An Applied Framework for New Product
Introduction Decision in the High Technology Industry
Ozalp Ozer
Department
of Management Science & Engineering, Stanford University.
Abstract: In this presentation, we will outline the
challenges and uncertainties associated with bringing a new product to market.
To do so, we will focus on a major global high-technology company located in
the Bay Area and discuss their challenges related to new product introductions
(NPI). The high technology industry is characterized by lightning speed in
technology innovation, intense competition and relentless price erosion. It is,
therefore, critical to bring the new product to the market at the right time to
ensure profitability.
We will present
our OR based modeling framework that is used to help a major global
high-technology company make effective time-to-market decisions. Our model
solves the problem in two phases: a design phase and a mass production phase.
The design phase is modeled as an optimal stopping problem where decision to
"enter or not" is made. The mass production phase is modeled as a
stochastic production control problem where production decisions are made. We
will characterize an optimal policy for market timing, an optimal policy for
production decisions and how and why they are amenable for implementation. We
will also discuss the techniques used to solve this large-scale stochastic
dynamic program, including how structural results enabled us to improve
computational efficiency.
Finally, we will
discuss how this project and the resulting software enabled various functional
areas, such as Finance, Manufacturing, Marketing and R&D within the firm to
communicate and jointly address this strategic question. If time permits, we
will share our perspectives on the challenges and key success factors of
working at the university/industry boundary.
Biographical Sketch:
Ozalp Ozer is an
Assistant Professor in the Department of Management Science & Engineering
at Stanford University. He is also an affiliated faculty member of the Stanford
Global Supply Chain Management Forum. His general research interests are design
and control of production and distribution systems, management and coordination
of supply chains, pricing and revenue management. Professor Ozer
has received the Wickham Skinner Early-Career
Research Accomplishment Award from the Production and Operations Management
Society in 2004, and the Eugene Grant Teaching Award in Stanford's School of
Engineering by vote of students in 2003. He received his Ph.D. and M.S. degrees
from Columbia University.