Field Service Organization
We engaged at fully integrated water treatment service provider with annual revenues of over $800 million. The company develops and manufactures specialty chemical products, and delivers those products via a nationwide field service organization. Their technicians conduct analysis of water samples, and administer treatment regimes, to clients in a variety of commercial and residential segments. While the business had been steadily expanding into new product and market areas, management was frustrated by declining margins and stagnant profits. As a result of our work, operating profits improved by $75 million.
Our primary challenge was developing an accurate approach to allocating the expense of the company’s large field service organization to individual customers and products. The modeling effort began by consolidating financial and operational data from 11 distinct legacy systems. Using both in-person and electronic means, our consultants then conducted an extensive effort survey from subject matter experts across all of the company’s market segments and product areas. Accunomics used the study to craft a detailed matrix of allocation factors by customer size and service type. The result was a finely grained profitability model that allowed the client to slice their profitability by geographic area, product, service type and more.
Customer Segment and Service Model Alignment
When Accunomics’ plotted profitability on a map, all the company’s profits were cluttered in densely populated areas. With the ability to breakdown fully loaded profitability to each geographic region, the company now understood that it’s earnings issues were rooted in its suburban and rural service areas. The company’s strategy of specialized technicians and standardized pricing broke down in these smaller markets, resulting in underutilized resources and uncompensated travel time.
Our consultants’ worked closely with the management team to identify a solution for profitably serving smaller markets. First, technicians were cross-trained in a broader range of products and services, allowing them to increase utilization rates. Second, the company adopted a differentiated pricing structure that was more effective in recapturing travel time. Last, in areas where the first two strategies were insufficient, the company outsourced service activities to third party partners.