Using Total Cost of Ownership to Compare Supplier Product-Service System Offering

Companies plan investments and acquire assets evaluating among different alternatives what is more suitable to satisfy their needs. Management choices should always be forward-looking, accurate, and coherent; otherwise, firm competitiveness in the market may be profoundly affected, or, even worse, its survival may be severely put to the test. In this context, implementing a robust and refined decision-making process is essential. Total Cost of Ownership (TCO) is a reliable approach that can be used to estimate the convenience of an investment in the long-term since it takes into account all costs associated with the entire lifecycle of an asset. The concept of TCO is nowadays well known and widely studied in the literature, and can be used for several purposes, not exclusively related to economic benefits of a managerial decision. Notably, it can be used as a decision making parameter to be evaluated in the selection of the kind of Product-Service System (PSS, e.g. maintenance, training) the customer could buy from a supplier. In particular, a logical process to support the PSS provider to compute TCO is proposed. This would allow the suppliers to compare different PSS offering and propose to their customers the most appropriate and convenient one, as a combination of the asset and a set of services to guarantee to customers cost and operational efficiency in the long-term. The development process is validated by using real data related to alternative PSS scenarios a supplier can propose to the customer.