Just-in-time: A cross-sectional plant analysis

This paper uses a data base of quantitative and qualitative plant-level cross-sectional data to analyze the relative performance of Just-in-time (JIT) and non-JIT plants operating in two distinct manufacturing industries: electronic components and auto-parts. A number of conjectures made by the literature concerning the relationship between JIT manufacturing and plant inventory holdings, costs and profits are tested. Consistent with many of these conjectures, the results suggest that JIT manufacturing at the plant level is associated with greater productivity in inventory usage, lower total and variable costs, but not fixed costs, and higher profits. The success of JIT plants along these dimensions is found to be related to the length of experience with JIT manufacturing, and process quality and leanness but unrelated to product quality, quality control or the extent of plant unionization.     

Low Cost Microcomputer Software for Multi-Attribute Decision Analysis

Total product quality is multidimensional and includes customer acceptance as well as the usual quantitative elements for conformance, performance and reliability. Also included are broad ranges of operational expectations that are specific to the particular product. Thus to assess overall quality requires analysis of a multi-attribute vector of quality measures, some of which are subjective but cannot be ignored in making quality-related decisions. Warranty costs reflect the overall effect of these elements and can serve as an overall measure for making economic decisions. In this paper, we will summarize warranty cost models and describe two warranty planning problems that are important in engineering economic decision making.     

Short life-cycle deteriorating product remanufacturing in a green supply chain inventory control system

Due to global warming, environmental consciousness and shortening product life-cycles, more attentions have been paid to ecological protection and resource utilization. Green products and production process designs significantly influence the environment and resource re-usage. The relevant EU regulations, such as WEEE and EuP, have reduced negative effects by controlling the disposals and the resource re-usage. In this study, green product designs and remanufacturing efforts are investigated when we develop an integrated production inventory model with short life-cycles. A numerical example is provided to illustrate the theory. We have shown that new technology evolution, remanufacturing ratios and system’s holding costs are critical factors affecting decision making in a green supply chain inventory control system.     

Exploring Portfolio Decision‐Making Processes*

Portfolio management is the set of activities that allows a firm to select, develop, and commercialize a pipeline of new products aligned with the firm's strategy that will enable it to continue to grow profitably over the long term. To appropriately manage the firm's new product portfolio, decisions must be made about which projects to fund, to what levels, at what point in time. Previous research has investigated portfolio management decisions as individually discrete decisions. Significant streams of research have investigated both project selection and project termination decisions. This research project shows, however, that portfolio decision making may be better understood if it is considered as an integrated system of processes that considers these decisions simultaneously, along with other decisions such as those to continue a project with reduced funding. Using in‐depth data from four diverse case studies, we use a grounded theory approach to develop a general model of how firms make new product portfolio decisions. According to the findings from these cases, effective portfolio decision‐making processes produce a portfolio mindset, focus effort on the right projects, and allow agile decision making across the portfolio's set of projects. Effective portfolio decision making is the result of the interaction between three types of decision‐making processes that managers use in making decisions: evidence‐, power‐, and opinion‐based. Being able to use each of these types of processes to make decisions depends upon having the data inputs that they require. Three domain‐based decision input‐generating processes (i.e., cross‐functional collaboration, practices of critical thinking, and practices of market immersion) are associated with making evidence‐based portfolio decisions. In addition, organizational politics produces the inputs that are associated with power‐based portfolio decision making, while managerial intuition is associated with opinion‐based portfolio decision making. Firm cultural factors, including trust, collective ambition, and leadership style, are associated with how these evidence‐, power‐ and opinion‐based processes are combined into an overall portfolio decision making process, and whether the firm's processes are more rational and objectively made, or more politically and intuitively made. The article presents propositions for how the decision‐making processes interact in their associations with decision‐making effectiveness.     

Optimal safety stock levels of subassemblies and manufacturing components

In order to control the time to market and manufacturing costs, companies produce and purchase many parts and components before receiving customer orders. Consequently, demand forecasting is a critical decision process. Using modular product design and super bills of materials are two effective strategies for developing a reliable demand forecasting process. They reduce the probability of stockouts in diversified production contexts. Furthermore, managing and controlling safety stocks for pre-assembled modules provide an effective solution to the problem of minimizing the effects of forecast errors. This paper develops, evaluates, and applies innovative cost-based analytical models so that the optimal safety stock of modular subassemblies and components in assembly to order and manufacturing to order systems, respectively, can be rapidly quantified. The implementation of the proposed models in two industrial case applications demonstrates that they significantly reduce the safety stock inventory levels and the global logistical cost.     

Black Box Engineering: Redefining the Role of Product Specifications

Original equipment manufacturers (OEMs) in numerous industries recognize the benefits of involving their suppliers in the product design process. Specifications play a central role in guiding that supplier-OEM relationship. For so-called “black-box” parts, the OEM specifies overall requirements for product function and performance, cost targets, and development lead time, and then communicates this information to suppliers, who perform detailed engineering and testing. Black-box engineering marks a fundamental change in the buyer-supplier relationship, and companies that use or plan to adopt this practice must understand the factors that contribute to its successful implementation. Using survey responses from more than 300 suppliers to a European automobile OEM, Christer Karlsson, Rajesh Nellore, and Klas Soderquist identify the problems those suppliers face in the specification process. To provide insight into the context and the causes of those problems, they also describe the results of case studies conducted in the OEM and two suppliers. In this way, they attempt to identify critical factors that can help to improve the specifications process both internally at an OEM and between the OEM and its suppliers. The respondents identified numerous problems that they face in the specifications process. Based on feedback from product development managers and design staff members in the case study companies, those problems are categorized as follows: technical content and the level of detail in requirements, changes of specifications, cost, interpretation and understanding, and supplier participation in the specification process. Black-box engineering redefines the role of specifications. Instead of a fixed document that dictates to the supplier, the specification becomes an open medium for communicating functional and performance requirements and necessary technical adjustments. In other words, black-box products require a highly interactive design process. Product development managers for suppliers and OEMs must understand that they cannot avoid changes in specifications during black-box engineering projects. Rather than view such changes as wastes of time and effort, they should approach the black-box engineering process as a learning opportunity. By working with several parallel sets of functional solutions, which they can validate with the customer before developing detailed dimensional definitions, suppliers can limit the amount of time they lose as a result of changes in specifications.     

Sequential price and quantity decisions under supply and demand risks

Firms need to deal with not only risks from stochastic demand but also risks from supply side. The supply side risk may be due to parts/service outsourcing, third party logistics, or random yield in production processes. In this paper, we study how firms sequentially make price and quantity decisions under these two risks. The first question we try to answer is how these two risks affect the decisions and profits of the firm. We find that increased supply risk usually causes increased quantity/stocking decision, however, there exists a threshold level of supply risk above which the firm reduces quantity/stocking amount as supply risk increases. This observation may be used in a supply chain setting, where reduction of the supply risk can cause higher delivered quantity and improve supply chain performance. This observation also provides support and insights on prioritizing the risk reduction efforts from marketing and operations to achieve better coordination. At the same time, reduction of the risks help not only firms but also consumers as the optimal price decreases. To further improve decision making process under both uncertainties, we study the impact from information revelation and postponement of decisions. We compare results from different sequential decision making cases. As illustrated in the paper, firms gain competing advantage when decision postponement is available and this advantage becomes further significant as the risks increase. Our numerical examples also indicate that price postponement strategy is usually preferred but the relative profit difference between price postponement and quantity postponement become smaller as consumers become more sensitive to the price.     

Antecedents of Team Intuition and Its Impact on the Success of New Product Development Projects

Research on new product development (NPD) team decision making has identified a number of cognitive mechanisms (e.g., team intelligence, teamwork quality, and charged behavior) that appear to guide NPD teams toward effective decisions. Despite an extensive body of literature on these aspects of NPD team decisions, team intuition has yet to be investigated in the context of NPD teams. Intuition is regarded as a form of information processing that differs from cognitive processes, and is associated with gut feelings, hunches, and mystical insights. Past research on intuition suggests that many managers and teams embrace intuition as an effective approach in response to situations in a turbulent environment where decisions need to be made immediately. Past research also revealed various benefits of intuition in decision making. These are: to speed up decision‐making process, to improve decision outcomes such as higher product quality, and to solve less structured problems (e.g., new product planning). This research examines the impact of team‐related antecedents (e.g., team member experience) and decision‐specific antecedents (e.g., decision importance) on intuition in NPD teams. The moderating impact of environmental turbulence between antecedent variables and intuition, as well as between intuition and team performance, is investigated. To test hypotheses, data were collected from 155 NPD projects in Turkey. The results showed that past team member experience, transactive memory systems (TMS), team empowerment, decision importance, and decision motives are significantly related to team intuition. The results also revealed that team intuition is significantly related to product success and speed‐to‐market, with both high and low levels of market turbulence. The findings of this study present some interesting practical implications to managers in order to improve intuitive skills of NPD teams. First, managers should make sure that team members have the relevant expertise to facilitate effective intuition. Second, managers should encourage and enhance TMS for effective intuition. If team members are not able to gain timely and unhindered access to others who have the needed experience and knowledge, past team member experience becomes idle in order to make effective intuitive judgments. Third, managers concerned with achieving successfully developed products and helping teams to make immediate but accurate decisions during NPD process should assign more power to team members so that they can rely on their intuitive skills.     

The Decentralization of Decision Making and Employee Involvement within the Workplace: Evidence from Four Establishment Datasets

Participatory work practices, like teams, quality circles and joint consultative committees (JCCs) can, but do not necessarily, decentralize decision making and increase worker autonomy. We use broad, cross‐sectional establishment data from the European Union and three Commonwealth countries to measure the extent of decision making by workers across these countries, and to analyse how this measure varies with the use of participatory practices. Within Europe, workers in Sweden, Germany, France, the Netherlands and Ireland are most likely to be given the authority to make decisions. In Spain, Portugal and Italy, decentralized decision making is more unusual. While decision making is generally higher in establishments with teams, JCCs and quality circles, this result does not hold across all countries. Even where the relationships are significant, use of participatory practices explains a surprisingly small amount of the overall variation in decision making.     

Is the future static or dynamic? The role of culture on escalation of commitment in new product development

Escalation of commitment in new product development has been studied extensively for the last four decades but the impact of culture on the escalation phenomenon remains largely unexplored. This study investigates how culture impacts the decision to escalate or deescalate commitment to new products. Americans are analytic thinkers whereas Chinese tend to be holistic thinkers. When it comes to decision making, analytic thinkers focus on field independent and abstract factors and believe that future is linear and static, whereas holistic thinkers focus more on contextual factors and believe that future is dynamic and nonlinear. Hence, Chinese are more likely to escalate their commitment relative to Americans on receiving a negative performance report in the new product development process. A lab experiment using weekend MBA students and managers was used to test this underlying hypothesis. The findings confirmed that analytical thinkers use fewer factors than holistic thinkers in making new product decisions, and that Chinese managers are more likely to escalate their commitment relative to American managers. The decision to escalate or de-escalate was moderated by perceived product innovativeness.     

Passion for Work,Nonwork‐Related Excitement,and Innovation Managers’ Decision to Exploit New Product Opportunities

This article investigates the role of affect in innovation managers’ decision to exploit new product opportunities—a decision central to the innovation process. The model proposes that different types of passion can trigger managers’ exploitation decisions but that this effect is contingent on experiencing excitement from events outside their work environment. A field experiment with 90 owner–managers of young firms located in an innovation context (business incubators) shows that passion for work and nonwork‐related excitement levels interdependently impact innovation managers’ decision to exploit new product opportunities. Specifically, harmonious passion has a general positive effect on managers’ propensity to exploit. In contrast, the effect of obsessive passion is more complex and contingent on the additional excitement managers experience such that the positive relationship between obsessive passion and the decision to exploit is more positive with higher levels of excitement. These findings extend the product innovation management literature by acknowledging that decision‐makers’ affective experiences influence innovation decisions and provide a first step toward understanding the role of affect and passion in the product innovation context. Second, the finding that obsessive passion and nonwork‐related excitement interact in explaining opportunity exploitation decisions highlights the need to incorporate contingency relationships in models of innovation decision‐making. Third, in drawing on a field experiment and the experimental manipulation of managerial affect during the decision‐making task, this article answers a recent call in the project management literature to pursue less common methodological approaches and develop “broader theoretical schema” in order to enhance our understanding of innovation management. Finally, this study also has implications for practitioners because it can help innovation managers understand their own decision policies. To the extent that innovation managers are able to regulate their affective experiences, this improved understanding might prevent them from premature and faulty decision‐making.     

Overhauling the new product process

The three cornerstones of successful product development are process, strategy, and resources, according to the benchmarking study reported in this article. Of the three, having a high quality new product process had the strongest impact on business's new product performance. A high quality new product process meant: an emphasis on up-front homework; sharp, early product definition; the voice of the customer evident throughout; tough go/kill decision points; a focus on quality of execution; and a thorough yet flexible process. The research results point strongly to a need to overhaul firms' new product processes—from idea to launch—to incorporate these and other key success drivers, such as the quest for real product superiority, and the need for true cross-functional teams. The goals of an effective new product process—that is, the specifications or key elements of a high quality process—are outlined, a vital starting point to any process reengineering exercise. The article ends with a quick look at a third generation stage-gate or new product process, together with some tips and hints on how to proceed to overhaul your company's new product process.     

Causal or effectual? Dynamics of decision making logics in servitization

This study explores servitization as an innovative market strategy for manufacturers and investigates how the decision making logics change over time in the servitization transformation process. Effectuation theory is applied to examine servitization as a new theoretical exploration. A longitudinal case study of a global heavy vehicle manufacturer's servitization process in China reveals that the decision makers adjust their decision making logics depending on the stage of the servitization process and associated risk patterns. As the servitization process evolves into a more sophisticated stage, decision makers will change their decision making logics from a causation dominant logic to an effectuation dominant logic in order to cope with the increased risks. Effectuation theory originally developed from entrepreneurship research is found to be a valid theory for the explanation of the risk and uncertainty control behaviors in the servitization transformation process of manufacturing firms.     

FUNDAMENTALS OF ACCOUNTING/ECONOMIC/FINANCIAL EVALUATION

A major assumption in inventory theory in general and in the area of price changes in particular is that the demand for an item is fixed. It is possible that the reduction in price may result in an increase in demand. In fact this is a reason for the sale offered by many organizations. In this paper we use the familiar net present value approach commonly used in financial decision making to analyze and formulate optimal inventory ordering policies. This approach is more accurate and straight-forward than the average annual cost method that is usually used for comparison of alternative inventory policies.     

Innovation Performance in New Product Development Teams in China's Technology Ventures: The Role of Behavioral Integration Dimensions and Collective Efficacy

In emerging markets, technology ventures increasingly rely on new product development (NPD) teams to generate creative ideas and to mold these innovative ideas into streams of new products or services. However, little is known about how behavioral integration (a behavioral team process) and collective efficacy (a motivational team process) jointly facilitate or inhibit team innovation performance in emerging markets—especially in China, the world's largest emerging‐market setting with collectivist and high power distance cultures. Drawing on social cognitive theory and behavioral integration research, this article elucidates the relationships between behavioral integration dimensions (i.e., collaborative behavior, information exchange, and joint decision‐making) and innovation performance and also examines how collective efficacy moderates these relationships in China's NPD teams. Results from a sample of 96 NPD teams in China's technology ventures reveal that information exchange is positively associated with innovation performance. Collaborative behavior positively but marginally influences innovation performance, whereas joint decision‐making does not relate to innovation performance. Moreover, collective efficacy demonstrates an important moderating role. Specifically, both collaborative behavior and joint decision‐making are more positively associated with innovation performance when collective efficacy is higher. In contrast, information exchange is less positively associated with innovation performance when collective efficacy is higher. This study makes important theoretical contributions to the literature on team innovation and behavioral integration in emerging markets by offering a better understanding of how behavioral and motivational team processes jointly shape innovation performance in China's NPD teams. This study also extends social cognitive theory by identifying collective efficacy as a boundary condition for the overall effectiveness of behavioral integration dimensions. In particular, this study highlights the condition under which behavioral integration dimensions facilitate or inhibit NPD team innovation performance in China.     

Balancing Development Costs and Sales to Optimize the Development Time of Product Line Additions*

Development teams often use mental models to simplify development time decision making because a comprehensive empirical assessment of the trade‐offs across the metrics of development time, development costs, proficiency in market‐entry timing, and new product sales is simply not feasible. Surprisingly, these mental models have not been studied in prior research on the trade‐offs among the aforementioned metrics. These mental models are important to consider, however, because they define reality, specify what team members attend to, and guide their decision making. As such, these models influence how development teams make trade‐offs across the four metrics to try to optimize new product profitability. Teams with such an objective should manage to a development time that minimizes development costs and to a proficient market‐entry timing that maximizes new product sales. Yet many teams use mental models for development time decision making that focus either just on development costs or on proficiency in market‐entry timing. This survey‐based study uses data from 115 completed NPD projects, all product line additions from manufacturers in The Netherlands, to demonstrate that there is a cost to simplifying decision making. Making development time decisions without taking into account the contingency between development time and proficiency in market‐entry timing can be misleading, and using either a sales‐maximization or a cost‐minimization simplified decision‐making model may result in a cost penalty or a sales loss. The results from this study show that the development time that maximizes new product profitability is longer than the time that maximizes new product sales and is shorter than the development time that minimizes development costs. Furthermore, the results reveal that the cost penalty of sales maximization is smaller than the sales loss of development costs minimization. An important implication of the results is that, to determine the optimal development time, teams need to distinguish between cost and sales effects of development time reductions. To determine the relative impact of these effects this study also estimates the elasticities of development costs, new product sales, and new product profitability with regard to development time. Armed with this knowledge, development teams should be better equipped to make trade‐offs among the four metrics of development time, development costs, proficiency in market‐entry timing, and new product sales.     

On the role of acquisition premium in acquisition research

Several studies argue that paying high acquisition premia is value destroying for acquirer shareholders. There are studies that have even used the size of premium as a measure of low‐quality decision making. This paper departs from the earlier research and shows that acquisition premia may be justified when target firms' resources are difficult for the market to value. An analysis of a sample of 458 acquisitions demonstrates that although higher premia are paid for R&D‐related assets, the premia do not cause negative abnormal returns. Abnormal returns are more strongly affected by the overall target price levels independent of premia. Copyright © 2007 John Wiley & Sons, Ltd.     

Simultaneous control of production, repair/replacement and preventive maintenance of deteriorating manufacturing systems

This paper presents a method to find the optimal production, repair/replacement and preventive maintenance policies for a degraded manufacturing system. The system is subject to random machine failures and repairs. The status of the system is deemed to degrade with repair activities. When a failure occurs, the machine is either repaired or replaced, and a replacement action renews the machine, while a repair action brings it to a degraded operational state, with the next repair time increasing as the number of repairs increases as well. A preventive maintenance action is considered in order to improve the reliability of the machine, thereby reducing the amount of disruptions caused by machine failures. The decision variables are the production rate, the preventive maintenance rate and the repair/replacement switching policy upon machine failure. The objective of the study is to find the decision variables that minimize the overall cost, including repair, replacement, preventive maintenance, inventory holding and backlog costs over an infinite planning horizon. The proposed model is based on a semi-Markov decision process, and the stochastic dynamic programming method is used to obtain the optimality conditions. A numerical example is given to illustrate the proposed model, and a sensitivity analysis is considered in order to confirm the structure of the control policy and to illustrate the usefulness of the proposed approach.     

Assessing introduction factors for a new industrial product

The present research involves determinant component analysis [3]. Specifically, the study assesses which components—price, product or environmental—are most important in the design of new entry strategy. Under conditions of abundance, industrial firms primarily analyzed price and product characteristics when making new product decisions. In choosing one supplier over another the stalwart buying motives have been quality, service and price [4]. However, these decision components were conceptualized in a period of abundance. Under conditions of scarcity, are price and product characteristics still important? Are environmental dimensions perhaps more important under shortage conditions when making new product decisions? Besides describing the key components that may be considered in new product programming, the article also outlines an approach that may be used to find determinant decision components.     

Organisational culture and decision making: a case of consensus management

Abstract
This paper explores how a state-of-the-art concept, organization culture, shapes decision making and consensus generating strategies used in the successful management of product development activities in high technology companies. Engineering development groups interact with many individuals and groups on a wide variety of very comples engineering, manufacturing, marketing and business issues Much uncertainty exists around these issues because information that would allow for a decision to be made is often unknow or unknowable. Trade-offs are made continually resulting in a high degree of interdependence among development groups and others with whom they interact. Achieving a balance between controlling development activities on the on hand, and encouraging creativity and initiative on the other, is a complicated process.
this paper illustrates the role of organizational culture in product development using case material from a very successful US high case material from a very successful US high technology company. 'Consensus management', a major cultural theme at 'DW Enterprises', is a decision making style that involves everyone in the decision making process who might have relevant input. A cultural analysis reveals that the engineers developed specific techniques for generating consensus, and that these related as much to control over participation in product development as to decision making.