OEM‐Servicizing with a Multi‐usecycle Product: Model analysis and insights

Abstract Customers of many OEMs in business‐to‐business markets today demand product‐servicizing which instead buying the product from OEM they buy use a during lease. During lease, (i) customer uses and returns it to after reaches specific level, (ii) remanufactures costly process sends back customer, this usecycle is repeated multiple times. The lease terms typically involve use‐based payment. While greater product‐use by brings larger revenue also increases remanufacturing cost incurred OEM. We investigate tradeoff using an analytical model for contract that used extensively industry. For case homogenous customers with common use‐rate product, we optimize payment identify market product‐remanufacturing characteristics should servicize selling it. show not when customers' exceeds threshold. This because beyond threshold, disproportionably, exceeding higher usage based revenue. Subsequently, consider two segments different use‐rates. servicizing modes: both segments, or selectively only one segment sell other segment, default mode segments. develop optimal these modes, thresholds optimality modes. Finally, extend results more than compare environmental impacts decision. Numerical informed empirical data OEM's loss profit choosing sub‐optimal servicizing/sell decision can be significant. article protected copyright. All rights reserved