How the Imperfect E-diagnostics Impacts the Capacity Planning and Pricing Decisions of a Maintenance Service Provider

Providing online monitoring (E-diagnostics) has become a value-added practice for equipment maintenance service providers to improve the service quality and efficiency. However, the E-diagnostics is always imperfect, whose accuracy depends on how much components of the equipment are monitored (namely, E-diagnostics depth in our research). This research analyzes the optimal capacity planning and pricing problem by taking into account the imperfect E-diagnostics. In addition, we consider the E-diagnostics accelerate effect to the service process and attempt to find how the effect influences the service provider's decisions. Our results reveal that the optimal pricing and capacity planning decisions are dependent on customers' failure cost and service provider's compensation cost. Specifically, if customers' failure cost is larger than service provider's compensation, the service provider would improve the price as the E-diagnostics depth increases; otherwise, the price should be lowered as the E-diagnostics depth increases. In addition, we find as the accelerate effect becomes increasingly obvious, customers' expected waiting time increases but the service price decreases. (C) 2019 The Authors. Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of the 11th CIRP Conference on Industrial Product-Service Systems