The 11th Asia Pacific Industrial Engineering and Management Systems Conference The 14th Asia Pacific Regional Meeting of International Foundation for Production Research Melaka, 7 – 10 December 2010 Service Development in Heavy Equipment Industry Dyah Santhi Dewi and Erik Jan van Voorthuysen School of Mechanical and Manufacturing University of New South Wales Sydney NSW AUSTRALIA, 2032 T. +61293854130 dyah_sd@yahoo.com.au erikv@unsw.edu.au ABSTRACT To stay competitive in today‟s complex market, companies need to find innovative business strategies to increase their market share or profitability. For this purpose, many companies have now started to shift their business focus from only designing tangible products into more comprehensive products and services designs. In this sense, the emerging importance of innovative service development becomes more apparent. Much research has been undertaken to develop methodologies or tools for developing and managing services. However, only limited interest has been given to the issue of service development in the heavy equipment industry. Heavy equipment is equipment that is capital-intensive, heavy, difficult to transport, has a longer life cycle and is technologically more complex and requires more intensive maintenance. This equipment utilized by many industries such as mining, construction, forestry, agriculture, and transportation. In these industries, heavy equipment requires high investment, thus, achieving an optimum return on assets (ROA) and capital velocity is of great importance. For this purpose, the provision of innovative services is very important for ensuring higher levels of asset availability and performance within acceptable cost. This paper aims to investigate innovative services development for the heavy equipment industry especially for mining industries. This incorporates issues such as service types and service levels. The investigation is based on an extensive literature review and a qualitative research approach which uses interview techniques. Three types of services are evaluated (i.e. product-oriented services, use-oriented services, and result oriented services). The initial research‟s results show that the most acceptable type of services is product-oriented services. Keyword: Asset Management, Heavy Equipment ,Service Development, Service level, Mining 1. Introduction In today‟s competitive market, manufacturing companies have to seek new business opportunities for gaining higher profitability and better market positions (Mathieu, 2001b). In accordance with this, service development has been suggested as a potential alternative business strategy (Oliva & Kallenberg, 2003; Sawhney et al., 2004). Primarily, this is because service development can enhance opportunities in terms of marketing opportunities, strategic opportunities, and financial opportunities (Gebauer et al., 2008). Firstly, in terms of marketing opportunities, services can help companies to sell more products and improve the relationship between supplier and customer (Parasuraman, 1998). Improving and tightening the customer-supplier relationship is important for retaining loyal customers and capturing new customers. In the context of strategic opportunities, services development could provide better product differentiation and competitive strategies (Oliva & Kallenberg, 2003). Competitive advantage is not only the result of providing services, but is a combination of services and products that can provide high-value „integrated solutions‟ to meet customer and company requirements (Davies, 2004). The company‟s ability to offer an innovative combination of products and services will become a distinct advantage that is difficult to copy and in the end will prevent other competitors entering the market. Lastly, services development brings expanded financial opportunities, since it rebuilds company profit (Mathe & Shapiro, 1993) and provides a more stable source of revenue (Potts, 1998; Sawhney et al., 2004). Unlike the sale of products, which is often a one-off transaction, services could become a repeated transaction generating a regular income for the company. To some extent, sale of services are counter-cyclical to the sale of products (Davies, 2004). In some circumstances, long term services transactions are easier to manage and more