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

Author

Listed:
  • 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.

Suggested Citation

  • Settanni, Ettore & Newnes, Linda B. & Thenent, Nils E. & Parry, Glenn & Goh, Yee Mey, 2014. "A through-life costing methodology for use in product–service-systems," International Journal of Production Economics, Elsevier, vol. 153(C), pages 161-177.
    • Handle: RePEc:eee:proeco:v:153:y:2014:i:c:p:161-177
    DOI: 10.1016/j.ijpe.2014.02.016
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    Cited by:

    1. Datta, Partha Priya, 2020. "Hidden costs in different stages of advanced services – A multi-actor perspective of performance based contracts," Journal of Business Research, Elsevier, vol. 121(C), pages 667-685.
    2. Sabrina Neugebauer & Silvia Forin & Matthias Finkbeiner, 2016. "From Life Cycle Costing to Economic Life Cycle Assessment—Introducing an Economic Impact Pathway," Sustainability, MDPI, vol. 8(5), pages 1-23, April.
    3. Jackson, Canek & Pascual, Rodrigo & Mac Cawley, Alejandro & Godoy, Sergio, 2023. "Product–service system negotiation in aircraft lease contracts with option of disagreement," Journal of Air Transport Management, Elsevier, vol. 107(C).
    4. Rodríguez, Arturo Estrada & Pezzotta, Giuditta & Pinto, Roberto & Romero, David, 2020. "A comprehensive description of the Product-Service Systems’ cost estimation process: An integrative review," International Journal of Production Economics, Elsevier, vol. 221(C).
    5. Cenamor, J. & Rönnberg Sjödin, D. & Parida, V., 2017. "Adopting a platform approach in servitization: Leveraging the value of digitalization," International Journal of Production Economics, Elsevier, vol. 192(C), pages 54-65.
    6. Martinez, Veronica & Neely, Andy & Velu, Chander & Leinster-Evans, Stewart & Bisessar, Dav, 2017. "Exploring the journey to services," International Journal of Production Economics, Elsevier, vol. 192(C), pages 66-80.
    7. Settanni, Ettore & Thenent, Nils Elias & Newnes, Linda B. & Parry, Glenn & Goh, Yee Mey, 2017. "Mapping a product-service-system delivering defence avionics availability," International Journal of Production Economics, Elsevier, vol. 186(C), pages 21-32.
    8. Lee, Sunghee & Yoo, Shijin & Kim, Daeki, 2016. "When is servitization a profitable competitive strategy?," International Journal of Production Economics, Elsevier, vol. 173(C), pages 43-53.
    9. Duran, Orlando & Afonso, Paulo Sérgio Lima Pereira, 2020. "An activity based costing decision model for life cycle economic assessment in spare parts logistic management," International Journal of Production Economics, Elsevier, vol. 222(C).
    10. Farsi, Maryam & Erkoyuncu, John Ahmet, 2021. "An agent-based approach to quantify the uncertainty in Product-Service System contract decisions: A case study in the machine tool industry," International Journal of Production Economics, Elsevier, vol. 233(C).
    11. Saccani, Nicola & Perona, Marco & Bacchetti, Andrea, 2017. "The total cost of ownership of durable consumer goods: A conceptual model and an empirical application," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 1-13.

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