Cost estimation of a service family based on modularity

Companies are competing to offer high varieties of customised services on top of customised products to increase revenues and customer satisfaction. By adopting product family design methodologies, new concepts such as service families and service platforms are adopted in the service sectors. Despite that, increasing diversity in service offerings induces complexity and difficulty in service cost estimation. This research presents a service family cost estimation methodology that is based on service modularity and activity based costing (ABC). A service family is identified by selecting a set of similar services. Subsequently, activities of each service are identified with an activity diagram. The service family is then decomposed into functional and physical elements, where service modules are identified. Service activities are then mapped into relevant service modules using k -mean clustering algorithms, and activities of each service module are segregated into common and specific services using un-weighted pair group method with arithmetic mean. Finally, modified two-stage ABC methodology is applied to estimate the costs for a service family. To demonstrate the applicability of the proposed methodology, a case study is carried out to estimate the cost for a family of aircraft engines.