At FRIGAIR 2025, Samuel Jacobs, executive head – business development at Energy Partners, presented a SAIRAC seminar on the topic‘ Business resilience: Aligning risk and expertise in the cold chain through servitisation’.

“ In discussions about business efficiency, we often miss how closely it ' s tied to risk. Every component in a system carries risk and understanding that from the ground up is key to identifying overall business vulnerability.

“ Technical teams focus on individual system performance, but at the executive level we need to connect those risks to the bigger business picture. If we don’ t, we risk major blind spots. Take refrigeration – a core part of the cold chain. Even a small component like a screw compressor can pose a serious threat if it underperforms. I’ ve seen how that can quickly lead to financial loss and environmental impact,” says Jacobs.

When a business installs new equipment, it effectively locks in that technology at a fixed point in time. While innovation continues, the system’ s performance is capped— and can start to decline immediately due to several factors:

• Design and installation issues: Efficiency can often be hampered even before the system is commissioned

• Misaligned designs – like oversizing due to incorrect load data – can cause problems such as compressor hunting from day one

• Commissioning and drift: Once operational, systems can drift outside their design envelope. Even if temperature targets are met, efficiency suffers, often without the customer noticing

• Latent failures: Over time, running outside design specs leads to rising maintenance costs or outright failure. Belts wear, components break, and only then does the issue become visible – triggering reactive support

FROM BASIC TO ADVANCED SERVICES: SHIFTING THE RISK BURDEN

In basic service models, the customer takes full responsibility for equipment. When something breaks, they request a quote, and a contractor replaces the part. The contractor’ s focus is limited to the fix – not performance – so while some efficiency is restored, the customer lacks visibility into overall system performance. There ' s no

continuous monitoring or measurement, just reactive repair.

“ To address this, many customers move to intermediate services – a key shift from‘ doing it yourself’ to‘ doing it with a partner’. Here, the service provider tracks performance, sets baselines, and reports on efficiency. This approach introduces asset management, giving customers real insight into how their systems are actually running,” says Jacobs.

Advanced service models like servitisation are where real business resilience begins, he explains. In this model, the service provider – not the customer – takes responsibility for equipment performance. Customers pay a risk premium for guaranteed outcomes, effectively insuring themselves against performance failures.

By aligning risk with expertise, servitisation helps cold chain businesses offload operational complexity and uncertainty.“ It reduces financial and environmental risks, frees up capital, and lets customers focus on their core business. This shift – from reactive fixes to performancedriven partnerships – is key to building lasting resilience in today’ s demanding cold chain environment.”

WHEN AWARENESS ISN ' T ENOUGH

Jacobs explains that in the intermediate services model, the service partner provides valuable insights into system inefficiencies, but the investment responsibility still lies with the customer. The asset manager can pinpoint exactly where performance is lacking and recommend actions – be it repairs, upgrades or component replacements.

“ The challenge is that customers are often focused on other priorities, like production expansion with limited technical or financial capacity to act. As a result, even with clear reports in hand, they may delay action – allowing inefficiencies to persist despite knowing they exist.”

This is where advanced services come in— offering a‘ do it for me’ solution. Customers may understand what needs to be done but lack the internal resources to act. They want a partner who delivers results without needing their time or capital.

Advanced services go beyond reporting by shifting the investment responsibility to the contractor. Because the customer pays for guaranteed performance, the contractor is motivated to invest in maintaining and improving system efficiency. The goal isn’ t just to fix or report issues – it’ s to ensure sustained, optimal performance.

Deviations are corrected immediately by the contractor, keeping performance consistently near peak levels. A key benefit is continuous improvement. The service partner not only maintains performance but also invests in upgrades as new technology emerges, lowering operational costs. This allows the customer to benefit

from improved efficiency without additional capital investment.

RISK BEYOND EQUIPMENT

Jacobs presented a performance – time graph depicting the deterioration of technological performance of cooling systems over time and the impact of basic, intermediate and advanced services on optimal performance. The area below the line of optimal performance represents business risk— not just to equipment, but to operations as a whole. Running below this line means the plant isn’ t delivering full utility, limiting production and increasing costs. Every drop in performance reflects a hidden constraint on the business.

“ To demonstrate this risk, I use a screw compressor ' s performance curve. These machines are most efficient at full load, and while a Variable Speed Drive( VSD) can manage capacity effectively, issues arise when control mechanisms fail.

“ For example, if a single compressor enables a 1 000kW system and that compressor ' s slide valve becomes unstable and for arguments’ sake say it can ' t be fixed, then the system’ s capacity becomes unpredictable. That faulty slide valve, slipping from 100 %( 1 000kW) to let’ s say 10 %( 100kW) unexpectedly can be catastrophic. If a room is filled based on full capacity and the system drops suddenly, 900kW of cooling is lost – leading to product spoilage and major financial loss. While slide valves are easily repaired, the demonstration highlights the serious risk of unmanaged operational deviations.”

Continuing with the failing slide valve example, Jacobs explains how a nonengineer business owner could make practical decisions under technological uncertainty by examining the impact the faulty slide valve has on the performance of his business. If compressor capacity fluctuates between 10 % and 100 %, the safest choice is to plan for the lowest reliable output – say, 100kW. However, this reduces plant utility and directly impacts revenue, since loading beyond that point carries risk.

To simplify the decision, the owner draws up a utility vs revenue curve for his business and translates the Coefficient of Performance( CoP) of the compressor into two key metrics:

• Utility = CoP: Higher CoP is better performance and better performance means better utility for his business.

• Revenue = available capacity. Each kW translates into a certain volume of product and therefore revenue. For example, 100kW yields X; 1 000kW yields much more Y.

“ This helps the owner to ask: What guaranteed performance can I secure, and what’ s it worth to me? With a reliable kilowatt output, they can confidently load rooms and forecast revenue— turning technical risk into a financial decision.” CLA

Samuel Jacobs, executive head – business development at Energy Partners.

CALCULATING THE RISK PREMIUM

Jacobs used a simplified example to show how this non-engineer business owner could quantify the value of guaranteed system performance – the risk premium, as an alternative to operating with embedded technological risk. Scenario:

• Max revenue for a given financial period at full capacity( 1 000kW) = R40 000

• Revenue during technological failure( 10 % capacity) = R10 000

• Probability of technological failure = 1 %

• Basic reactive repair cost = R300

• He derives his utility function from the utility curve and calculates the expected utility( a dimensionless number translating the performance of his business should he outsource the technological risk profile) = 199

• The equivalent revenue is then calculated from the expected utilisation( the performance) of the business = R39 601

• Then the difference between earning R40 000 with embedded risk and earning R39 601 with no risk is the actuarially fair premium, an amount his business would be willing to pay to avoid the capacity uncertainty that the failing slide presents— the amount to secure guaranteed system performance, an advanced service

• In this case, the calculated premium is R399

• The difference between basic reactive repair services( R300) and the premium( R399) for advanced services is R99

• This R99 represents the risk premium— what the owner is willing to pay to eliminate the 1 % risk of failure and lost revenue through advanced services

This example illustrates how cold chain businesses can look at servitisation. Performance guaranteed services, even with low-probability failures, justify a higher service investment when business impact is high.

Supplied by Energy Partners