Loading...
Pricing service maintenance contracts using predictive analytics
Deprez, Laurens Antonio, Katrien Boute, Robert
Deprez, Laurens
Antonio, Katrien
Boute, Robert
Citations
Altmetric:
Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2021
Journal
European Journal of Operational Research
Book
Publication Volume
290
Publication Issue
2
Publication Begin page
530
Publication End page
545
Publication NUmber of pages
Collections
Abstract
As more manufacturers shift their focus from selling products to end solutions, full-service maintenance contracts gain traction in the business world. These contracts cover all maintenance related costs during a predetermined horizon in exchange for a fixed service fee and relieve customers from uncertain maintenance costs. To guarantee profiftability, the service fees should at least cover the expected costs during the contract horizon. As these expected costs may depend on several machine-dependent characteristics, e.g. operational environment, the service fees should also be differentiated based on these characteristics. If not, customers that are less prone to high maintenance costs will not buy into or renege on the contract. The latter can lead to adverse selection and leave the service provider with a maintenance-heavy portfolio, which may be detrimental to the profi tability of the service contracts. We contribute to the literature with a data-driven tarif plan based on the calibration of predictive models that take into account the different machine profi les. This conveys to the service provider which machine pro files should be attracted at which price. We demonstrate the advantage of a differentiated tarif plan and show how it better protects against adverse selection.
Research Projects
Organizational Units
Journal Issue
Keywords
Maintenance, Servitization, Contract Pricing, Predictive Analytics, Risk Management, Calibration