaul.

Returning to the maintenance concept mentioned earlier, the A-E coding; the overhaul kits; and the PMSes are

used to implement the maintenance concept within Marel Stork Poultry Processing. The implementation of the

service coding in the maintenance concept is displayed in Figure 9. From this figure can be derived that

corrective maintenance should be conducted at breakdown parts, because the lifetime of these parts cannot

be predicted, therefore these parts are advised to the customer to have on stock. Operational maintenance

should be conducted at A-parts, and preventive maintenance should be conducted at A, C, D, and E parts. Once

successful in preventive maintenance, predictive maintenance and continuous improvements should be

applied to optimize the maintenance intervals and service offering delivered to the customer, which finally

enables Marel Stork Poultry Processing to shift to high-end maintenance contracts, operational offerings, or

eventually performance offerings in Figure 9. This maintenance concept, implemented at the IC Poultry

Boxmeer, is planned to be rolled out globally at the entire Marel organization.

Figure 9, Implementation of service coding into the maintenance concept

Service offerings

Via the interviews conducted at the IC Poultry Boxmeer, basically four categories of service offerings were

identified, namely installation; reactive/ ad-hoc services; service contracts; and service agreements. Within

these service categories, different versions of service contracts and agreements exist for different service

clusters within poultry. The description of the different service offerings is displayed in Table 8. All these service

offering were recurring in the different service clusters of Poultry, although each service cluster applied some

deviations on these offerings.

Installation is comparable to the pre-sale product services in Appendix D and is offered by none of the service

clusters within Poultry, because installation is a responsibility of sales who negotiate it in the product sale.

Reactive/ ad-hoc services are comparable to post-sale product services in Appendix D, and basically include all

possible services and spare parts a customer orders reactively, corrective maintenance is also included in this

category. Within Poultry they want to shift the customers from this category to service contracts or service

agreements, although the relative importance and the generated revenue of this category is still of significant

importance within Poultry. Especially in the UK cluster of Marc van Lith, the market is still conservative

resulting in a significant importance of the ad-hoc services in this cluster.

Service contract accounts for the largest amount of customers within the IC Poultry, this offering is comparable

to the low-end maintenance contract in Appendix D, and consists of a predefined number of inspection visits

on the performance of the machine or process. These visits result in an inspection report with a

recommendation on the required maintenance and spare parts. Whether the customer follows the

60

recommendations is his own responsibility. Within these contracts, two variants exist, namely paying a fixed

price up front, or always pay once the service is actually delivered.

Service agreements are currently the most extended service offerings within the IC Poultry Boxmeer, this

service agreement is comparable to the medium maintenance contract in Appendix D, and include offering

customer-specific preventive maintenance schedules (PMS) in combination with inspection visits and optional

maintenance included. So basically all service agreements consist of a PMS with inspection visits included,

these visits differ from the inspection visits in a service contract on the aspect that these inspections especially

focus on compliance with the PMS and checking whether E-parts should be included in the overhaul or could

be postponed to the next overhaul. The clusters UK and Benelux also offer the possibility to include

maintenance support in the service agreement. This could be conducting the entire overhaul at the customer

or supervise the overhaul, conducted by the technical department of the customer. These service agreements

are generally invoiced afterwards being delivered to the customer, however the cluster UK has the possibility

to offer a service agreement for a fixed price, paid up front. Although service agreements currently account for

the smallest number of customers, they generate a substantial amount of revenue. Therefore IC Poultry wants

to increase the number of service agreements offered, by actively promoting them. Because service

agreements have a tendency to lock-in the customers because it more or less obliges them to buy original

Marel parts because otherwise the functionality of the PMS cannot be guaranteed any more. Which results in a

more stable and predictable source of revenue, and allows Marel to plan their supply chain and field engineers

more efficiently.

Global and local service infrastructure

Service infrastructure & HR capabilities

As the IC Poultry Boxmeer has originated from Stork PMT, the service provision of this industry center still has a

strong central focus (Appendix B). Basically the service provision to the customer is arranged around six service

clusters, operated from Boxmeer, based on geographical market regions, which form the direct link with the

customer. These clusters are comparable to a controlling department, defined in the HR capabilities column in

Appendix D. Each cluster consist of a service area manager who maintains direct contact with the customer,

actively tries to sell service in the market, and is commercially responsible for his cluster. These service area

managers are supported by a number of service coordinators and spare parts coordinators. The service

coordinators design service quotations and form the first contact to solve customer complaints. The spare parts

coordinators handle spare parts. For Poultry, the majority of the spare parts are provided centrally from the

warehouse in Boxmeer. Locally, the customers are advised to have an emergency stock in place, in order to

prevent long breakdowns. This emergency stock is property of the customer itself. The service clusters are also

responsible for the provision of field service engineers (FSE) to the customer; these FSE’s are mostly located at

Boxmeer and are travelled to the customer wherever necessary. The FSE’s with Poultry consist of three

knowledge levels, namely assistant engineers; service engineers; and senior service engineers. Assistant

engineers and service engineers are comparable to 1st

level service engineers and senior service engineers are

comparable to 2nd

level service engineer, described in the framework and proposed by (Kucza & Gebauer,

2011).Besides the FSE’s the service department of IC Poultry Boxmeer also consist of a process specialists

department (PTO), which are specialized in implementing 0-series and optimizing process performance. Within

Poultry these functions are defined as specialists and consultants, which is comparable to 3rd

level service

engineers in Appendix D (Kucza & Gebauer, 2011)

To support the service organization and develop the service offering, the IC Poultry has also a structural group

service in place. This group conducts projects that structurally support the entire service organization and

eventually expansion of service offerings to the customer.

The service organization of Poultry is not operated as a separate business unit, with its own profit-and-loss

responsibility, however within Poultry the total revenue and costs of service labor and spare parts are

registered, but not registered for each service offering specifically. According to the respondents it is wise to

specify the revenue and cost for each service offering, but they think that the organization should never be

operated as a complete separate business unit. Because in their opinion it is necessary for the complex systems

of poultry that the service department is closely linked to the R&D department.

61

Reflecting the organizational structure of the IC Poultry, their local and global service infrastructure can be

defined as an “integrated and ethnocentric service structure” (Kucza & Gebauer, 2011) with a central provision

of services and some local agents selling products and is summarized in Table 18.

Table 18, Service infrastructure of Case I: IC Poultry


Service provision

- 1st

level (basic)

- 2nd


- 3rd


Warehouse function

Sales

- Products

- Services


Available customer process data and automation level

The interviews assessed the available customer process data on the basis of four categories originating from

the classification of maintenance performance indicators of Campbell (1995). The categories entail Installed

Base data; equipment performance data; cost performance data; and process performance data. This

paragraph describes how Case I: IC poultry scores on these items and how the data is registered and

automated.

Installed base data

The installed base data comprises of customer specific data describing which machines are located at a specific

customer, of which parts these machines comprise, and what the maintenance history per part and machine at

the customer is. The IC Poultry has a PLM system in place, which registers product specific data as the serial

number with the corresponding Bill of Material, drawings, and the related maintenance documents. Within the

PLM system, Poultry recently implemented an Installed base management system, which registers the

customer-specific installed base data. So basically Poultry has the possibility the register machines at the

customer and the parts per machine at the customer, however currently this is only registered properly for the

new sold machines. Machines sold in the past are registered not consistently in the IBM system. Competitor’s

machines installed at the customer can also be registered in IBM in PLM but this is currently not done.

Maintenance history currently cannot be registered in IBM, but this will become possible in the future.

Currently the maintenance history is only registered in expense sheets of Field Engineers, but this is totally not

machine specific.

Contract conditions within Poultry are registered in the ERP system, but not maintained properly.

Equipment performance data

Equipment performance data comprises of specific equipment performance data, such as the critical parts in a

machine and the related failure probability and condition (Table 19). Within the IC Poultry Boxmeer critical

parts are identified via the A-E coding, described previously. These codes are registered machine-specific in

PLM. On the basis of the A-E coding and PMSes and indication of failure modes can be determined, but this is

based on expertise and historical data, and totally not underpinned statistically. So within Poultry the exact

failure probability, process critical failure rate, and condition of parts are not known and registered. Only some

large customers maintain a failure registration list in order to indentify a failure pattern in cooperation with

Marel, with the aim to validate the PMS schema. This can be regarded as a start of continuous improvements in

Figure 9.

Cost performance data

Cost performance data consist of all data on the cost structure of spares and labor. Within the IC Poultry

Boxmeer, business process data (pricing, manufacturing, logistics, and ordering process) is maintained and

registered in the Enterprise Resource Planning (ERP) system SAP. From the data in Table 19, the cost structure

62

of spares and the order delivery time is registered within this system. The pricing of spares is based on a coding

structure, each code relates to a certain margin based on the complexity and availability of a certain spare part.

The cost structure of offered maintenance contracts is also known within Poultry, because the contracts

currently offered pre-define everything what is included in the contract and invoice everything what is not

included in the contract to the customer.

From the remaining data in the category cost performance data, only the cost of maintenance and inspection

visits and failure modes is roughly known up front, but not registered; only the direct cost of required spares is

known exactly. Indirect costs of a failure mode, such as downtime are not known within Poultry Boxmeer.

Process performance data

Process performance data entails customer specific data on their processes, such as manufacturing time,

uptime, downtime, availability etc. Within IC Poultry Boxmeer only the order delivery time and maintenance

time are registered. The order delivery time is automatically registered in the ERP system. The maintenance

time is only known afterwards, and registered via invoices to the customer, but this is not automated. Most

service area managers roughly know the number of shifts of their customers, with the related capacity;

however this is not monitored and registered. Also the processing time of a customer is not monitored,

because they have no sufficient measurement tool in place, and they think it is the responsibility of the

customer.

Position on continuum on the basis of available data

On the basis of the available customer process data identified in Table 19, IC poultry Boxmeer is on the level of

medium maintenance contracts in Appendix D.

Table 19, Available customer process data at IC Poultry Boxmeer

IB data Equipment

performance data

Cost performance data Process performance data

(time registration)

Machines at customer

(only new machines, bad

registered in the past)

Critical parts per

machine (coded in

A-E coding)

Costs structure spares

(cost price & margin)

(coded in price

categories

Visit diagnose & maintenance

time (only known afterwards)

Parts per customer-specific

machine

Preventive

maintenance schedule

Costs of maintenance

and inspection visits

(only roughly known, and

not registered)

Order delivery time

Contract conditions (known

but not maintained properly)

Failure modes per

machine and process

with related criticality

Value machines at

customer

Operations time (nr of shifts,

nr. of birds per hour)

Competitor’s machines in

line.

Failure probability per

part

Costs of failure modes

(only known directly)

Manufacturing time

Maintenance history per

machine and per part

Machine / process

critical failure rate

Costs / benefits of


Equipment uptime

Condition of critical

parts in the process

(remote conditioned

maintenance)

Total cost structure

maintenance contracts

Equipment downtime

Total cost structure of

operating processing

system during lifetime

(TCO)

- System costs

- Maintenance cost

- Operations cost

- Energy cost

System availability

63

IT automation level

As mentioned, within the IC Poultry Boxmeer basically two major IT systems are in place, namely PLM for the

product-specific data, and the ERP system SAP for business process data. Currently there exist some integration

between these IT systems but not integrated in one interface. However Marel is developing the

implementation of a Customer Relationship Management (CRM) system globally, which will integrate PLM and

ERP. The CRM system will function as a dashboard, containing customer-specific data, which is retrieved from

the ERP and PLM system.

As CRM will be implemented globally within Marel, the level of data collection automation with IC Poultry

Boxmeer can be defined as “Applied” (Veger, 2008), implying that they are starting to integrate business critical

IT processes.

Case II: IC Further Processing

Service offerings

The IC Further Processing is a relatively young organization, which is still in a learning process, and has

therefore made little progress in their service provision. Recently they implemented the maintenance concept

of Poultry (Figure 9); however they are still in an “infant” phase and just started with coding their machines on

the basis of A-E coding. For 50 % of the machines this coding is finished and overhaul packages are developed,

however Preventative Maintenance Schedules are not developed yet, but are expected to be designed in the

future. So the current service portfolio of FP is limited and consists of equipment installation; offer services and

spares on customer request, reactively; service contracts; and a technological service contracts (Table 10).

Installation entails the installation of equipment, which is negotiated in the product sale and the responsibility

of sales. Ad-hoc services, consist of the provision of service and spares parts to the customer, purely on

customer request, the customer has no service agreement in place in this case. The service contract is an

agreement with the customer on predefined number of inspection visits per year on the performance of the

equipment and resulting in an inspection report with the recommended maintenance and spare parts. The

technological service contract is a new contract offered by FP which is still under development; this contract

aims to improve the process knowledge of the customer on the basis of five starting knowledge levels. Based

on the assessed starting knowledge level of the customer, FP determines which training is required to the

customer to reach a desired knowledge level.

As Further Processing is still a relatively young organization, the focus is currently on building a solid

organization capable of dealing with future demands. Therefore FP currently does not serve the market

proactively, their approach is still very reactive. This is also reflected by the division in service offerings offered

to the customer, approximately 80-90% of the total customers consist of reactive / ad-hoc services; merely 10

% of the customers has a service contract in place; and merely one customer has a technological service

contract in place.

Global & local service infrastructure

Service infrastructure & HR capabilities

As the IC Further Processing originated from Stork Titan, the service infrastructure of IC FP Boxmeer is relatively

similar to that of Poultry Boxmeer. They also divided their market in clusters, each of the three service clusters

consist of a service area manager, who sell services in the market and are commercially responsible for the

cluster; two service coordinators; and one spare parts coordinator. These cluster are provided with structural

support from the structural group service FP, consisting of two employees. To provide service in the field FP

Boxmeer consists of eleven field service engineers, from which 6 are assistant engineers (1st

level knowledge,

Kucza & Gebauer, 2011); two are service engineers (2nd

level knowledge, Kucza & Gebauer, 2011); and three

senior service engineers (also 2nd

level knowledge, Kucza & Gebauer, 2011). For 3rd

level support Further

Processing has to invoke the R&D department.

64

Table 20 summarizes the organizational functions of the IC FP Boxmeer, although FP started working with SSU’s

in their market they still have a very central focus on their service provision. Therefore the service

infrastructure of FP can be defined as integrated and ethnocentric (Kucza & Gebauer, 2011).

Table 20, Organizational functions IC Further Processing


Service provision

- 1st

level (basic)

- 2nd


- 3rd


Warehouse function

Sales

- Products

- Services



The interviews within Case II: IC FP assessed the available customer process data and automation level on four

main categories, namely installed base data; equipment performance data; cost performance data; and process

performance data. The available data for the IC Further Processing Boxmeer is displayed in Table 21, and will be

discussed in this paragraph.

Installed base data

The installed base data of IC FP is still limited. Despite they have a PLM system in place for product-specific

data, they have not implemented installed base within PLM yet. Currently their installed base will be managed

in the ERP system SAP. However this will only be done for new sold machines (not maintained accurately),

machines sold in the past are limited registered. It occurs regularly that a service area manager visits a

customer, and discovers that they have a number of FP machines in place of which FP was not aware. As the IB

is not maintained very accurately, FP does not know of which parts a customer-specific machine exists, this is

only registered for generic machines in the PLM system. Contract conditions are known by the service area

managers but not maintained accurately, these are registered in an excel file. Conducted maintenance is

registered in maintenance reports; however this is not automated, and definitely not registered customer-

machine-specific.


Just as the installed base data, the equipment performance data within the IC FP is still relatively limited. As

mentioned they have started with coding their parts on the basis of A-E coding, applied within Poultry (Table

17). Currently FP coded 50% of their machines, and overhaul kits are developed for these machines. The next

step in the future for Further Processing will be to develop preventive maintenance schedules.


Cost performance data consists of all data on the cost structure of spares and labor. Within the IC FP Boxmeer,

the cost structure of spare parts is known and registered in the ERP system SAP. Recently FP has implemented

the same price coding strategy as Poultry, which implies that margins on spares are based on the complexity

and accessibility of a specific part. As the service contracts consist of a number of predefined standard services,

the cost for providing these contracts are relatively well known upfront.



uptime, downtime, availability etc. Within the IC FP the order delivery process, the related order delivery time,

and the reliability is maintained and registered in the ERP system SAP. As mentioned the maintenance to be

performed at the customer is predefined in a service contract and therefore known upfront. Currently the IC

65

Further Processing Boxmeer is not able to register the process performance of their customer, such as uptime;

downtime; and availability. However because they want to register this in the future, they are currently

designing systems which are able to measure the process performance of their customers.


On the basis of the available customer process data identified in Table 21, IC Further Processing Boxmeer is on

the level between post-sale product services and low-end maintenance contracts in Appendix D. They are

currently not up to the level of low-end maintenance contracts because they have not coded all their machines,

and not have their installed base up-to-date.

Table 21, Available customer process data of IC Further Processing Boxmeer

IB data Equipment

performance data


(time registration)




Critical parts per

machine (in

development, 50 %

coded in A-E coding)


(cost price & margin,

(coded in price

categories)


time

Parts per generic machine Preventive



and inspection visits.

Order delivery time


machine

Failure modes per

machine and process


Value machines at

customer

Operations time (nr of shifts

with related capacity)




part



Manufacturing time


line.

Machine / process


Costs / benefits of


Equipment uptime


machine and per part.



(remote conditioned

maintenance)



Equipment downtime




(TCO)

System availability

IT automation level

As mentioned, the IC Further Processing Boxmeer has two major IT systems in place, namely PLM for product-

specific data, and the ERP system SAP for business process data. Currently there exists some integration

between these IT systems, but this is not integrated into one dashboard. In addition there totally exist no

integration of the IT systems within the SSU’s and these within the IC. The SSU’s don’t have an ERP system in

place. Marel wants to implement a Customer Relationship Management (CRM) system globally, which will

integrate PLM and ERP. However, as Further Processing Boxmeer first has to implement the installed base

management system in PLM, their IT automation level is characterized as “Siloed” (Veger, 2008), implying that

there currently exist no integration between domain-specific application systems.

Case III: “Old” Marel

Service offerings

Because the “old” Marel equipment consist of little wear and tear parts, also relatively little amount of spare

parts are required. Therefore a relatively high percentage of service revenue is generated by labor services. In

order to deal with the less predictive character of the “old” Marel machinery, their service approach is

relatively reactive, and aimed at being able to respond to breakdowns quickly. Their service portfolio consists

mainly of pre-sale related product-services like installation, demonstration, and training; Ad-hoc / break-fix

66

service, which is purely reactive; and service level agreements on hardware or software (SLA’s), in which a

number of variants are possible, displayed in Table 12.

Installation and demonstration services are comparable to pre-sale products services in the theoretical

framework (Appendix D), and are mostly negotiated in the product-sale. Although within Poultry these services

are the responsibility of sales, whereas within “old” Marel these services are the responsibility of the service

department.

Ad-hoc services are purely reactive services, and consist of delivering labor and spares parts on customer

request. If for these services a certain response time will be guaranteed to the customer, the agreement is

fixed in a Service Level Agreement (SLA).

Basically every agreement with the customer is defined as an SLA within the “old” Marel structure. These SLA’s

range from very simple to all including agreements in which for a certain time period all planned maintenance,

breakdown maintenance, and the spare parts related to this are included for a fixed price. Within these SLA’s a

certain response time is guaranteed in which “old” Marel is obliged to respond via the helpdesk or to be on

customer’s site, when they not meet these agreements they can be penalized for that. According to “old”

Marel, guaranteeing these response times is necessary due to the low predictive character of their equipment.

Global & local service infrastructure


As mentioned, the Product Center (PC) and Sales and Service Unit (SSU) structure originated from the “old”

Marel companies. Currently their service infrastructures is much decentralized, basically the SSU’s operate as

independent units, and sell machines, SLA’s and provide 1st

& 2nd

line maintenance support to their customers.

Most SSU’s consist of a management board, controlling the SSU; a sales department; a finance department; a

HR department; and a service department. Depending on the SSU classification (Marel financial flows) the SSU

has a skilled and large service department in place and requires little support from the IC, or a relatively little

service department which is very reliant on the IC.

Besides the SSU’s, the “old” Marel companies have PC’s and IC’s in place, however the IC’s are not well

developed yet. The product centers develop specific machines for different industries and provide specialized

3rd

line support to the customer. In order to conform to the new Marel structure described in the Marel

financial flows, case III: “old” Marel has developed Industry Centers at some Product Center locations. This

means that the created IC’s currently have only knowledge about the PC technology at that specific location

and not about the entire process, as desired in the new Marel structure. As the organizational structure of

“old” Marel is still very reactive, they don’t have a structural group in place, which structurally supports the

service provision. This is something case III wants to develop in the future.

Case III: “old” Marel is not operated as a separate profit and loss unit. However in the past, the SSU’s within

Marel were rewarded on the basis of Earnings before Interest (EBIT), within the new structure this is changing,

as the SSU’s currently will be charged on the basis of revenue. According to the respondents it is wise to specify

the revenue and cost for each service offering, but they think that the organization should never be operated

as a complete separate business unit. Because in their opinion it is necessary for complex equipment that the

service department is closely linked to the R&D department.

Currently at the SSU’s there is still some inventory present, in the future this should disappear and be operated

via a global supply chain.

Table 22 summarizes the organizational functions of the “old” Marel companies, as the SSU’s still operate as

independent entities their service infrastructure can be defined as integrated and polycentric (Kucza &

Gebauer, 2011).

67

Table 22, Organizational function “old” Marel companies


Service provision

- 1st

level (basic)

- 2nd


- 3rd


Warehouse function

Sales

- Products

- Services



The interviews within the “old” Marel companies assessed the available customer process data and automation

level on four main categories, namely installed base data; equipment performance data; cost performance

data; and process performance data. The available data for the IC Further Processing Boxmeer is displayed in

Table 23, and will be discussed in this paragraph.

Installed base data

The amount of installed base data available within the “old” Marel companies (Table 23) differs significantly.

Some companies register their installed base consequently in their ERP systems, while most of the SSU’s don’t

have system in place to register their IB data and merely register the IB in an excel sheet, and do not maintain it

properly. The parts for generic machines are registered by the PC’s but are difficult to access for the SSU’s

because they don’t have the appropriate IT systems in place. Although the IB is not very accurate, the offered

Service Level Agreements are registered, though this is still not automated.


Just as the installed base data, the equipment performance data in Table 22 within the “old” Marel companies

is very limited. They only know on expertise what the critical parts are in the machine, but this is not coded like

with Poultry Table 17, although they want develop it in the future. On the failure modes and failure probability

no data is available, which characterizes the reactive and break-fix character of the service provision of Marel.


Cost performance data consists of all data on the cost structure of spares and labor. Within the PC’s or IC’s the

cost structure of spare parts is registered in their ERP system. For this they had developed a price coding

system similar to Poultry, which currently will be aligned to come to a global price list. From the remaining cost

performance data in Table 23, no data is available within the “old” Marel companies. Remarkable of this is that,

although case III: “old” Marel is offering all including SLA’s (all spares and maintenance, both planned and

corrective included) they do not know the total cost structure of these contracts, as they don’t know the failure

probability of the parts in these SLA’s. Within “old” Marel the price of these SLA’s is based on historical data

and on a rough estimate on the expected cost. Their reasoning is that by offering a large amount of SLA’s they

can lose money on some contracts, but gain money on the majority of the SLA’s, which on average still gives a

positive profit.



uptime, downtime, availability etc. From the process performance data in Table 23 only the order delivery time

and the response time are registered consequently, because case III is sued for not achieving the agreed

response time in the SLA. The rest of the process performance data is currently not measured or registered

within the “old” Marel companies.

68


On the basis of the available customer process data identified in Table 23 can be concluded that the available

customer process data within the “old” Marel companies is very limited. On the basis of this the available

customer process data is on the level of post-sale product services, so purely reactive.

Table 23, Available customer process data within the “old” Marel companies

IB data Equipment

performance data


(time registration)




Critical parts per

machine (only known

on expertise, not

registered)


(cost price & margin,

(coded in price

categories)


time

Parts per generic machine Preventive



and inspection visits.

Order delivery time &

response time


machine

Failure modes per

machine and process


Value machines at

customer

Operations time (nr of shifts

with related capacity)




part



Manufacturing time


line.

Machine / process


Costs / benefits of


Equipment uptime


machine and per part.



(remote conditioned

maintenance)



Equipment downtime




(TCO)

- System costs

- Maintenance cost

- Operations cost

- Energy cost

System availability

IT automation level

Within the “old” Marel companies a number of ERP systems for business process data are in place, namely

Navision, Microsoft Dynamics AX, SAP or no ERP system at all. So basically there exists no integration between

the IT systems. In order to integrate these systems, Marel wants to decrease the ERP systems in place to only

SAP and Microsoft Dynamics AX; implement PLM in all companies; and implement a CRM system to integrate

both systems. These systems should be implemented Marel globally. However, currently the IT systems of

“old” Marel are not integrated and therefore their IT automation level can be defined as “siloed” (Veger, 2008).

69

Appendix G: Maintenance concept

Maintenance Concept

Corrective

Maintenance

(non scheduled)

Proactive

maintenance

(scheduled)

BreakdownPerformance Issue

Preventive

maintenance

(periodic maintenance)

Predictive

maintenance

(condition based)

Inspection

Condition monitoring

Statistical Machine

Monitoring (SMC)

Statistical Process

Monitoring (SPC)

Time based

maintenance

Operational

maintenance

First line maintenance

Count based

maintenance

Modification

Yield and

performance based

maintenance

TPM based

maintenance

TPM =Total Productive

Maintenance

Continues

Improvement

70

Appendix H: Service organization model

Main stages Reactive services Proactive agreements Process performance agreements


Ad-hoc services Reactive stand-alone service agreement

Basic proactive stand-alone service

agreement

Premium proactive stand-alone performance agreement

Process inspection agreement

Preventive process maintenance agreement

Basic process performance agreement

Extended process performance agreement

Premium process performance agreement

Product Content offering Services which are

directly related to a new product sale

Installation

Demonstration

User-training

Services provided purely on customer request

Product support, on-site or via help desk

Spare parts

Product upgrades No agreement with the customer in place

Service agreement on stand-alone products, consisting of a nr. of predefined levels offered for a fixed price: I: 7 by 24 service, with guaranteed response time. II: Labor included (planned & breakdown). III: All spares included (planned & breakdown). - No A-E coding in place. - No overhaul kits in place. - No preventive maintenance schedules in place. limited theoretically grounded Typical SLA’s currently applied for A&B projects

Proactive agreement on stand-alone machinery , customized according to customer needs:

Overhaul kits based on A-E coding.

Inspection on machine performance

Preventive maintenance schedules on machinery.

Possibility to include maintenance and spares.

No performance agreement in place. New agreement for A&B project theoretically grounded

Performance agreement on stand-alone machines for fixed price including:

Machine perfor-mance & response time guarantee.

Maintenance conducted by supplier (planned & breakdown).

All spare parts included.

Possibility to retain ownership of machine at supplier and pay fee per machine output.

New SLA on A&B machinery theoretically grounded end point for A&B products

Agreement on planned number of process performance inspections

Inspection on process performance and state of critical parts

Functionality testing

Safety-function testing

Results in: Inspection report with recommend-ded maintenance and spare parts. Based on A-E coding and overhaul kits. - No maintenance conducted by supplier. - No performance agreement in place. Typical for C&D projects

Agreement on preventive maintenance of processing lines

Customer specific preventive main-tenance schedules (PMS)

Planned nr. of inspection visits on PMS compliance

Option to include maintenance and PMS spare parts.

Based on PMSes resulting from A-E coding and overhaul kits No performance level is guaranteed. Typical for C&D projects

Process performance agreement on preventive maintenance of process-sing line, offered for a fixed price including:

Process availability and up-time guaranty

Entire preventive maintenance conducted by supplier.

All spare parts included, except for breakdown and consumables.

On site Marel engineer Daily / operational maintenance conducted by customer. Typical for C&D projects

Process performance agreement on entire maintenance of processing line, offered for a fixed price including:

Process availability and up-time guaranty.

Entire maintenance conducted by supplier (operational & preventive).


On-site maintenance crew of supplier. Supplier does not operate the plant, but only conducts the entire maintenance for an agreed process performance. Typical for C&D projects

Agreement in which ownership and maintenance responsibility is at the supplier and offered for a certain fee per output.

Performance and output guaranty

Entire maintenance conducted by supplier


Ownership of the equipment is at the supplier.

On-site maintenance crew of supplier. End-point for C&D projects supplier has become “pure” service provider

Maintenance character

Training Maintenance will be conducted reactively and will be provided in case of breakdown or performance issue, initiated by a customer call.

Proactively conducting operational and preventive maintenance on specified moments aimed at preventing breakdowns; maintaining machine and process performance and increasing supply-chain efficiency.

Continuous improvement on operational and preventive maintenance. Maintenance should be conducted at the right moment, e.g. predictive. Aim is to optimize the maintenance cost, by designing equipment from a cost of ownership and availability perspective.

Knowledge level Basic knowledge on equipment installation

Basic knowledge on ad-hoc support for machinery and processes

Knowledge on critical parts within stand-alone machinery is limited and not formalized via coding critical parts (A-E) coding Expected costs based on historical data.

Extensive knowledge on interactions between parts in the machine and their corresponding lifetime and criticality for developing A-E coding; overhaul kits; and preventive maintenance schedules.

Extensive knowledge on total cost structure of providing all including performance agreements on a specific machine All expected spare parts; maintenance; and financing costs.

Extensive knowledge on all possible machines in a processing line and the interactions between them and their parts; and their effect on the final end-product knowledge on the criticality of components and their effect on other components and the final end-product A-E coding; overhaul kits; and PMS. Knowledge on the effect of different machines on the final end-product high technological knowledge

Complete knowledge on all the possible machines in a processing line and the effect on the end product; complete knowledge on the total cost structure of providing all including service level agreements; and knowledge on how to increase the financial performance of these agreements. Extensive process knowledge on how to optimize the maintainability of the process and the related costs conduct maintenance at the optimal moment (not too early and not too late); while still maintaining system performance extensive monitoring of process performance is required. Increase or maintain uptime and yield, while minimizing cost of ownership

Customer and process data

Order/ product specifications

Data on how to operate the system

Cost structure of spare parts and labor provision (cost price & margin) price coding

Expected cost structure for providing SLA’s, based on historical data expected nr. of spare parts and labor required per SLA

Response time measure per customer.

Critical parts in machine A-E coding

Overhaul kits

Expected lifetime components PMS

Cost price and margin price

Critical parts in machine A-E coding

Overhaul kits

Expected lifetime components PMS

Cost price and margin price coding

Critical parts per machine and process A-E coding

Overhaul kits

Failure modes in machine and process Preventive maintenance schedules (PMS)

Machines in processing line up-to-date installed base data

Maintenance should be conducted at optimal moment

Complete cost structure of agreement should be known and minimized (CoO)

Exact process performance data (uptime; availability ;and yield)

Data on condition of components and machines in the processing line, in order to conduct maintenance at the optimal time-interval Condition based monitoring (CBM) & statistical process control.

Equipment should be designed from a maintainability and availability perspective.

Relative importance of tangible goods End point standalone C-products /

A&B products

End point process equipment /

C&D projects

Relative importance of services

coding Total cost structure cost of ownership

Performance measures in place

Cost structure of spares and labor provision Extensive installed base data (machines in system, with related parts, with related failure probability, and maintenance history).

End responsibi-lity of process performance and output

Customer Customer Supplier responsible for performance; maintenance and ownership of standalone machine.

Customer Supplier responsible for process performance and preventive maintenance of the entire processing line.

Supplier responsible for process performance and the entire maintenance of the entire processing line.

Supplier completely responsible for the process output, main-tenance and ownership of the entire processing line.

% service rev. of total revenue

0-3 % 100 %

Customer

Value proposition to the customer

Reduction of perceived risk of adopting the product

Quick delivery of spare parts and labor

Prevention of long downtime by response time guaranty. Risk is that service cannot be delivered up to the promises due limited theoretical foundation of SLA’s

Reduction of operating risk by preventing break-downs and offering services for a fixed price.

Reduction of operating risk by preventing break-downs; guaranteeing standalone product performance and taking over the ownership of the standalone machine.

Provision of insight in process performance and recommendations for improvement.

Prevention of breakdowns and maintained system performance via preventive maintenance schedules (PMS).

Reduction of operational risk by taken over preventive maintenance and related spare parts, with guaranteed process performance.

Reduction of operational risk with the ability to focus on core business, by taking over complete maintenance with guaranteed process performance.

Reduction of operational risk, and capital employed with the ability to focus on core business, by taken over complete maintenance and ownership equipment.

Degree of risk aversion of customer

Low: customer is totally not risk aversive, is willing to take all the risk and thinks that the financial risks are lower than the costs of having a service agreement.

Low / moderate: customer is willing to take operational risk, though he wants to decrease the risk of a long downtime by a response time guarantee.

Moderate for standalone: customer is still willing to take operational risk of stand-alone product, though he wants to prevent downtime by preventive maintenance.

High for standalone: Customer wants to eliminate operational and financial risk of standalone product by a performance agreement on the standalone product

Moderate: customer is still willing to take the operational risk of the processing line, without a performance agreement, though he wants to decrease the risk of downtime by placing strong emphasis on preventive maintenance.

High: customer wants to decrease operational risk by a guaranteed performance and conduction of preventive maintenance by the supplier. One price for guaranteed performance, preventive maintenance and spare parts.

High: customer wants to eliminate the risk of servicing the complete process line, but is still willing to take the financial risk of purchasing the equipment. One price for guaranteed performance, entire maintenance and spare parts.

Extremely high: Customer wants to eliminate the operational and financial risks of operating the processing line. One price per processed chicken, while maintenance and ownership equipment is at supplier.

Criticality of supplier’s service for customer’s business / Dependency on the supplier

Low: machinery at customer requires little maintenance or the customer has a strong maintenance crew that is able to solve problems and conduct maintenance themselves. This implies that only occasionally service from the supplier is required, and that the service of the supplier is totally not critical for the customer’s business. Customer is totally not dependent on the supplier

Low / moderate: customer requires the expertise of the supplier for servicing his standalone machinery. However as maintenance from the supplier is only required for a standalone machines, the criticality of the supplier’s service for the entire business of the customer is still relatively low. Customer is dependent on supplier expertise for servicing standalone equipment

Moderate: customer relies on expertise of the supplier for supervising preventive maintenance and maintaining system performance for the entire processing line. However as the customer still has his own maintenance crew, he is still able to solve breakdowns themselves, which makes the service of the supplier still not critical for the customer’s business. Customer is dependent on supplier’s expertise for preventively servicing the process line.

High: customer totally depends on preventive maintenance conduction by the supplier. Supplier is fully responsible for process performance, which makes the supplier’s service critical for the customer’s business. Customer is highly depen-dent on the supplier.

Extremely high: the supplier is totally responsible for conducting the entire maintenance and guaranteeing system performance. As the customer has no maintenance crew themselves, he totally depends on the supplier’s service for maintaining process performance and preventing breakdowns. The supplier‘s service in this case is extremely critically for sustaining the customer’s business. Customer is totally dependent on the supplier.


Reactive: purely functional and transactional relationship primarily aimed at satisfying customer’s calls with standardized offerings. Customer feels little connection to the supplier and does not see the added value of the supplier’s service.

Proactive relationship aimed at generating trust and the feeling that the supplier provides superior value and delivers up to the promises, by providing unique and customized solutions. Customer gets connected to the supplier and its offerings and is more open to other services and repeated product sales.

Partnership in which the supplier and customer are totally committed to each other and in which services are highly personalized and customized. Results in a strong interdependency between supplier and customer, and a strong loyalty of the customer to the supplier. Supplier becomes customer’s first and only choice. Supplier locked in the customer.

Price sensitivity of the customer

High: customer is purely focused on purchasing spare parts and service from the supplier for the lowest price. Customer does not see the added value of supplier’s service.

Moderate: customer recognizes the importance of the supplier’s service and is starting to see the added value of the supplier. Customer still regards price as important but this is subordinated to quality of the service provision.

Low: customer is totally committed to the supplier, and is convinced that the supplier is the best choice. Customer is focused on total cost of ownership and performance, instead of purchasing the equipment and service for the lowest price.

Nr. of customers and IB value per customer

Large number of customers with a relatively low installed base value per customer Small number of customer with a relatively high installed base value per customer.

Customer type Customers who want to decrease the perceived risk of adopting a product.

Customers who do not see the added value of a maintenance agreement or who have a highly skilled maintenance crew

Standalone customers who want to decrease the risk of a long breakdown.

Standalone customers who want to prevent breakdowns; decrease operational risk and want to have a customized service bundle.

Standalone customers who want to prevent breakdowns and decrease operational and financial risk.

Process customers who want to prevent or minimize breakdowns, and realize that PMSes are essential for this High capacity process efficiency oriented.

Process customers with high focus on total cost of ownership (TCO) and want to decrease operational risk, but still want to conduct operational maintenance.

Process customers who want to focus on core-business and don’t want or can’t conduct maintenance of the equipment.

Process customer who wants to focus on core business and wants to reduce capital employed, by completely outsourcing maintenance and ownership of the equipment to the supplier.

Organization

Strategy: Revenue model

Generate revenue on product sales, spare parts sales, and labor; bundled in packages or separate offerings.

Generate revenue on product sales, spare parts sales, and labor; bundled in packages or separate offerings. Proactive approach increases plan ability of maintenance which increases efficiency of service supply chain, and customer satisfaction leading to direct and indirect financial savings.

Generate revenue on sales of processing lines, spare parts sales, and labor; bundled in packages or separate offerings. Proactive approach increases plan ability of maintenance which increases efficiency of service supply chain, and customer satisfaction leading to direct and indirect financial savings.

Generate revenue on product sale and fixed price maintenance agreement. Service costs should be optimized to have guaranteed performance for the lowest cost. (optimal replacement of spare parts)

Generate service revenue per process output aim to minimize acquisition and service cost, while still ensuring system performance.

Processes: Criticality of spare parts availability & supply chain reliability

Low: Reactive relationship and relatively low impact of the supplier’s service on the customer’s business does not necessitate spare parts to be availability immediately. Delivering spare parts and service within an acceptable time is sufficient.

Low/ moderate: criticality of supplier service for customer’s business is relatively low, which does not necessitate spare parts to be available immediately. Though they should be delivered relatively quickly to keep the customer satisfied.

Moderate /high: Spare parts availability is important because of guaranteed performance, though it is not critical for the customer’s business because of the standalone character.

Moderate: spare parts availability and supply chain reliability is important, because of the high costs involved with a process breakdown. However spare parts availability still not critical, because there is no performance guaranteed. Customer is advised to have his own emergency spare parts package on-site.

High: Spare parts availability and supply chain reliability is critical, due to the guaranteed process performance and uptime. (If the supplier is not capable of delivering the guaranteed uptime, he will be penalized for it). Supply chain should be capable for providing spare parts and service quickly and accurately.

Processes: IT automation & maturity level

Siloed No formalized integration between different domain-specific application and IT systems. Domain specific application and IT systems are still operated independently of each other.

Applied

Start of integration of business critical application systems. Linkages between business critical systems are formed in order to enhance integration and from one interface (Integration CRM; ERP; and PLM)

Integrated

Integration of IT systems is formalized in company policies, and there exists one interface between the application systems. However, the integration is still not common ground and multiple systems are still in use.

Institutionalized Integration of IT systems has become a standard interface within the organization, and are common ground for usage

Networked Company application systems are integrated with the customer’s application systems. (CRM integrated with customer’s ERP)

Structure: Service infrastructure / service provision

Decentralized

Reactive service approach leads to low plan ability of maintenance (break-fix approach), in combination with the large amount of customers, a decentralized infrastructure is advised.

Regional Plan ability of maintenance enables the supplier to serve a larger area.

Centralized Plan ability of maintenance in combination with a relatively small amount of customers, enables the supplier to serve their customers from a few central locations.

On-site & centralized A few people on site to supervise performance, backed-up by a centra-lized maintenance crew

On-site Full maintenance agreement (preventive & operational) requires to be stationed on-site permanently with an entire maintenance crew, which will be backed up with structural support from the central organization.

Structure: Channel responsible for service delivery

SSU for A&B projects; IC for C&D projects

SSU III / PC Or IC or PC in case of complicated failure

SSU II / PC

SSU I / PC SSU/IC Knowledge on the complete product range offered within an industry should be centralized at the industry center (IC)

On-site Marel engineers, backed up by IC or SSU I engineers IC = responsible Full line integrator

On-site Marel maintenance crew Marel crew conducts maintenance independently and is backed-up by structural support of the IC and operational support of SSU I IC = responsible Full line integrator

People: Knowledge/skills

Basic break-fix knowledge: Basic knowledge on servicing customers reactively is sufficient.

High level of standalone knowledge and basic level of customer knowledge: Thorough knowledge on critical parts in standalone equipment is required, in combination with the impact of service on machine performance. Process knowledge is not required in this case.

Moderate level of process and customer knowledge: Engineers need to have process knowledge for servicing a processing line preventive and customer-specific. As performance is not guaranteed, knowledge on how maintenance is related to performance and customer’s business is not strictly necessary to have.

High level of process and customer knowledge: Engineers need to have thorough knowledge on servicing a processing line and on how performance can be maintained for the lowest cost (conducting maintenance at the optimal moment). In addition thorough customer knowledge is required to link service provision to customer’s business.

High level of process; customer and financial knowledge: besides thorough process and customer knowledge also thorough knowledge is required on the financial impact of retaining the ownership of the processing equipment.

People: HR strategy / importance HR

Required knowledge level is relatively low and applicable for a broad range of machines, resulting in a relatively short and broad training trajectory. Economic value of employees is still relatively low Aim is to recruit and educate employees efficiently.

Employees possess a relatively high level of stand-alone knowledge, and are trained to serve a broad range of stand-alone products. Economic value of employees is increasing as they obtain more customer-specific knowledge. Retain the best engineers and develop them to a customer-oriented focus.

Employees possess a large amount of process knowledge and have undergone a relatively long training trajectory. Employees have a relatively high value to the supplier Aim is to educate employees well with a customer-specific focus and retain them.

Employees have undergone a long training trajectory and possess a large amount of customer specific process knowledge. Employees are of high (economic) value to the supplier and critical for offering performance contracts profitable. Aim is to educate the best, and focus on retaining these employees.

Rewards: Rewards service units on EBIT: Customers in this category only want to be served reactively and are highly price-sensitive aim is to deliver services efficiently and for the lowest costs.

Reward service units and employees on generated revenue instead of on EBIT: Investing in new relationships costs more in the beginning than it is generating in revenues. By rewarding employees on EBIT, they are more reluctant to invest in new customer relationships. By rewarding on EBIT, employees are motivated to invest in customer relationships.

Reward service units and employees on contract performance. These performance agreements become profitable if performance levels are met for lower service costs than the fixed price the customer is paying. Employees should be challenged to deliver the up to the agreed performance for the lowest cost.

Appendix I: Positioning of cases on service organization model

Main stages Reactive services Proactive agreements Process performance agreements


Ad-hoc services Reactive stand-alone service agreement

Basic proactive stand-alone service

agreement

Premium proactive stand-alone performance agreement

Process inspection agreement

Preventive process maintenance agreement

Basic process performance agreement

Extended process performance agreement

Premium process performance agreement

Product Content offering * •

X

Maintenance character

* •X

Knowledge level * • X

Customer and process data

* • X

End responsibi-lity of process performance and output

* • X

% service rev. of total revenue

* •

X

Customer

Value proposition to the customer

* • X

Degree of risk aversion of customer

• * • X

Dependency on the supplier

* • X


* • X

Price sensitivity of the customer

* • X

Nr. of customers and IB value per customer

* • X

Customer type • * • X

Goodness of fit = ( scores in column highest score – scores outside column highest score) / total scores {(13 + 11 + 14) – (1+1+2)} / 42 = 0.81

X = Case I: IC Poultry = 0.86 • = Case II: IC Further Processing = 0.57 * = Case III: “Old” Marel = 1

Organization Strategy: Revenue model

* • X

Processes: Criticality of spare parts availability & supply chain reliability

* • X

Processes: IT automation & maturity level

* • X

Structure: Service infrastructure / service provision

* • X

Structure: Channel responsible for service delivery

* • X

People: Knowledge/skills * • X

People: HR strategy / importance HR

* • X

Rewards: * •X

Total scores Case II: 1

Case III: 14

Case I: 1 Case I: 13

Case II: 11 Case II: 2

75