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Enhancing System-Wide Profitability With New Product Introduction And Throughput Accounting

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  • OLLI-PEKKA HILMOLA

    (Logistics, Turku School of Economics and Business Administration, Rehtorinpellonkatu 3, FIN-20500 Turku, Finland)

Abstract

Most often product development performance is used as an appraisal measure to achieve sustainable profitability now and in the future. Despite the fact that global markets are favoring more knowledge and service intensive products, manufacturing still has an important role within New Product Introduction (NPI) process. It is argued in this paper that the proper understanding and management of business decisions through manufacturing and market constraints is vital in the profitability evaluation of new product alternatives. According to the analyzed hypothetical example, conventional cost accounting methods in the evaluation process will lead to losses, where constraints management method (called throughput accounting) increases profits significantly. Despite this important finding, in the paper it is being speculated that global infinite market demand combined with higher number of possible product alternatives and keen management focus to concentrate only on the most profitable one might diminish profitability performance according to these two accounting approaches. However, according to the hypothetical example, in infinite global markets it seems to be extremely profitable to concentrate in several product groups simultaneously, instead of one.

Suggested Citation

  • Olli-Pekka Hilmola, 2004. "Enhancing System-Wide Profitability With New Product Introduction And Throughput Accounting," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 289-306.
    • Handle: RePEc:wsi:ijitmx:v:01:y:2004:i:03:n:s0219877004000192
    DOI: 10.1142/S0219877004000192
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    Cited by:

    1. Machado, Mariana Paim & Abreu, Jaqueline Lilge & Morandi, Maria Isabel Motta & Piran, Fabio Sartori & Lacerda, Daniel Pacheco, 2023. "Exploratory decision robustness analysis of the theory of constraints focusing process using system dynamics modeling," International Journal of Production Economics, Elsevier, vol. 260(C).

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