[Focus] Etablissements Cros: performance improved by the functional service economy

[Focus] Etablissements Cros: performance improved by the functional service economy

Etablissements Cros, based in Échirolles, specialize in the sale, rental and maintenance of equipment for industry and construction in the fields of air, water, electricity and vacuum (compressors, pumps, generators, etc.). 

As a result of requests from certain customers, the company has been developing its compressed air offer. Before this, the activity involved selling several machines (compressors, measuring devices, etc.), aggregating them, setting them up on a customer’s premises and dealing with maintenance. In recent years, Etablissements Cros have adopted the functional service economy model: they retain ownership of the equipment and sell only cubic meters of compressed air.

This approach was built gradually from the development of a range of remote monitoring and on-call services. Creation of the new business model drew support from CIRIDD and the Institut Inspire. Today, the functional service economy is truly embedded in the company’s vision.

An economic, ecological solution

By selling compressed air and not the plant to make it, Etablissements Cros are thinking in terms of overall cost. They incorporate the fact that 50% of the cost of production is due to energy consumption. This is because the process leads to a lot of heat loss: out of 100 units of energy at the start, only 10 come out of the pipe. To meet this drawback, the company is committed to an energy ratio with the customer and has developed a heat recovery system fitted to certain compressed air plants depending on feasibility.

Combining the functional service economy and the circular economy in this way makes it possible to propose a viable solution from the ecological and economic standpoints. Energy efficiency is improved and the heat recovered leads to cost avoidance because it is used to heat the customer's premises or pumped back into its industrial process.

In addition, the fact that Etablissements Cros remain owners of the plant promotes the extension of its life. They go further than the requirements of the maintenance plan to keep the equipment operational for as long as possible.

In addition to the resources saved, the advantage of this solution for customers is to delegate the risks and imperatives caused by ownership of a compressed-air power plant (considerable initial investment and the cost of taking charge of running the facility). This offer corresponds to their need to reduce and harmonize costs (with buying cubic meters the bill corresponds to monthly consumption), to outsource an activity that is not part of their area of expertise as is the case for digital industries, and to improve their energy performance to match ISO standards. 

An innovative solution from several standpoints

Innovation is one of the pillars of the transition from selling equipment to that of using it. This concept combining functional service economy with reuse of heat is itself innovative. In France, calorie recovery is used in fewer than 10% of compressed air plants.

Setting up the integrated solution required technical innovations concerning the design and monitoring of equipment. A sophisticated system for monitoring heat recovery was set up, equipment is monitored 24 hours a day and staff are on call so as to be able to intervene at any time.

Innovation is also to be found in how this activity is run based on strengthening cooperation and creating partnerships.

Etablissements continue to work with their long-standing partners (such as subcontractors) but new forms of cooperation had to be created to develop and run the heat recovery solution. This part of the activity requires outside know-how and a greater in-house expertise.

Investment in a plant may be as much as one million euros and the risks are high since the company retains ownership of the equipment. Because of this, relations with financial and legal partners have changed. Insurers are also differently involved since they help to set up the offer.

In addition, compressed air supply contracts are more complex than conventional sales contracts: they bind the customer and the company differently and over a long period (three to ten years). The transition to the functional economy implies a more partnership-based way of working with customers based on transparency and joint construction.

Each case is unique depending on the size of the facility, how close the heating plant is, etc. The applicable solutions therefore differ each time. The time taken to set up the plants and especially negotiation time are consequently greater, especially when the decision is not the responsibility of the customer alone but of a mother company.

Finally, internal cooperation between Etablissements Cros’s different departments is reinforced. For example, the sales department needs to interact more than before with the technical department to set up the projects. This new way of working also reinforces a global corporate strategy that seeks to integrate more cooperation within it.

Changing business model: a source of increased skill

The model can not be changed without the company demonstrating openness and without calling on new skills. Support from people outside the company has made it possible to widen the scope of possibilities and develop the initiative 

Also transmission of knowledge takes place in contact with the partners. This is the case with heat recovery, an activity in which Etablissements Cros were not involved before. Another lever favouring increased skill acquisition, the relatively long contracts make it possible to be free of economic fluctuations and cyclical effects, this stability being reflected in the ability to invest in human resources.

Increased commitment to the functional service economy requires expanding partnerships and know-how. According to Antoine Cros, one of the directors, this is stimulating, makes sense from the point of view of the company, the customer and the environment, and gives the feeling of doing a better job. Etablissements Cros are planning to incorporate the functional service economy in other aspects of their activities. They hope to achieve 50% of their turnover with this business model by 2023. 

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Photo credits: Etablissements Cros


Source: ECLAIRA - Newsletter No. 9 / January 2018

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Newsletter edited by CIRIDD with support from Région Auvergne - Rhône-Alpes


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