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Why service agreements are vital when the outlook’s uncertain

Whether you’re running a fleet of container ships, manage a power plant or look after heavy machinery, running a business is tough. One thing remains constant across all industries, however, and that’s the need to keep on top of costs. That’s where service agreements come in.

With the ability to turn often unexpected and untimely capital costs into more predictable and manageable operating costs, a service agreement can make all the difference to the success of your company.

Service agreements effectively act as insurance. Run an engine for 24 hours a day, seven days a week, and it’s inevitable that parts will wear out. This can be incredibly expensive on a number of levels, not just because of the cost of replacement parts and fitting, but also because of the costs you’re likely to incur through unplanned downtime.

If the turbine blades in your engine’s turbocharger wear and need replacing, for example, can you afford the cost of not being able to deliver a service? How long will it take to source the relevant parts? Do you have the finances in place to cover such capital expenditure?

A service agreement can remove these unknowns, covering anything from just spare parts sold on a one-time basis, to something far more comprehensive that can be included into ongoing operating expenses (OPEX), with maintenance management agreements helping to deliver far more predictable costs.

Rolf Bosma, Executive Director and President at Turbo Systems United Co. Ltd., explains:

“We can manage the diverse needs of our customers with a unique service agreement concept, designed to address our customers’ unique business needs. Let’s say it’s about budget, transparency or maintenance management; whatever their requirements, a service agreement can be tailor made to the customer’s needs.”

Opting for a service agreement will see your company pay a fixed sum of money per month. The benefits are plentiful, making it easier to stay on top of both maintenance and costs, and there are other benefits as well.

Customers with service agreements will be higher priorities when it comes to sourcing parts, for example, and the ability to replace parts and get your engine running properly again in the shortest time possible can make a huge difference to the downtime of your machinery.

Add in planned and predictable maintenance, where you’ll be able to schedule other necessary work alongside, and it’s clear that having a service agreement in place will keep your fleet, power station or other machinery running as smoothly as possible.

The only downside to service agreements is the fact your company will be paying operating costs each and every month. Go without an agreement, and you’ll have months where you’re not paying anything in maintenance, which can seem like a more attractive proposition in the short term.

Over time, however, can you afford to take a big hit if a part wears out or fails? Can your fleet afford to be missing a ship at a vital time of year? Does your contract include penalties for the unplanned downtime of your power plant?

All of these factors are worth considering, but one thing is for certain – service agreements can remove much of the stress and unpredictability of running complex machinery, with constant operating costs making it easier to manage and predict your company’s finances.

Image credit: Dominik Baur