Industrial service innovation through improved contractual relationship

Abstract

PurposeThe purpose of the paper is to discuss various contractual issues that could encourage industrial service innovations with special reference to improving operation and maintenance process effectiveness of complex and advanced production facilities in the capital‐intensive industries.Design/methodology/approachA case study was performed to study the influence of contractual relationships on industrial service innovations. The study focused on contractual relationships between service companies that sell operation and maintenance services to production facility operators in the Norwegian oil and gas industry.FindingsThe case study shows that service innovations are desired in most of the operation and maintenance contracts, but existing contractual relationships most often do not support innovations. Moreover, contract duration, contract type and control mechanisms can influence cooperation and collaboration during contract execution.Research limitations/implicationsThe findings are based on a case study with participants from the Norwegian oil and gas industry. The study is limited to knowledge and technology based services required to support operation and maintenance of advanced, complex and integrated production facilities. However, we believe that the study is of value for other capital‐intensive industries such as mining, energy, paper and pulp, chemical, etc.Originality/valueThe development of contracts that support industrial service innovations and create an environment for cooperation and collaboration could be of value to improve the efficiency and effectiveness of operation and maintenance processes in the capital‐intensive industries. Studies focusing on improving contractual relationships and service innovations for operation and maintenance services are scant.

Value elements of industrial maintenance: verifying the views of the customer and service provider

“…The low valuation of R&D was expected at least from the customer side, because R&D in industrial services has many contract-related issues and cooperation is considered complicated (Panesar and Markeset, 2008). In the service providers' side this was slightly surprising, because Sinkkonen et al (2013) discussed it to be one of the most important value elements in support services.…”

A Theoretical Perspective of Contract and Contractual Customer-Supplier Relationship in the Mobile Phone Service Sector

“…This long-term customer relationship need was confirmed by Sheth and Parvatiyar (1995) who also identified that literature investigating behavioural retention motivations related to theories of relationship marketing within the customer markets was limited, while there was extensive literature on supplier markets. Even in industrial services, there is not a great deal of literature on the contractual relationship phenomenon and its related behaviour studies as the majority of previous studies focused on contractual outsourcing issues for some service operations and services maintenance (Lai et al, 2006;Panesar & Markeset, 2008). However, some transaction exchanges were seen to be contractual transactions rather than relational ones (Dubois & Gadde, 2000).…”

“…Firstly, the contractual data which covers many elements that ensure that interactions and it is circumstances between both relationship parties run efficiently without any violations (Alshurideh, 2010cited Wei & Chiu, 2002. Secondly, the contractual relationship requirements, which are described clearly and classified by Panesar (2008, cited in Thompson et al, 1998 into four main elements, namely, (a) the relationship between the involved parties, (b) the responsibilities of each party, (c) the sharing risk of events and actions in a contract, and (d) the reimbursements structure. These elements usually act together to define and shape the contractual relationship between any two parties.…”

Asset Integrity Knowledge Management: A Case Study from the Petroleum Industry

“…Nevertheless, these challenges can be coped with through the organization's supplier management. There are several literature references that discuss risk, quality and performance issues (see for example Vilko andRitala, 2014, Zakaria et al, 2010), contractual issues (see for example Stremersch et al, 2001, Panesar andMarkeset, 2008) and supplier selection issues (see for example: Keramydas, 2011, McIvor, 2008 Quality of data Ensure reliable data for input and processing into information from the beginning of field development through decommissioning.…”