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26 Nov 2010 | Viewed 321 times

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'Power by the Hour': Can Paying Only for Performance Redefine How Products Are Sold and Serviced?

Author: Knowledge@Wharton

Imagine paying for your car only when it works. Or your television. Or even your high-end toaster. That might sound far-fetched, but it could be the future model for purchases requiring service over time. Known as "Power by the Hour" (PBH) in the private sector, this new approach is already reshaping customer-supplier relationships in defense and aerospace contracting under the name "Performance-based Logistics" (PBL). Customers and suppliers of mission-critical products, such as semi-conductor manufacturing equipment, commercial aircraft and military weapon systems, are recognizing that the acquisition of world-class products is not sufficient, but rather it is necessary to provide superior, cost effective maintenance and support services throughout the after-sales phase of the customer-supplier relationship. A major focus of these efforts involves re-designing the contractual and implicit relationships between customers and suppliers in the service support supply chain.

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