Keywords: Product-service system (PSS); PSS model; Evaluation scheme; Evaluation criteria. 1 ... from the customer's perspective with the support of a PSS.
An Evaluation Scheme for Product-Service System Models with a Lifecycle Consideration from Customer’s Perspective 1
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Kwang-Jae Kim , Chie-Hyeon Lim , Jun-Yeon Heo , Dong-Hee Lee , Yoo-Suk Hong , and Kwangtae Park
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Department of Industrial and Management Engineering, Pohang University of Science and Technology, Republic of Korea 2 3
Division of System LSI Business, Samsung Electronics
Department of Industrial Engineering, Seoul National University, Republic of Korea 4
Business School, Korea University, Republic of Korea
Abstract The product-service system (PSS) is a business system in which its integrated products and services jointly fulfill customer needs. This research proposes an evaluation scheme for PSS models. The PSS model evaluation scheme consists of evaluation criteria and methods. The current paper mainly focuses on the introduction of the evaluation criteria and their application. The set of evaluation criteria has a four-layered hierarchical structure which has 2 perspectives, 5 dimensions, 21 categories, and 94 items in total. They are designed to consider the provider and customer perspectives, and all 3P (profitability, planet, and people) dimensions. They cover various stages of a PSS lifecycle, namely, design, production, sales (or purchase), usage as well as disposal. To illustrate the usefulness of the proposed evaluation scheme, a few PSS cases are first modeled using an existing PSS visualization tool, and then evaluated using the scheme. Case studies show the proposed evaluation scheme is workable to assess the potential value of the PSS models in question; it provides an extensive knowledge base for PSS evaluation, thereby serves as an efficient and effective aid to practitioners for successful PSS development. Keywords: Product-service system (PSS); PSS model; Evaluation scheme; Evaluation criteria
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INTRODUCTION
With the commoditization of many products, product-based companies now face various challenges in innovation. Getting ahead of competitors in terms of cost and technology leadership in production is becoming more difficult. Furthermore, global environmental regulations are becoming more rigid. With more intense product-led competition, many product-based companies have begun to adopt a service-led competitive strategy to distinguish themselves from competitors [1, 2]. Recent studies have defined such value proposition, in which its integrated products and services “jointly fulfill” customer needs, as product–service system (PSS) [3, 4, 5]. Representative examples of PSS include the precise farming solution, car-sharing scheme, and document management solution [6]. PSSs have enabled the win-win situation for both customers and providers. Customers become able to perform specific tasks in product consumption process faster, better, or cheaper than before [6, 31]. Literature has categorized what providers benefit from PSS into 3P values, namely, profitability, planet, and people [5, 11]. From profitability (i.e., economic) point of view, greater customer satisfaction contributes to arrive bigger gain. Furthermore, building closer relations based on customer process management enables companies to anticipate future businesses and to stabilize the profit mechanism [2, 8]. From planet (i.e., environmental) point of view, providing PSSs dematerializes product offering and taps the potential to alleviate material production surplus and consumption [3, 5, 9]. From people (i.e., social) point of view, the balanced consumption propensity achieved through the use of PSSs encourages people to streamline their product consumption routines with more mature choices. Meanwhile, the products consumption related-social cost decreases [10, 11]. In short, PSS could be an
alternative solution in achieving sustainable growth affording the stakeholders grins. A generic process of PSS development consists of iterative two phases (van Halen et al., 2005): alternatives design and evaluation. For any PSS development project, either developing brand new PSSs or improving existing PSSs, to be successful, the evaluation of PSS should be done in a proper manner. Despite its importance, PSS evaluation has not received as much attention as it deserves in literature [3, 29, 30]. In this regard, this paper proposes an evaluation scheme for evaluating PSS. The evaluation scheme should include evaluation criteria, evaluation methods, and an evaluation procedure. This paper focuses on the introduction and use of evaluation criteria. The evaluation criteria cover not only the provider perspective but also the customer perspective. The results of this research can support the development of PSS. This paper presents an extension of the authors’ previous work [7] by emphasizing the lifecycle consideration from the customer’s perspective with the support of a PSS visualization tool, called PSS Board [6]. 2
LITERATURE REVIEW
Existing studies related to the PSS evaluation can be classified into five categories according to the focus of evaluation: profitability, planet, and people which refer to economic, environmental, and social value, respectively; all the 3P (profitability, planet, and people); and customer value created from the customer needs fulfillment. This section introduces some of the reviewed studies. Although some of the introduced studies are not specifically targeted for the PSS evaluation, their approaches or insights can be employed for the purpose of the evaluation.
20th CIRP International Conference on Life Cycle Engineering, Singapore, 2013
70 For profitability value, Mannweiler et al. [13] proposes a methodology to assess the costs arising throughout the whole lifecycle of PSS, while Kimita et al. [14] proposes a methodology to evaluate service activities, employing activity based costing. For planet value, Vogtlander et al. [15] proposes the EVR (ecocosts/value ratio) model to measure ecological burden over added value of a product, a service, or a product-service combination. Park and Tahara [16] proposes a methodology to evaluate ecoefficiencies of product using data envelopment analysis (DEA) and life cycle assessment (LCA). For people value, Rothenberg [2] provides insights extracted from the three PSS case studies (Gage, PPG, and Xerox). This research proposes six key success factors of the PSS development regarding organization’s structural and cultural changes. The author mentions the true change in the PSS development is overcoming cultural inertia that employees and customers have. Labuschagne et al. [17] proposes a framework to evaluate the sustainability of operations in the manufacturing sector. For all the 3P values, van Halen [9] proposes methodology for PSS innovation (MEPSS) that is developed based on the authors’ consulting experience on PSS development over time. The methodology consists of various tools and a PSS development process. The tools, such as Inventory of Sustainability Indicator, E2 Vector and Sustainability Design-Orienting, support evaluating the 3P values of a PSS and interpreting the results. Omann [10] proposes a PSS evaluation tool. The tool includes a set of 59 evaluation criteria reflecting the 3P values. For customer value, Garvin [18] proposes eight dimensions of product quality, namely, performance, features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality, while Parasuraman et al., [19, 20] proposes five dimensions of service quality, namely, reliability, assurance, tangibles, empathy, and responsiveness. Womack and Jones [21] argues the importance of streamlining the customer’s consumption process, while Frei [22] identifies the five types of customer-introduced variability affecting the service outcomes, namely, arrival, request, capability, effort, and subjective preference. Based on the literature review, we propose three requirements for successful PSS evaluation as follows. First, the customer perspective to experience a PSS should be considered in the PSS evaluation. This is because the essence of PSS is to focus on customer’s fundamental goal rather than the product concept [3, 23]. However, most works have considered only the provider perspective. Second, a spectrum of the PSS lifecycle in time needs to be thoroughly investigated in the PSS evaluation, since the value of a PSS is continually created throughout its entire life rather than at a single point in time. Without a complete understanding of the contextual relationships, the PSS evaluation could be limited. Brissaud and Tichkiewitch et al. [24]; Mannweiler et al. [13]; and Lim et al. [6] define the steps of PSS lifecycle (or PSS process) from the customer perspective for its effective analysis, while Aurich et al. [25]; Hepperle et al. [26]; and Geum and Park [27] define the steps from the provider perspective. In summary, a PSS lifecycle consists of five phases, namely, design, production, sales (or purchase), usage as well as disposal. Third, for a sustainable growth of a PSS or eventually the PSS provider, the evaluation should be done in a balanced manner, which covers all the 3P values. However, few works have considered 3P for sustainability.
K.-J. Kim et al. 3
PROPOSED PSS EVALUATION SCHEME
The PSS evaluation scheme consists of evaluation criteria, evaluation methods, and an evaluation procedure. This paper focuses on the introduction and use of developed evaluation criteria. The proposed evaluation scheme pursues a general evaluation model. It attempts to evaluate PSS in a comprehensive manner. First, it considers both customer and provider (company) perspectives. Second, the evaluation scheme considers all phases of PSS lifecycle by including the PSS lifecycle-dependent criteria. Third, all the 3P (profitability, planet, and people) dimensions are considered in the provider perspective. Table 1 shows the structure of the evaluation criteria. The framework of evaluation criteria has a four-layered hierarchical structure. The uppermost level of the structure is the perspective level. The perspective refers to the evaluator's point of view. In the perspective level, two levels exist. One is sustainability and the other is customer value. Sustainability and customer value represent the provider (company) and the customer perspectives, respectively. Each perspective has several dimensions, and each dimension has categories as shown in Table 1. A dimension is a particular part of perspective. Categories refer to “the broad areas or groupings of social, environmental or economic issues of concern to the company stakeholders [9].” A brief explanation of each category is also given in Table 1. Each category has several items. Items refer to “the general types of information related to a given category [9].” A category and an item need specific adaptations since they depend on a specific context considered. The wide coverage over both process lifecycle dimension and value dimension (i.e., the 3P and customer values) is the main advantage of the proposed set of 94 criteria. This enables a comprehensive and balanced understanding on the weaknesses and strengths of the PSS. On the other hand, all the proposed criteria may not be relevant in evaluating a particular PSS process. Thus, in an actual evaluation, only the criteria relevant to the given PSS can be selected as appropriate to the evaluation purpose. The user, definitely, can adapt the criteria or add her own ones as needed. The process of arriving at the 94 evaluation criteria is as follows. First, we collected the evaluation criteria and perspectives proposed by existing studies related to the PSS evaluation. Section 2 introduces some of the studies reviewed. Second, we examined their relevance with lifecycle and value dimensions. In this examination, some of the criteria proposed by existing studies are adopted, while some are distilled from the implicit expertise related to evaluation criteria. As a result, experts in existing studies related to the PSS evaluation had been re-defined as evaluation criteria considering lifecycle and all the 3P values dimension of PSS. Third, some evaluation criteria, which the existing studies related to the PSS evaluation (shown in Table 1) could not cover, were newly identified and added to the library in the present work, based on our understanding on PSS and general system evaluation. Finally, we examined the collection of criteria if it provides enough diverse viewpoints to evaluate all the three types of PSS [28]. We also modified (e.g., combined, divided, or renamed) some of them as required. Then, we repeated this refinement process several times. As a result, the set of 94 evaluation criteria, specifically related to the lifecycle and all the 3P values of PSS, finally came through.
An Evaluation Scheme for Product-Service System Models with a Lifecycle Consideration from Customer’s Perspective
Perspective Sustainability
Dimension [10000] Profitability
[20000] Planet
[30000] People
Customer Value
[40000] Quality
[50000] Cost
Category
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Item
[10100] Fixed cost
Fixed cost for offering PSS
[10200] Operational cost [10300] Revenue [10400] Ecosystem Structure [10500] Macroeconomic effects
[10101] Fixed cost for designing PSS [10102] Fixed cost for producing PSS [10103] Fixed cost for supporting the use of PSS [10104] Fixed cost for supporting the disposal of PSS Variable cost for operating PSS (4 items) Financial benefits from PSS (8 items) Efficiency/Effectiveness of Ecosystem Structure (4 items) Ripple effects resulting from PSS (2 items)
[20100] Product usage
Intensity of product use (2 items)
[20200] Material usage [20300] Energy usage [20400] Emissions of toxic substance [20500] Environmental management
Amount of material use (4 items) Amount of energy use (3 items) Amount of toxic substance discharge (8 items) Observance of environmental standards (3 items)
[30100] Capability of employees
Level of employees’ capabilities (3 items)
[30200] Profit sharing [30300] Working environment [30400] Employment equity [30500] Acceptability [30600] Influence on society
Sharing profit among stakeholders (2 items) Working environment and conditions (5 items) Providing equal opportunity of employment (8 items) Level of acceptance by people and society (3 items) Impact on society and culture (6 items)
[40100] Product-related quality
Quality of product component of PSS (7 items)
[40200] Service-related quality
[40300] Customer support [40400] System convenience
Quality of service component of PSS [40201] Tangibles of service component [40202] Reliability of service component [40203] Responsiveness of service component [40204] Assurance of service component Customization and support for customers (5 items) Convenience and flexibility of PSS (6 items)
[50100] Cost
Costs to customers (3 items) Table 1: Structure of PSS evaluation criteria.
The complete list of the 94 evaluation criteria can be found at "http://thome.postech.ac.kr/user/quality/PSS_Evaluation/Complete_l ist.pdf." We do not present the set of 94 evaluation criteria as an exhaustive listing of the PSS evaluation criteria. Different researchers addressing this issue may build the library in which owns more or different criteria. Our effort is an initial one to emphasize the lifecycle-oriented and all the 3P values-considered PSS evaluation. 4
CASE STUDY
We conducted various case studies to test the applicability of the proposed scheme. In this paper, we introduce the evaluation of a car-sharing model in Korea. A number of companies in Korea provide cars to be shared by citizens and visitors in various cities. These companies also provide services to take care of all the troublesome duties related to cars. As a result, car-sharing users need only to reserve, unlock and drive the cars, a process which costs less than buying the cars. The massive environmental load caused by cars is expected to decrease since a portion of these vehicles is shared. The power of car-sharing model is evaluated in
comparison with conventional car selling, car leasing, and carpooling models. First, we visualized three models using a PSS process visualization tool. Essentially, gaining a complete view of the As-Is is the first step towards its evaluation, and visualization of PSS is a useful method accomplish this purpose. PSS is a complex system which consists of various components; and its value creation mechanism and power are characterized by the system components and their relationships. With rough understanding of the system architecture, companies can neither analyze the mechanism of PSS nor achieve a precise evaluation. In particularly, a PSS process visualization tool is advantageous because: 1) it supports the decomposition of process architecture and thus helps to outline the evaluation scope, and 2) it facilitates the association of components and customer activities of the PSS with evaluation criteria. Considering the three requirements proposed in Section 2, PSS Board (Lim et al., 2012) is employed as a basis for the PSS evaluation in this research. This tool is capable to decompose PSS process showing how the four components of PSS, namely,
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Figure 1: A car-sharing model visualized on PSS Board.
Figure 2: Evaluation results of automobile-related PSS models on the category level.
An Evaluation Scheme for Product-Service System Models with a Lifecycle Consideration from Customer’s Perspective
products, services, dedicated infrastructures, and provider network, support customer’s goal achievement process in a very structured and complete manner. In particularly, this tool can show a PSS with a full consideration of its lifecycle from customer perspective. In fact, PSS Board was originally developed for the systematic PSS design and evaluation considering the system mechanism. Figure 1 shows the visualized car-sharing model on PSS Board. From the evaluation criteria shown in Table 2, only the criteria relevant to the specific case study are selected. As a result, 20 out of 21 categories, and 82 out of 94 items are selected and actually used in this study. The three models are evaluated against a reference model. The conventional car selling model is set as the reference model, denoted as Model 0. For each evaluation item, a five-point scale is used for scoring. That is, each model is evaluated either as much worse (1), worse (2), same (3), better (4), or much better (5) compared with Model 0. The evaluation is done based on the information gathered from various sources, including an existing study on PSS models in the automobile industry [30] and the internet (Website of the company, customer reviews in blogs, and news), besides our experience on the car-sharing model. Figure 2 shows evaluation scores in the category level. The relative weaknesses and strengths of car-sharing model to others are clearly illustrated. From case studies, we could validate the practicability and power of the proposed PSS evaluation scheme. In comparison with existing studies, the scheme is distinguished by its rich knowledge base. In particular, the evaluator can fully utilize the wisdom from prior experiences in order to evaluate PSSs instead of starting from scratch. 5
CONCLUDING REMARKS
Product-service system (PSS) is a collection of inter-dependent components, namely, products, services, infrastructures, and provider network organized as a whole in order to accomplish customer’s goal. These components are realized over PSS lifecycle, namely, design, production, sales (or purchase), usage as well as disposal.
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customer perspectives, respectively. Each dimension is further classified into categories, and finally into more detailed items. The framework has 5 dimensions, 21 categories, and 94 items in total. With the proposed scheme, evaluators can utilize the wisdom from rich experience in PSS evaluation in the past, rather than starting from scratch. The proposed scheme is comprehensive enough to cover the provider and customer perspectives as well as all phases of the PSS lifecycle. Although the proposed scheme is not complete at this moment, it has a potential to grow as a generic platform for PSS evaluation in the future. There are several issues for future research to improve the evaluation scheme. First, the comprehensiveness of the proposed 94criteria should be continually checked and updated over time. Second, more PSS cases should be evaluated using the evaluation criteria. Third, the usage of the evaluation criteria for the PSS evaluation considering its composition should be investigated. Effective system engineering, including system design, evaluation, realization, and operation, can never be achieved without clear definition and understanding of the system composition. In this regard, Cavalieri and Pezzotta [32] argue the necessity of a system perspective on PSS engineering, based on a wide review of studies on PSS. As such, consideration of the composition of PSS as well as its lifecycle would be very useful to effective PSS evaluation. Fourth, evaluation procedure should provide a step-by-step guide to conducting an evaluation. Finally, the feedback mechanism after an evaluation needs to be developed. The evaluation result should be reflected upon and utilized in devising a PSS improvement plan. A detailed guideline on which characteristic of the PSS should be refined or revised when evaluation scores are unsatisfactory should be created. 6
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