Product/Service-Systems in the Maritime Industry - From Economic Evaluation Throughout the Life Cycle to Implementation

Abstract

Product-Service Systems (PSS) provide business opportunities for both suppliers and customers, as they enhance traditional product offerings with service elements in an effort to create new revenue streams and customer value. Despite the growth of the field in recent years, the role of costs and benefits in PSS implementation remains obscure. Moreover, research has been conducted from the supplier perspective, while the role of the customer in successful PSS procurement, implementation and co-development understudied. As a result, there is a pronounced need to understand the economic potential of PSS and ensure that improvements have a life cycle outlook and they do not result in cost shifting. In order to understand and estimate the economic potential of PSS, Life Cycle Costing (LCC) was used as a framework to cover the whole life cycle. LCC was aligned with Life Cycle Assessment (LCA) to allow comparison between economic and environmental impacts and benefits of PSS. Based on a review of the literature, a series of challenges and considerations were identified for applying Life Cycle Costing in PSS. Building on the developed support and theoretical understanding, the project continued by examining how the developed support can help understand the potential of real-world PSS offerings. A multiple case study was conducted in the context of the maritime industry, and considered both the supplier and customer perspectives to evaluate the role of analysis of costs and benefits in service strategy formulation. The quantitative analysis revealed that PSS had a strong savings potential that follows a non-linear relationship to the demand for individual services and is dependent on the way the underlying systems is being managed by the end-user. Moreover, the uncertainty analysis highlighted that a specific aspect in the way the reference system operates can have a pronounced impact on the demand and the economic impacts of the PSS. At the same time, the lack of fundamental demand for services questioned the financial attractiveness of PSS. The qualitative analysis highlighted the impact of the legislative framework and the importance of both customer and supplier capabilities in service strategy formulation. Moreover, the interaction between customer/supplier capabilities was also important, as PSS adoption was in some cases hampered by lack of synergies between customer and supplier and suppliers’ inability to deliver on customer expectations. The multiple case study identified customer capabilities as determinants of service strategy formulation, and consecutively successful PSS adoption. In light of the ongoing trend of digitization, this study tried to understand how the institutionalisation of digital capabilities in the customer organisation affects the implementation of PSS. The original hypothesis was that digital capabilities uptake in the customer organisation would reveal system-wide opportunities for procurement and co-development of PSS. But instead of facilitating procurement of PSS, digital capabilities facilitated development of PSS by stakeholders internal to the company, and strategic co-development with external stakeholders. The reason was that the institutionalisation of digital capabilities circumvented cost barriers associated with the procurement of services from external stakeholders. Moreover, it supported process standardization - to the expense of process innovation-, and transformed the network that delivered PSS by closing opportunity gaps for externally procured services. Lastly, the uptake of digital capabilities highlighted the importance of cost estimation in making the company more responsive. The research contributes to the associate field by providing a more balanced view on the role of costs and benefits in PSS adoption. In particular, empirical findings cast a critical eye on the opportunity that digital innovations and capabilities hold for PSS procurement. Equally important, the research provides a closer look on the customer perspective and its impact on PSS implementation and development. Future work could generalise the findings and expand focus beyond the maritime industry to other industries, and evaluate the impact of emergent technologies on PSS.