An Anatomy of a Decision-Support System for Developing and Launching Line Extensions

Abstract

For most firms producing fast-moving consumer packaged goods, line extension is central to their new product development (NPD) strategy. The authors present a decision-support system for managing the NPD process in this industry, which explicitly evaluates the financial prospects of new line extension concepts. The system developed is based on an in-depth analysis of 51 new product projects launched over a three-year period at a major food manufacturer. It embodies historical knowledge about the productivity of the firm's NPD process and captures some key research and development resource inputs that can affect this productivity. It also provides shipment forecasts at various stages of the NPD process and thus can be used at new product project review gates to evaluate line extension concepts systematically. Finally, the system also can be used to improve the practice of the NPD process by enabling its users to take a product line perspective, using incremental sales evaluation, and by facilitating cross-functional and inter-project learning. Although the system has been developed specifically for a packaged food company environment, its underlying design principles are generic and applicable to a wide range of industries.