ASU Center for Organization Research and Design

A Through-life Costing Methodology for Use in Product-Service-Systems

by Ettore Settanni; Linda B. Newnes; Nils E. Thenent; Glenn Perry; Yee Mey Goh

Jul 1, 2014

Availability-based contracts which provide customers with the use of assets are increasingly offered as an alternative to the purchase of an asset and separate support contracts. The cost of servicing a durable product is addressed by Through-life Costing (TLC). Providers are now concerned with the cost of delivering outcomes which meet customer requirement using combinations of assets and activities via 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 to the 'what?' (cost object), 'why/to what extent?' (scope and boundaries), and 'how?' (computations). Qualitative methods provide a preliminary understanding of howthe actions undertaken within the boundaries of the enterprise system enable or hinder service delivery.

The principles of Input-Output Analysis are used to produce a mathematically treatable counterpart of the qualitative PSS representation which preserves the system structure. The research provides clarity for those costing availability in a performance-orientated contractual setting and provides insight to the measures that may be associated with it. Whilst seeking to ensure generality of the findings, the application of TLC examined here is limited to a military aircraft platform and subsystems.