Service Offering Uncertainty Analysis Tool

Abstract: Companies that seek to venture into providing services in addition to providing products have many business issues to consider as there are many differences between providing service and product offerings.  One factor that needs to be considered in service offerings is the aspect of time, as services are offered for an extended period of time, creating a unique type of relationship between the customer and the service provider.  With product offerings, the point of sale is usually the end of the product provider and customer relationship.  The added time aspect in the service offering brings with it the issues of uncertainty as service contracts are made for a certain period of time in the future, where things are unknown.   This thesis looked at types of uncertainties important to service offerings, especially in the manufacturing industry.  The uncertainties have an impact on how service offering contracts are constructed, as they can affect the profit and costs of the service provider. The three types of uncertainties that were examined were product malfunction uncertainty, service delivery uncertainty, and customer requirement uncertainty. Using these three types of uncertainty, mathematical models were constructed to represent the cost and revenue of different contract types. The different contract types were identified through a case study with a product manufacturer in Sweden.  Different probability distributions were selected to model the three types of uncertainty based on a literature review.  The mathematical models were then used to construct a software program, the uncertainty simulator tool, which service contract designers can use to model how uncertainties affect cost and revenue in their contracts.