Dynamic product portfolio management with life cycle considerations

Ralf W. Seifert, Jean-Sébastien Tancrez and Işık Biçer

International Journal of Production Economics, 2016, vol. 171, issue P1, 71-83

Abstract: We consider a portfolio of products in which each product probabilistically transitions through various life cycle stages. The evolution through these life cycle stages is impacted by both marketing support and product launch decisions, which are bound by a financial constraint in the form of restricted working capital. In the model, the joint working capital level serves to finance the portfolio expenditures and is decided a priori by the company. We use an infinite-horizon Markov Decision Process (MDP) to find the optimal decisions to coordinate the operations and finance depending on the composition of the portfolio. We find that the policy optimizing the product launch, marketing support and inventory decisions under a working capital constraint is independent of the correlation between demand levels of the products in the portfolio. We numerically demonstrate that the joint management of the products has a significant positive effect on the total profit, reducing the amount of working capital used per product. We also show that the optimal policy smooths aggregated demand levels as well as cash flows.

Keywords: Product portfolio management; Life cycle; Working capital; Markov Decision Process; Inventory control (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527315003989
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:171:y:2016:i:p1:p:71-83

DOI: 10.1016/j.ijpe.2015.10.017

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().