← Business Models: Industry Specific (Industrials & Materials) (all topics)
TRM (total refractory management contracts)
What it is
A contracting model where the refractory supplier takes responsibility for the customer's entire lining performance - design, supply, installation, monitoring and relining - and is paid per tonne of steel produced rather than per tonne of brick sold
It aligns the supplier's incentive with lining life rather than refractory volume
Impact on industries
- Transforms a commodity supply relationship into a long-term service contract, with revenue visibility and far higher switching costs
- Aligns incentives correctly - the supplier profits by making linings last longer, which is exactly what the steelmaker wants
- Embeds the supplier inside the customer's operations, generating performance data that competitors cannot replicate
- Transfers performance risk to the supplier, so a lining failure hits the contractor rather than the steel plant
- Requires technical services capability, on-site teams and working capital, which smaller refractory makers cannot fund