New Product Planning Decisions Under Uncertainty

Ronald G. Hudson, John C. Chambers and Robert G. Johnston
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Ronald G. Hudson: Xerox Corporation, Rochester, New York
John C. Chambers: Xerox Corporation, Rochester, New York
Robert G. Johnston: Xerox Corporation, Rochester, New York

Interfaces, 1977, vol. 8, issue 1-part-2, 82-96

Abstract: New product decisions often must be made with considerable uncertainty relating to sales, product and process development outcomes, manufacturing costs, etc. Purchasing commitments (long and short-term) and product and process development decisions are required at early points in the product life-cycle and usually involve large expenditures. The authors describe how Management Science techniques have been used to assist in new product purchasing and development decision-making, where the new product required significant technological innovation and was being introduced into a market in which there was little previous experience.The project approach consisted of: (1) formulating deterministic economic and capacity models to simulate the consequences of alternative outcomes in the market and technical areas; (2) working closely with engineering, procurement, marketing and planning organizations to determine the range and likelihood of the input variables; (3) using the models to determine the sensitive variables and to place probabilistic ranges on the outcomes of interest; and (4) presenting the results to management so that decisions could be made relative to plant construction, purchase quantities, and alternative components/processes.Emphasis is placed on methodology and the way management scientists can effectively work with and assist decision-makers, rather than on the models and techniques employed.

Date: 1977
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