Functions Marketing: Take Control of Logistics to Control Business Risks!

Research output: Chapter in Book/Report/Conference proceedingPaper in conference proceeding

Abstract

This paper introduces the possibility of increasing the efficiency and
minimizing the risk in functions marketing in the aircraft industry by
focusing on better control of the logistic parameters.
Functions marketing can be described as the marketing of a function rather
than a product. The emphasis in this paper will be on the maintenance, i.e.
repair and overhaul, of aircraft engines. Functions marketing rather than
maintenance, is a clear trend in the industry today. It is often economic
and financially attractive for the customer to buy a function rather than a
product. Buying functions also support many companies’ strategies to focus
on their core business.
The primary economic advantages for the customer of aircraft engine
maintenance, lies in the reduction of business risk, and the possibility to
estimate the cost per engine flight hour. As a large part of the risk is
transferred from the buyer of maintenance to the seller through the contract
regulating the marketing of a function, it is crucial for the seller to have the
knowledge and capacity to calculate and control the business risks involved.
The maintenance cost consists primarily of the costs for repair and exchange
of engine components. The capital costs and obsolete costs for these
components are very large. The scope of maintenance works is, to a large
extent, controlled by the conditions stipulated in contracts. A number of
contracts indicate that the business risk, for the seller, depends on how the
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contractual agreement and the logistic parameters interact. In order to
control the business risk, emphasis must be put on the ability to quantify
and control the logistic parameters in question.
This paper concludes with a structured discussion about modeling of
contractual agreements when logistic parameters are included, and the risks
that are associated with this interplay.

Details

Authors
  • Jenny Svanberg
Organisations
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Other Mechanical Engineering
Original languageEnglish
Title of host publication[Host publication title missing]
PublisherICIL
Publication statusPublished - 2001
Publication categoryResearch
Peer-reviewedYes
EventICIL - Okinawa, Japan
Duration: 2001 Jul 92001 Jul 12

Conference

ConferenceICIL
CountryJapan
CityOkinawa
Period2001/07/092001/07/12