Development of a module based service family design for mass customization of airline sector using the coalition game Aman Aggarwal a , F.T.S. Chan b , M.K. Tiwari a,⇑ a Department of Industrial Engineering and Management, Indian Institute of Technology Kharagpur, Kharagpur 721302, West Bengal, India b Department of Industrial and Manufacturing Systems Engineering, The University of Hong Kong, Pokfulam Road, Hong Kong, China article info Article history: Received 10 September 2012 Received in revised form 5 October 2013 Accepted 9 October 2013 Available online 18 October 2013 Keywords: Mass customization Service family design Coalitional game Cournot model abstract The Airline industry faces various issues and difficulties related to its management, which have a peculiar and a complex solution. The objective of this paper is to introduce new and simplified methodologies for improving the airline sector by introducing cost efficient and relatively high payout services. In this paper, we have applied strategic sharing of modules in service family design using coalition game and Cournot game theories to model the related situations. Service family design is a cost-effective way for achieving mass customization by developing highly differentiated products from a common platform while laying emphasis on individual products. A coalitional game is applied which is used to model the potential module sharing and thus determines which modules that are being used in the platform proves to be the most beneficial ones. The empirical evidence suggests that convenience, safety and ser- vice quality also have a major influence on the choice of airline passengers. In a Cournot model, new ser- vices are predicted to be introduced by an airline and the effect of that service on its profits and thus response from other competitor airlines are carefully examined and result of this, decides the layout of the service in the functionality of the airline. This research can be efficiently used to assist the working of airline companies and help them to select services and have a better understanding of the role of qual- ity of different services in the airline sector as a whole, thus giving them an edge over its competitors. Ó 2013 Elsevier Ltd. All rights reserved. 1. Introduction The process of ‘‘effectively postponing the task of characterizing a product for a particular customer until the latest point in the sup- ply network’’ is termed as Mass customization. It depends on a company’s ability to provide tailored products or services based on the economical development and production systems (Silveria, Borenstein, & Fogliatto, 2001). For mass customization, companies are aspiring to reduce cost and lead-time while development of new products and services takes place satisfying individual cus- tomer needs. By reusing and sharing assets like process, compo- nents, information and knowledge over a family of products and services, companies and enterprises can efficiently produce a set of differentiated economic offerings by improving responsiveness and flexibility of product and service development. Mass Customization is defined as the process of distributing wide-market goods and services that are revised to satisfy a specific customer need. Mass customization is a marketing and manufac- turing technique that combines the personalization and flexibility of ‘‘custom-made’’ with the small unit costs correlated with mass production. Many applications of mass customization include soft- ware-based product configurations that allow end-users to add and/or change certain functionalities of a core product. Product family design is a cost-effective way for achieving mass customization by allowing highly differentiated products to be developed from a common platform while targeting products to distinct market segments. Recent behavior tends to apply and ex- tend principles and methodologies from product family design to new service development. Families of services and thus service platforms have been developed and are being applied in various service industries. (Hidaka, 2006). For example, an airline industry can develop a family of services by combining common services (e.g., booking, cancellation, change of dates), and various options (e.g., Internet Booking, Personal Insurance) for offering varied ser- vices. The common services are considered to be a service platform for the service families to be worked on. Thus, a typical approach so as to create varied services is to provide customers with various choices and options related to specific customer needs, which often lead to additional charges as they add richness to the initial offer- ing. For example, in the IBM service unit of Malaysia, the modular- ization of the scope of work and methodologies is being applied to service level design for the purpose of mass customization (Peters & Saidin, 2000). 0360-8352/$ - see front matter Ó 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.cie.2013.10.003 ⇑ Corresponding author. Tel.: +91 3222 283746, mobile: +91 9734444693; fax: +91 3222 282272. E-mail addresses: aman.aggarwal92@gmail.com (A. Aggarwal), mffchan@inet. polyu.edu.hk (F.T.S. Chan), mkt09@hotmail.com (M.K. Tiwari). Computers & Industrial Engineering 66 (2013) 827–833 Contents lists available at ScienceDirect Computers & Industrial Engineering journal homepage: www.elsevier.com/locate/caie