Resource title

An Optimal project admission policy in new product development

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While annual portfolio reviews are important in New Product Development (NPD), many project ideas arrive and must be decided upon one-by-one during the year. The authors model the NPD organization as an M/M/N queueing system that faces project arrivals with a continuous payoff distribution. The model includes idea obsolescence in the following way: a project idea that is not accepted right away may wait until more capacity is available, but it disappears (is superseded) when a new project idea arrives. New features of this model are the continuous payoff distribution (rather than discrete customer classes) and the project idea obsolescence. The authors find that the optimal admission policy is a threshold policy. For a system size of N = 2, the thresholds increase in the amount of capacity available (the organization becomes more choosy when more capacity is available), and the value function is convex, that is, the marginal value of an additional capacity unit is increasing.

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en

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application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp2003/2003-44.pdf

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Copyright INSEAD. All rights reserved