Managing the exchange of information in product development

Abstract

In the present paper, we develop a dynamic programming (DP) model of the product development (PD) process. We conceptualize product development as a sequence of decisions: whether to incorporate a piece of information that just arrived (i.e. became available) or wait longer. We utilize this formulation to analyze different situations that depend on the type, and nature of information that is exchanged: stationary versus dynamic information. We derive optimal decision rules to determine whether (and when) to incorporate for each case. An analysis of the model results in several important findings. First, we must not necessarily incorporate all available information that is related to the design activity. Specifically, once the information collection exceeds certain value, the design team should stop collecting further information. Second, only when past design work accumulates to a certain threshold value should the team include the latest information and perform rework. Large uncertainty of the information and large sensitivity of the design activity makes the incorporation of new information less likely. Finally, managerial implications are discussed with several numerical examples.