CASE 2: CASE STUDY OF A VENDING MACHINE MANUFACTURER

Overview of Company B’s business model.

 

This company, referred to as Company B, specializes in the manufacture of coffee vending machines. The company has three manufacturing units in Brazil and is headquartered in São Paulo. Company B has 160 employees. Its market segment comprises offices and companies, which also means a B2B relationship.

The main value proposition of Company B’s business is the delivery of “hot, good quality coffee.”  To ensure this functionality, Company B offers a variety of services for the coffee machine, such as replacement spare parts, technical assistance, installation and maintenance. Company B also supplies a consumable, which is ground coffee.

The main resources of this business are the experience and know-how of service technicians, who are responsible for ensuring the availability and performance of the machines.

The customer relationship is established by means of a long term contract. The company has two types of contracts, “Management” and “Location.” These contracts describe the type of agreement between Company B and its clients and the modalities of its revenue model. The “Management” contract involves having an employee of Company B working at the client’s facilities, providing services upon request. Company B charges its clients according to the number of machines in operation; hence, the monthly lease price is variable. There is also the possibility of charging per cup of coffee. Services are included in the lease price. This is the type of contract most commonly offered by Company B. “Location” contracts are based on machine leasing and monthly payments. The main difference is that “Location” contracts do not involve having an employee at the customer’s facility to provide services and ensure the machine’s availability.

Company B carries out most of its processes and activities in-house. Product development occurs in Italy, where a development partner is located. The vending machines are manufactured at Company B’s facilities in response to clients’ requests, i.e., they are made to order (MTO). The production process takes place at Company B, which also distributes machines and consumables, although it also uses a distribution channel of commercial representatives in the majority of Brazilian states. The role of the subsidiaries is to provide services during the use phase of machines to clients located close to them geographically. Company B also sells consumables to clients that lease their machines. Clients located far away from the company’s facilities have to buy a certain volume of the ground coffee; otherwise, they must pay for its transportation.

At the EOL of the machines, Company B takes them back and recovers the ones that still have added value. Depending on a machine’s conditions, it can be remanufactured and commercialized again. Spare parts that do not have enough residual value to be remanufactured are recycled or used by technical assistance in second hand machines. The company’s manufacturing and remanufacturing operations share the same infrastructure and employees.

As mentioned earlier, Company B has a strategic partner in charge of product development. The company has two other types of partners: those that produce and supply ground coffee and those that provide services to customers located far away from the company’s facilities.

Company B’s revenue comes from consumables sales, the supply of services and machine leasing. The main business costs are related to services supplied during the use phase of the machine. The figure above depicts Company B’s business model under the “Management” type of contract, which is its more common one.

 

 

 

Contact for Germany

Technische Universität Berlin
Institut für Werkzeugmaschinen und Fabrikbetrieb
Pascalstr. 8-9, 10587 Berlin
Thomas Guidat: guidat[at]mf.tu-berlin.de

Contact for Brazil

Universidade de Sao Paulo
Escola de Engenharia de São Carlos
Av. Trabalhador São-carlense, 400, Pq Arnold Schimidt
São Carlos - SP/Brasil, CEP 13566-590
Ana Paula Barquet: anabarquet[at]hotmail.com