A through-life costing methodology for use in product-service-systems

Settanni, Ettore; Newnes, Linda B.; Thenent, Nils E.; Parry, Glenn; Goh, Yee Mey

Abstract

Availability-based contracts which provide customers with the use of assets such as machines, ships, aircraft platforms or subsystems like engines and avionics are increasingly offered as an alternative to the purchase of an asset and separate support contracts. The cost of servicing a durable product can be addressed by Through-life Costing (TLC). Providers of advanced services are now concerned with the cost of delivering outcomes that meet customer requirements using combinations of assets and activities via a Product Service System (PSS). This paper addresses the question: To what extent are the current approaches to TLC methodologically appropriate for costing the provision of advanced services, particularly availability, through a PSS? A novel methodology for TLC is outlined addressing the challenges of PSS cost assessment with regard to 'what?' (cost object), 'why/to what extent?' (scope and boundaries), and 'how?' (computations). The research provides clarity for those seeking to cost availability in a performance-orientated contractual setting and provides insight to the measures that may be associated with it. In particular, a reductionist approach that focuses on one cost object at a time is not appropriate for a PSS. Costing an advanced service delivered through a PSS is a problem of attributing the value of means to the economic activities carried out for specific ends to be achieved. Cost results from the interplay between monetary and non-monetary metrics, and uncertainties thereof. Whilst seeking to ensure generality of the findings, the application of TLC examined here is limited to a military aircraft platform and subsystems. © 2014 Elsevier B.V. All rights reserved.

• Journal Article Type: Article
• Acceptance Date: Feb 20, 2014
• Online Publication Date: Mar 1, 2014
• Publication Date: Jul 1, 2014
• Deposit Date: Mar 3, 2014
• Publicly Available Date: Nov 15, 2016
• Journal: International Journal of Production Economics
• Print ISSN: 0925-5273
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 153
• Pages: 161-177
• DOI: https://doi.org/10.1016/j.ijpe.2014.02.016
• Keywords: through life costing, product service systems, cost estimation, availability contracting, defence and aerospace
• Public URL: https://uwe-repository.worktribe.com/output/815463
• Publisher URL: http://dx.doi.org/10.1016/j.ijpe.2014.02.016
• Additional Information: Additional Information : NOTICE: this is the author’s version of a work that was accepted for publication in International Journal of Production Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Journal of Production Economics, [153, (July 2014)] DOI: 10.1016/j.ijpe.2014.02.016.
• Contract Date: Nov 15, 2016