Almost everyone uses them: streaming services. As different as the content from Disney + or Netflix may be, they all have one thing in common: payment via a subscription model. This is a convenient system for providers as it guarantees long-term customer loyalty. Is the model also suitable for mechanical engineering? Yannik Gabelmann, a doctoral student at the Center for Digital Transformation at the TUM Campus Heilbronn, is investigating this.
Before Yannik Gabelmann came to the TUM Campus Heilbronn, he studied economics in his hometown of Kaiserslautern. He then came across the SCALA project launched by Professor Sebastian Müller through a job advertisement: “The task is exciting and can have a lasting impact on mechanical engineering,” says Gabelmann.
An affair of the heart, as the doctoral student is writing his dissertation at the same time, in which he is investigating the influence of language models on share prices. This calls for good time management: “Three days a week I concentrate on the SCALA project, the others I spend researching my dissertation topic.”
Subscription instead of one-off purchase
The researchers need a lot of time, because they want to break with a time-honored tradition: “The subscription model focuses on long-term customer loyalty and moves away from the idea that a purchase contract is concluded and the relationship with the customer ends with it. The path leads from a one-off purchase to a subscription,” explains Gabelmann. Ownership is not transferred. Instead, the machines are rented, including the associated services such as maintenance and optimization.
The system is already being used successfully for equipment packages: “The tool manufacturer Hilti is a pioneer here. The subscription packages contain 20 tools, for example. The supplier puts them together, delivers them one by one and if something breaks, it is replaced.” Whether small or large machines, a finished product is always delivered, not raw materials that are further processed.
Looking for a partner
But with which customers does it make sense to enter into a long-term relationship over several years? “We want to help machine and plant manufacturers in particular to identify customers with whom they can enter into a subscription model relatively risk-free,” explains the young scientist. After all, there is of course a risk that the customer will drop out after one or two years or become insolvent.
The six main categories for the customer risk assessment have already been defined: creditworthiness, the potential for improvement of the machine on site, the general relationship, the effort or costs involved in initiating such a subscription, the feasibility and the customer's sales market. The crucial question for Gabelmann: “Do the banks even want to finance the project?”
Support for the little ones
The team receives feedback on financially critical data from the banking association, with which it has signed a memorandum of understanding: “Payment arrears and current market developments are included in the risk score at the first level. The second is the possible damage to the company in the event of a default. Both risk classes are rated from 1 to 5,” explains Gabelmann.
At the end of the SCALA project, a freely accessible guide or calculator will be available online for all companies. With two decisive parameters: “Firstly, the requirements that the supplier places on the customer, and secondly, the risk score that is tailored to this customer.” Both parameters then lead to a summarized profitability calculation.
Yannik Gabelmann emphasizes: “With our tool, we want to support small and medium-sized companies in particular with their transformation. Because in the end, it is still up to the company to decide whether it wants to take this risk with the customer or not.”
Before Yannik Gabelmann came to the TUM Campus Heilbronn, he studied economics in his hometown of Kaiserslautern. He then came across the SCALA project launched by Professor Sebastian Müller through a job advertisement: “The task is exciting and can have a lasting impact on mechanical engineering,” says Gabelmann.
An affair of the heart, as the doctoral student is writing his dissertation at the same time, in which he is investigating the influence of language models on share prices. This calls for good time management: “Three days a week I concentrate on the SCALA project, the others I spend researching my dissertation topic.”
Subscription instead of one-off purchase
The researchers need a lot of time, because they want to break with a time-honored tradition: “The subscription model focuses on long-term customer loyalty and moves away from the idea that a purchase contract is concluded and the relationship with the customer ends with it. The path leads from a one-off purchase to a subscription,” explains Gabelmann. Ownership is not transferred. Instead, the machines are rented, including the associated services such as maintenance and optimization.
The system is already being used successfully for equipment packages: “The tool manufacturer Hilti is a pioneer here. The subscription packages contain 20 tools, for example. The supplier puts them together, delivers them one by one and if something breaks, it is replaced.” Whether small or large machines, a finished product is always delivered, not raw materials that are further processed.
Looking for a partner
But with which customers does it make sense to enter into a long-term relationship over several years? “We want to help machine and plant manufacturers in particular to identify customers with whom they can enter into a subscription model relatively risk-free,” explains the young scientist. After all, there is of course a risk that the customer will drop out after one or two years or become insolvent.
The six main categories for the customer risk assessment have already been defined: creditworthiness, the potential for improvement of the machine on site, the general relationship, the effort or costs involved in initiating such a subscription, the feasibility and the customer's sales market. The crucial question for Gabelmann: “Do the banks even want to finance the project?”
Support for the little ones
The team receives feedback on financially critical data from the banking association, with which it has signed a memorandum of understanding: “Payment arrears and current market developments are included in the risk score at the first level. The second is the possible damage to the company in the event of a default. Both risk classes are rated from 1 to 5,” explains Gabelmann.
At the end of the SCALA project, a freely accessible guide or calculator will be available online for all companies. With two decisive parameters: “Firstly, the requirements that the supplier places on the customer, and secondly, the risk score that is tailored to this customer.” Both parameters then lead to a summarized profitability calculation.
Yannik Gabelmann emphasizes: “With our tool, we want to support small and medium-sized companies in particular with their transformation. Because in the end, it is still up to the company to decide whether it wants to take this risk with the customer or not.”
