Linking Optimal Design Decisions to the Theory of the Firm: The Case of Resource Allocation

[+] Author and Article Information
Panayotis Georgiopoulos

Program In Manufacturing, University of Michigan, Ann Arbor, MI 48109panayio@umich.edu

Mattias Jonsson

Department of Mathematics, University of Michigan, Ann Arbor, MI 48109mattiasj@umich.edu

Panos Y. Papalambros

Department of Mechanical Engineering, University of Michigan, Ann Arbor, MI 48109pyp@umich.edu

These are estimates from private discussions with automotive industry professionals.

J. Mech. Des 127(3), 358-366 (Jun 26, 2004) (9 pages) doi:10.1115/1.1862679 History: Received November 13, 2002; Revised June 26, 2004

Resource allocation is a core business milestone in a firm’s product development process: Maximize the final value derived from allocating resources into an appropriate product mix. Optimal engineering design typically deals with determining the best product based on technological (and, occasionally, cost) requirements. Linking technological with business decisions allows the firm to follow a resource allocation process that directly considers not only the resources to invest in different products but also the appropriate physical properties of these products. Thus, optimal designs are determined within an enterprise context that maximizes the firm’s value. The article demonstrates how this integration can be accomplished analytically using a simple example in automotive product development.

Copyright © 2005 by American Society of Mechanical Engineers
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Grahic Jump Location
Figure 1

Decisions modeled

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Figure 2

A random walk in the future

Grahic Jump Location
Figure 3

Expected present value



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