Managing Product Transitions under Technology Uncertainty

45 Pages Posted: 20 Apr 2010 Last revised: 29 Oct 2015

See all articles by Sreekumar R. Bhaskaran

Sreekumar R. Bhaskaran

Southern Methodist University (SMU) - Information Technology and Operations Management Department (ITOM)

Ankur Goel

Case Western Reserve University - Weatherhead School of Management

Karthik Ramachandran

Georgia Institute of Technology - Scheller College of Business

Date Written: February 22, 2011

Abstract

Sequential innovation, where a new product is developed to replace an existing product, creates several logistical challenges for innovating firms. We consider a firm that has to make the end-of-life inventory decision (or final build) for an existing product before identifying key performance measures of a new product. The firm also has the ability to improve the new product's quality during the transition, which we refer to as development flexibility. We jointly model the final build and new product introduction decisions, and characterize optimal inventory and launch policies. The effects of competition, product architecture and development flexibility on the firm's product transition strategy are also explored. In a competitive setting, we show that the optimal policy can be characterized as competitively overstocking or understocking, based on the inventory level relative to a rival's time of entry. Our results thus provide an alternative view of inventory as a hedge against development uncertainty that is inherent to product development.

Keywords: New Product Development, Product Transition, Inventory Management, Sequential Innovation

Suggested Citation

Bhaskaran, Sreekumar R. and Goel, Ankur and Ramachandran, Karthik, Managing Product Transitions under Technology Uncertainty (February 22, 2011). Available at SSRN: https://ssrn.com/abstract=1775430 or http://dx.doi.org/10.2139/ssrn.1775430

Sreekumar R. Bhaskaran (Contact Author)

Southern Methodist University (SMU) - Information Technology and Operations Management Department (ITOM) ( email )

Dallas, TX 75275
United States

Ankur Goel

Case Western Reserve University - Weatherhead School of Management ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

Karthik Ramachandran

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
(404) 894-8631 (Phone)

HOME PAGE: http://www.prism.gatech.edu/~karthik37/

Register to save articles to
your library

Register

Paper statistics

Downloads
311
rank
95,177
Abstract Views
1,545
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information