A Planning Methodology for Product Startups

By William J. AbernathyNicholas Baloff
1972| Working Paper No. 88

The problem of maintaining a balance between production output and demand growth during new product introductions is analyzed. In many cases, the introduction of a new product results in both rapid demand growth and significant changes in the production rate throughout the startup period, during which productivity and product output increase significantly. It is demonstrated that, if these two phenomena are not estimated and used as a basis of closely coordinated planning between production and marketing, very large costs can be incurred — either lost sales and potential introduction failure related to stock out conditions caused by “underproduction” or excess inventory holding, obsolescence and opportunity costs when an over production imbalance occurs. Following a description of the problem examples are used to illustrate the benefits of increasing rigor in the joint planning of new product introductions. Finally, a general methodology based upon an heuristic pattern search algorithm is employed to provide an optimal solution to a multivariate planning example.