Portfolio selection of new product projects: a product reliability perspective

Abstract

Article citation info: (*) Tekst artykułu w polskiej wersji językowej dostępny w elektronicznym wydaniu kwartalnika na stronie www.ein.org.pl IntroductionNew product development (NPD) and its launch is one of the most important business processes in contemporary enterprises. Dynamic development of technology, increasing customer requirements and growth of global competition result in a reduction of product life cycle [8,11]. Product complexity and limited resources (e.g. financial, personal) hinder quick development of innovative products. Therefore, companies often modernise existing products to develop a new product according to changing customer requirements [8,31]. Modernisation of an existing product reduces time, cost and risk compared with designing a new product from scratch [13,15,28]. A faster launch of a new product can ensure company an advantage over competitors. However, a reduction of product design time often leads to the decrease of product reliability, and consequently, increases the warranty cost in the post-sale phase. Moreover, a decline of customers' loyalty due to unsatisfactory product quality can decrease future sales and profits. On the other hand, the greater expenses for improving product quality usually lead to increasing product price, what is also adversely perceived by customers. Hence, there is a need to develop a system approach to ensure the desired product reliability from the viewpoint of entire business, and from the stage of selecting portfolio of new product development projects.Product reliability is defined as the ability of a product to perform required functions, under given environment and operational conditions and for a stated period of time [22]. Product reliability is widely considered in the literature from an engineering perspective (e.g. determining stress-strain models of materials in the stage of testing a new product) that aims to improve durability of a product and ensure reliability-related standards [7,12]. Product reliability is less often considered in a system approach that includes all stages of product life cycle and aligns reliability with business goals such as customer satisfaction, sale/profit growth, and a reduction of development, production and warranty costs.Murthy [22] proposes a decision support system for determining parameters of product reliability based on development cost model, warranty cost model, and reliability and usage models. There is considered product reliability in the context of three levels (business, product and component), and three stages (pre-development, development, and post-development). In turn, Kumar [19] presents a knowledge based reliability engineering approach to manage product safety that takes into account manufacturing process of a new product and business environment (customer requirements, quality of materials purchased from suppliers). These studies consider product reliability from the perspective of a system approach, however, they do not Relich M. Portfolio selection of new product projects: a product ...

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