Product co-design with consumer participation in a service-oriented manufacturing system

AbstractProduct co-design which connects the firm and consumers to achieve value co-creation is widely applied in the service-oriented manufacturing system (SOMS) to improve service quality. One of the key challenges in practice is to understand how the product co-design affects the performance of SOMS under different business models. This study considers a SOMS in which the firm optimises its product co-design effort and consumers decide whether to participate in product co-design under the selling and leasing models. The results show that the firm can always benefit from implementing the product co-design, even though consumers do not participate in product co-design under some specific circumstances. However, it does not always hold for consumers. Interestingly, we find that the free rider effect occurs when the participation cost is high. We further elaborate on the firm's business model selection strategy, introducing a threshold-based policy designed to assist the firm in making decisions when confronted with varying residual values and participation costs. Lastly, our findings indicate a lack of clear-cut pros and cons between the two business models in terms of the firm's product co-design efforts and consumer surplus.Keywords: Consumer participationproduct deisgnco-designservice-oriented manufacturingselling and leasing model AcknowledgmentsThe authors would like to thank the anonymous reviewers, the associate editor, and the editor-in-chief for their comments which are helpful to improve this article.Data availability statementThe data supporting the findings of this study are available within the article.Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 Audi Magazine: Creative collaboration. URL: https://magazine.audi.com.au/article/creative-collaboration.2 A New Wave, A New WEY: User Co-creation System Launched by WEY at AUTO CHINA 2020. URL: https://global.wey.com/news/1155933.html.3 Note: if α>4ks−s16k2−s+4ks, when η≤(4k+s)(1−α)θ4k+α−1, then s~A=s~A1; when (4k+s)(1−α)θ4k+α−1<η≤4kθ4k−1, then s~A=s~A2; when η>4kθ4k−1, then s~A=s~A3.4 η≤min{4kθ4k−1,(4k+s)(1−α)θ4k+α−1}, then α~A=α~A1; when min{4kθ4k−1,(4k+s)(1−α)θ4k+α−1}<η≤max{4kθ4k−1,(4k+s)(1−α)θ4k+α−1}, then α~A=α~A2; when η>max{4kθ4k−1,(4k+s)(1−α)θ4k+α−1}, then α~A=α~A3.5 if α≤4ks−s16k2−s+4ks, when η≤4kθ4k−1, then α~B=α~B1; 4kθ4k−1<η≤(4k+s)(1−α)θ4k+α−1, then α~B=α~B2; when η>(4k+s)(1−α)θ4k+α−1, then α~B=α~B3.6 if α≤4ks−s16k2−s+4ks, when 4kθ4k−1<η≤(4k+s)(1−α)θ4k+α−1, then s~B=s~B1; when η>(4k+s)(1−α)θ4k+α−1, then s~B=s~B2.Additional informationFundingThis research is supported by the National Natural Science Foundation of China [grant numbers 71771108, 72171104, 72201118 and 72091215] and the Fundamental Research Funds for the Central Universities [grant number D5000220498].Notes on contributorsZerong LyuZerong Lyu is a Ph.D. candidate in Operations Management at the School of Management, Lanzhou University, China. His research interests include supply chain management, business ecosystem, service-oriented manufacturing, and game theory. He has published paper in the academic journal International Journal of Production Research.Zhaofu HongZhaofu Hong is currently a professor of Operations Management at Northwestern Polytechnical University. He received the Ph.D. degrees in Management from Lanzhou University, China, and in Industrial Engineering from Ecole Centrale Paris (joint programme), France. His research interests include green supply chain management, sustainable operations management, supply chain platform, and the interface between marketing and operations management. He received various research grants, including grants from the National Natural Science Foundation of China. He has published more than 30 papers in academic journals such as International Journal of Production Research, European Journal of Operational Research, Omega, Transportation Research Part E: Logistics and Transportation Review, International Journal of Production Economics, and IEEE Transactions on Engineering Management. His papers are selected as the 'ESI Highly Cited Paper' and 'ESI Hot Paper'. He currently serves as an Associate Editor for the international journal: Modern Supply Chain Research and Applications.Yunrong ZhangYunrong Zhang is currently a senior research fellow in Sustainable Operations Management at Lanzhou University, China. She received her Ph.D. degree in Management Science and Engineering from Sun Yat-sen University, China. Her research interests are in the areas of supply chain management, sustainable operations management and game theory. She received some academic research grants, including the grant from the National Natural Science Foundation of China. She has published some papers in academic journals such as the European Journal of Operational Research, the International Journal of Production Research, or the Chinese Journal of Management Science.Chang WangChang Wang is a master student in Operations Management at the School of Management, Lanzhou University, China. His research interests include supply chain management, platform economy, and intelligent transportation. He has published paper in the academic journal International Journal of Production Research.