ENHANCING SYSTEM-WIDE PROFITABILITY WITH NEW PRODUCT INTRODUCTION AND THROUGHPUT ACCOUNTING

Olli-Pekka Hilmola ()
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Olli-Pekka Hilmola: Logistics, Turku School of Economics and Business Administration, Rehtorinpellonkatu 3, FIN-20500 Turku, Finland

International Journal of Innovation and Technology Management (IJITM), 2004, vol. 01, issue 03, 289-306

Abstract: Most often product development performance is used as an appraisal measure to achieve sustainable profitability now and in the future. Despite the fact that global markets are favoring more knowledge and service intensive products, manufacturing still has an important role within New Product Introduction (NPI) process. It is argued in this paper that the proper understanding and management of business decisions through manufacturing and market constraints is vital in the profitability evaluation of new product alternatives. According to the analyzed hypothetical example, conventional cost accounting methods in the evaluation process will lead to losses, where constraints management method (called throughput accounting) increases profits significantly. Despite this important finding, in the paper it is being speculated that global infinite market demand combined with higher number of possible product alternatives and keen management focus to concentrate only on the most profitable one might diminish profitability performance according to these two accounting approaches. However, according to the hypothetical example, in infinite global markets it seems to be extremely profitable to concentrate in several product groups simultaneously, instead of one.

Keywords: Theory of constraints; product mix decision; new product introduction (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219877004000192

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