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

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

Research output: Contribution to journalArticlepeer-review

59 Citations (Scopus)
43 Downloads (Pure)

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.
Original languageEnglish
Pages (from-to)161-177
Number of pages17
JournalInternational Journal of Production Economics
Volume153
Early online date1 Mar 2014
DOIs
Publication statusPublished - 1 Jul 2014

Keywords

  • Through-life costing
  • Product–service systems
  • Cost estimation
  • Availability contracting
  • Defence and aerospace

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