Servitization through outcome-based contract – a systems perspective from the defence industry

This paper provides a viable systems perspective of an outcome-based service initiative involving major manufacturers in the defence industry. The viable systems perspective allowed a coherent structuration of the complex servitization context involving provider and customer organizations. It also unveiled critical relationship mechanisms that enable synergy and facilitate the achievement of co-capability by the organizations involved. Through a case study approach, the research finds that interventions in the customer system reduce variability in the provider system as well as in the service system as a whole. The systemic interventions are implemented via key provider/customer relationships the study identifies. The relationships deal with the high level of internal variety in outcome-based service systems. A typology for the identified relationships is developed, offering a helpful basis for the purposeful planning and design of interactions aimed at developing co-capability. The paper also offers theoretical propositions defining fundamental features of outcome-based service systems. The unique characteristics of these systems addressed in this paper provide particularly useful insights concerning the implementation of this type of servitization initiative not only in the defence industry, but also in other industrial sectors where servitization initiatives involve complex configurations of provider and customer organizations

Power-by-the-hour: the role of technology in reshaping business strategy at Rolls-Royce

There is a recognised trend of manufacturing companies offering not only products, but services and even complete solutions to business problems. Research has highlighted economic, market demand and competitiveness factors as responsible for the re-shaping of business strategies that this has involved. This study analyses the extent to which another factor, technology, has been a significant factor in the switch from product oriented to service oriented strategies. A case study of the aero engine manufacturer Rolls-Royce is used to analyse the impact of technology, which is found to have led manufacturers to re-shape their business strategies. The study finds that developments in one technology in particular, namely digital electronics, have been a powerful enabling factor facilitating the implementation of service strategies. This provided original equipment manufacturers (OEMs) like Rolls-Royce with a competitive advantage relative to conventional service providers, by enabling them to acquire new knowledge management capabilities

Servitization and operations management : a service-dominant logic approach

Managing organisational performance in sectors such as equipment provision has become increasingly complex as competition has heightened and firms have felt pressure to add value through the provision of services (Baines et al, 2007; Howard and Caldwell, 2011; Neely et al., 2011). This provision is commonly referred to as the servitization of manufacturing (Vandermerwe & Rada, 1988). By extending the traditional offering of equipment to include service activities however, underlying operational delivery systems and processes have become more complex to manage and co-ordinate. No longer are firms simply making and shipping products; they are now engaged in a more complex world of design and delivery (Neely et al., 2011). This study aims to explore servitization from a value perspective through the lens of Service-Dominant (S-D) logic, and to propose its implications for operations management

An effective uncertainty based framework for sustainable industrial product-service system transformation

Industrial Product-Service Systems (IPS2) can provide insights to enhance the environmental sustainability and lower environmental impact. However, its successful realisation for preventing the production of waste, while increasing efficiencies in the uses of energy and human capital remains a highly convoluted problem. This research article aims to address this issue by presenting an innovative uncertainty-based framework that can be used to assist in achieving increased sustainability within the context of IPS2. The developed framework explains the drivers for decision-making and cost to enable sustainability improvements in transforming to industrial services. This is based on academic literature, and multiple case studies of seven industrial companies with over 30 h of semi-structured interviews. The validation of the framework through two case studies demonstrates that uncertainty management can enable resource efficiency and offer sustainable transformation to service provision

Contracting for complex performance in markets of few buyers and sellers: the case of military procurement

Article"This article is (c) Emerald Group Publishing and permission has been granted for this version to appear here. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited."Purpose – The aim of the paper is to identify and review the impact and challenges of new contractual arrangements on UK military procurement and other limited or oligopolistic markets. Design/methodology/approach – The unit of analysis is the large-scale procurement programme. Two cases of major military platforms (naval and air defence) examine through-life maintenance or “contracting for availability” and build theory on procuring complex performance (PCP). Propositions are developed from the literature then tested and extended from the case analysis, supported by 35 interviews from buyer and supplier representatives. Findings – Examining UK military platform procurement reveals a perspective not present in fast moving high volume supply chains. In oligopolistic markets such as defence, the Ministry of Defence (MOD) represents a market of one, seeking ambitious and non-incremental innovation from the prime contractor during the procurement process. The new contractual arrangements show an increasing shift in responsibility to the prime contractor who coordinates service support and supply chain incentivisation over extended, often multi-decade platform lifecycles. Research limitations/implications – The cases were conducted separately and later compared. Whilst based on defence sources, the paper concludes with general recommendations for all public-private complex procurements and seeks to explore other industry sectors as part of further research into PCP. Originality/value – Examined from a theoretical and practical perspective, the cases reveal the challenges facing procurement in major public-private projects. The changing role identified reflects extended timescales and the quasi-market military procurement environment, compounded by current economic and politically charged conditions. Procurement by default increasingly plays a new shaping role in large-scale programme management driven by outcome-based contracting. Customers such as the MOD must re-evaluate their role under these new contractual arrangements, providing leadership and engaging with future contracting capability and innovation

Integrating IVHM and Asset Design

Integrated Vehicle Health Management (IVHM) describes a set of capabilities that enable effective and efficient maintenance and operation of the target vehicle. It accounts for the collection of data, conducting analysis, and supporting the decision-making process for sustainment and operation. The design of IVHM systems endeavours to account for all causes of failure in a disciplined, systems engineering, manner. With industry striving to reduce through-life cost, IVHM is a powerful tool to give forewarning of impending failure and hence control over the outcome. Benefits have been realised from this approach across a number of different sectors but, hindering our ability to realise further benefit from this maturing technology, is the fact that IVHM is still treated as added on to the design of the asset, rather than being a sub-system in its own right, fully integrated with the asset design. The elevation and integration of IVHM in this way will enable architectures to be chosen that accommodate health ready sub-systems from the supply chain and design trade-offs to be made, to name but two major benefits. Barriers to IVHM being integrated with the asset design are examined in this paper. The paper presents progress in overcoming them, and suggests potential solutions for those that remain. It addresses the IVHM system design from a systems engineering perspective and the integration with the asset design will be described within an industrial design process

Integrating IVHM and asset design

Integrated Vehicle Health Management (IVHM) describes a set of capabilities that enable effective and efficient maintenance and operation of the target vehicle. It accounts for the collecting of data, conducting analysis, and supporting the decision-making process for sustainment and operation. The design of IVHM systems endeavours to account for all causes of failure in a disciplined, systems engineering, manner. With industry striving to reduce through-life cost, IVHM is a powerful tool to give forewarning of impending failure and hence control over the outcome. Benefits have been realised from this approach across a number of different sectors but, hindering our ability to realise further benefit from this maturing technology, is the fact that IVHM is still treated as added on to the design of the asset, rather than being a sub-system in its own right, fully integrated with the asset design. The elevation and integration of IVHM in this way will enable architectures to be chosen that accommodate health ready sub-systems from the supply chain and design trade-offs to be made, to name but two major benefits. Barriers to IVHM being integrated with the asset design are examined in this paper. The paper presents progress in overcoming them, and suggests potential solutions for those that remain. It addresses the IVHM system design from a systems engineering perspective and the integration with the asset design will be described within an industrial design process

A systems engineering approach to performance-based maintenance services design

Traditionally, industrial services have been mainly transaction-based, i.e., the equipment user pays the service provider for getting a job done or providing assistance and support for equipment operations. Recently, a trend has emerged of increasing the relational perspective of these services, which are becoming more oriented towards customer value and service performance levels. Among these emergent industrial services, performance-based services represent an opportunity for equipment manufacturers to transform their service offerings towards more relational and customer-oriented services. The purpose of this work is to study the design of a generic performance-based maintenance service under a novel perspective given by systems engineering. This paper is intended to serve as a starting point to fully understand this type of services and to develop a method that can support equipment manufacturers who wish to advance their service offerings

The Financial Consequences of Servitization in Manufacturing Firms: An Empirical Analysis

Prior body of servitization research falls short to fully capture the financial consequences of servitization. This paper aims at investigating the financial consequences of servitization in listed manufacturing companies in four countries, namely UK, USA, Germany and China. By means of secondary data obtained from Worldscope database, regression models will be developed to compare servitized and non-servitized manufacturing firms in the aforementioned countries. This study contributes to the current understanding of the financial consequences in the transition towards service provision and aims to enhance managerial decision-making processes regarding servitization by comparing different contexts and countries