New product development considering product cannibalization, development cost and production cost

Bibo Yang, Xiaoling Hu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

3 Citations (Scopus)

Abstract

This paper explores a situation in which a firm wants to add a new product to its existing product line in order to maximize its profit. A new product contains a group of attributes, and thus its development can be viewed as a configuration of attribute levels. Different attribute levels contribute to product variety and reduce cannibalization by product similarities. On the other hand, large variations in attribute levels often increase development cost and process variation cost. Thus, the impact of product cannibalization, development cost and production cost on new products should be evaluated. We formulate this selection of attribute levels as a nonlinear optimization problem. A heuristic is proposed to solve the problem efficiently, and managerial implications are provided.
Original languageEnglish
Pages (from-to)130-145
Number of pages16
JournalJournal of the Operations Research Society of Japan
Volume59
Issue number1
DOIs
Publication statusPublished - 1 Mar 2016

Keywords

  • Cannibalization
  • Decision making
  • New product selection
  • Process variation cost
  • Product planning

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Management Science and Operations Research

Cite this