Profitability of Industrial Product Service Systems (IPS²) – Estimating Price Floor and Price Ceiling of Innovative Problem Solutions

Date published

2009-04-01

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Cranfield University Press

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Conference paper

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Citation

M. Steven, M. Rese, T. Soth, W.-C. Strotmann, M. Karger, Profitability of Industrial Product Service Systems (IPS²) – Estimating Price Floor and Price Ceiling of Innovative Problem Solutions, Proceedings of the 1st CIRP Industrial Product-Service Systems (IPS2) Conference, Cranfield University, 1-2 April 2009, pp243

Abstract

Companies from industrialised nations are faced with the threat of competition from low-cost countries. We suggest Industrial Product Service Systems (IPS²) as a possible answer. But as the development and production can be quite expensive for the supplier, the question arises how the net benefits of an IPS² for the supplier can be determined to ensure that the IPS² is profitable. We establish a framework for the calculation of both the supplier’s revenues and costs of an IPS². Requirements induced by possible subsequent changes of the IPS² are emphasized. We propose a combination of the Net Present Value Approach and the Real Options Approach as a means of determining the quantified revenues and a combination of Direct Costing, Time-Driven Activity-Based Costing and the Real Options Approach for the calculation of the costs of an IPS² for a supplier over its life cycle.

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Organised by: Cranfield University

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Github

Keywords

Industrial Product Service Systems, Net Present Value Approach, Real Options Approach, Time Driven, Activity-Based Costing, Learning Effects, Price Ceiling

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Copyright: Cranfield University 2009

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Funder/s

Mori Seiki – The Machine Tool Company