B.S. (Bachelor of Science)
Department of Industrial and Systems Engineering
Motorola offers its customers a repair contract option that sets a monthly fee per radio to cover radio repairs. When a contracted company needs a radio serviced, the repair cost is covered by the service contract. Currently Motorola determines their contract prices based only on the number and type of radios a customer owns. The current contract pricing system in use at Motorola is outdated and needs to be replaced with one that is more cost effective. Instead of basing contract prices solely on the number and type of radios a customer owns, Motorola would like to implement a contract-pricing model that takes possible failure factors into account. Since Motorola has never conducted a study to determine how particular factors determine failure rates, the project team will conduct contract customer surveys and analysis of historical data in order to determine what actually has a significant effect on radio failure rates. Based on the data, a new contract-pricing model will be developed which will incorporate possible factors determined to affect fail rates in order to reduce monetary loss from repairs, avoid price subsidizing and give fairer prices to customers. The project team performed linear regression and statistical analysis on the data using IMP statistical software. This software package determined that there were several factors that could have an effect on failure rate. Instead of determining a pricing model, it was concluded that the mean repair cost should be utilized in the new pricing system. Customers that fall into the categories determined to have a significant effect on failure and poorer historical failure rates would be priced slightly higher than the mean and vice versa for those with good historical data and didn't fall into the categories.
Olen, Sandee, "Contract pricing project" (2001). Honors Capstones. 338.
54 pages (various pagings)
Northern Illinois University
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