Information availability at the competitive bidding stage for service contracts

Sustainable production and consumption have become more important internationally which has led to the transformation of market structures and competitive situations into the direction of servitisation [Baines et al., 2011; Bandinelli and Gamberi, 2011]. For a manufacturing company the shift towards being a service provider is characterised by a high level of uncertainty about the future strategic development of the company caused by e.g. inadequate knowledge and information [Song et al., 2007]. For this research, a service is defined as an activity or a process which is aimed at the change of the state of the service issue such as the repair of a machine or the supply of flying hours for an aircraft [Araujo and Spring, 2006; Gadrey, 2000]. [...continues]

Information display for decisions under uncertainty

In the early product design stage, considering the Through Life Cost and uncertainty are important. However, the information given to the decision maker is often limited, resulting in a large level of subjectivity. This paper introduces experimental research exploring different information displays and their subjective interpretation by cost forecasters within the defence and aerospace sector. Three different kinds of information display and different levels of detail of contextual information were tested, showing that they impact the decision making process and subjective interpretation

Manifestation of uncertainty - a classification

The aim of the research presented in this paper is to propose a classification of the manifestation of uncertainty to offer a basis for a shared understanding and characterization of the concept of uncertainty within the area of design research. During the past decade a growing number of papers about uncertainty have been published. These papers focus on different aspects and points of the design process and offer insights on different aspects of uncertainty. The research presented in this paper describes the manifestation of uncertainty and proposes a classification. The classification consists of context uncertainty arising from the situation circumstances, data uncertainty stemming from input information or data into a further process, model uncertainty resulting from the simplifications in models, and phenomenological uncertainty connected to the outcome of a process. Each of these categories is described in detail offering a basis for positioning specific research contributions published in previous ICED conferences. This offers a basis for the consideration of the appropriate uncertainty management methods

Approaches to displaying information to assist decisions under uncertainty

The estimation of the costs of a product or project and the decisions based on these forecasts are subject to much uncertainty relating to factors like unknown future developments. This has been addressed repeatedly in research studies focusing on different aspects of uncertainty; unfortunately, this interest has not yet been adopted in practice. One reason can be found in the inadequate representation of uncertainty. This paper introduces an experiment, which engages different approaches to displaying cost forecasting information to gauge the consideration of uncertainty in the subsequent decision-making process. Three different approaches of displaying cost-forecasting information including the uncertainty involved in the data were tested, namely a three point trend forecast, a bar chart, and a FAN-diagram. Furthermore, the effects of using different levels of contextual information about the decision problem were examined. The results show that decision makers tend to simplify the level of uncertainty from a possible range of future outcomes to the limited form of a point estimate. Furthermore, the contextual information made the participants more aware of uncertainty. In addition, the fan-diagram prompted 75.0% of the participants to consider uncertainty even if they had not used this type of diagram before; it was therefore identified as the most suitable method of graphical information display for encouraging decision makers to consider the uncertainty in cost forecasting

Competitive bidding for outcome based contracts – price to win?

The suppliers of long-life assets such as submarines and airplanes no longer simply sell these assets but provide advanced engineering services. In other words companies that traditionally designed and manufactured long-life products now compete through the provision of a service, such as asset availability. These companies face a high level of uncertainty due to the novelty of the process and the long-term nature of services. However, regardless of these uncertainties the service provider needs to estimate the cost and expected profits for such provision. The pricing decision of these service contracts is influenced by multiple factors and considerations and as a minimum the supplying contractor needs to yield suitable profit to sustain their business. From current research it is known that the estimated company profit is often optimistic. This places pressure on both the customer and the service provider. From our research we found examples of reductions in profits for those providing services. For example a company, which moved to performance-based road maintenance contracts, only yielded less than 50% of their expected profit. So, how can providers of long-life, high-value assets estimate the costs for delivering an expected outcome and account for the uncertainties? One of the challenges is measuring such uncertainties and taking account of them in the pricing decision. In this paper we present our research to date on the provision of a framework and a five-step process for modelling the influencing uncertainties and the impact of these uncertainties on the price bid. We will present the background need for such analysis and then provide an overview of our approach and findings to date. Finally, using an exemplar service we will demonstrate how using our approach highlights the probability of winning the contract, the probability of making a profit and the expected profit value for particular price bids

Uncertainty analysis and its application to service contracts

Because of the transformation of market structures into the direction of servitization, manufacturing companies are forced to compete through the supply of services as opposed to products. Competing for these service contracts, particularly during bidding, the decision makers face various uncertainties that influence their decisions. This paper presents a holistic approach for identifying, modeling and representing these uncertainties to enable a more informed decision. As current literature lacks a holistic approach to characterize uncertainty, this paper proposes such an approach by classifying uncertainty into five layers. It is described how they offer an integrated approach to describing the uncertainty inherent in a situation. This classification is then applied to the bidding situation for a service contract in the form of a conceptual framework. This framework depicts the influencing factors on a bidding decision, namely, the contract conditions, internal company perspective, competitors and customer. To demonstrate the use of the uncertainty classification in detail the influencing factor of the customer is used as an exemplar. The uncertainty connected to the customer is characterized and the techniques for modeling the uncertainty are described. It is explained how the can be included in a decision matrix representing the probability of winning the contract