Performance based contracting for the manufacturing industry by using integrated platform and dynamic pricing model

• Main Authors: LINDAWATI, GUNAWAN, Aldy
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: dynamic pricing; genetic algorithm; industrial machinery and components manufacturing; integrated platform; performance based contracting; Operations Research, Systems Engineering and Industrial Engineering; Theory and Algorithms
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5137; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6136/viewcontent/Performance_Based_Contracting_for_the_manufacturing_industry_by_using_integrated_platform_and_dynamic_pricing_model.pdf
• Institution: Singapore Management University

Although Performance Based Contracting (PBC) concept is not totally new, the PBC adaptation in Industrial Machinery and Components (IMC) manufacturing, which produces high-value and long life machineries, is rather slow and it is done with extra caution. Three main concerns for manufacturers to implement PBC are the investment cost, the maintenance cost and possible revenue loss. To handle these concerns and accelerate the PBC implementation, we propose an integrated platform that consists of three components: dynamic pricing, sensor data feeding and machinery monitoring. We model the dynamic pricing as an optimization problem and propose Genetic Algorithm to solve the problem. We run the experiment on generated data and show that GA provides a good pricing solution with average difference of 5.64% from the traditional fixed leasing price.