Managing the costs of new product development projects: a longitudinal case study at an automotive company

The overarching research topic of this dissertation is the management of the costs of new product development projects. New product development (hereinafter NPD) is essential for most companies, as the introduction of innovative products is crucial for their long-term success. Due to the high level of uncertainty that comes with the innovative process of product development, the management of NPD costs is a highly challenging task. We illuminate the field of NPD cost management from two perspectives, which represent our research topics. The first research topic of this thesis is the estimation of NPD costs. NPD costs are costs triggered by the activities that companies pursue to technically develop new products (i.e., labor costs of engineers, project managers, designers, and quality assessors, costs for tools and software required in NPD, costs of material and components required for testing and prototyping, and NPD-related overhead costs). Many authors have presented methods for product cost estimation in general, mostly focusing on overall product costs or direct material costs. Limited research is available about the estimation of the specific cost type of NPD costs. We conduct three studies to contribute to this gap. First, we give an overview of the status quo regarding NPD cost estimation. We do this by conducting a systematic literature review on methods for this purpose. Second, we develop and present the NPD cost benchmarking method. With this method, which is mostly built on external data, we add a new approach to the literature on NPD cost estimation methods. As third study in the context of NPD cost estimation, we present a case study in which we provide detailed, empirical insights on the challenges in NPD cost estimation, and on the application of the NPD cost benchmarking method in particular. The second research topic of this thesis concerns decision-making processes during NPD projects. In this uncertain and dynamic environment, decision-makers often rely on heuristics to choose between alternative options for responding to unpredicted developments during NPD projects (for example, changes in market demands, technical challenges, or new information about competitors). Empirical insights are mostly missing about how such decisions are made. Our fourth study provides insights on the use of heuristics in ongoing NPD project managerial decision-making by conceptualizing and empirically testing the within-project NPD cost compensation heuristic. This dissertation was supervised by Prof. Dr. Marc Wouters from KIT’s chair of Management Accounting at the Institute of Management. It is written in English language and the author aims to obtain the title of Dr. rer. pol

Recommendation domains for pond aquaculture

This publication introduces the methods and results of a research project that has developed a set of decision-support tools to identify places and sets of conditions for which a particular target aquaculture technology is considered feasible and therefore good to promote. The tools also identify the nature of constraints to aquaculture development and thereby shed light on appropriate interventions to realize the potential of the target areas. The project results will be useful for policy planners and decision makers in national, regional and local governments and development funding agencies, aquaculture extension workers in regional and local governments, and researchers in aquaculture systems and rural livelihoods. (Document contains 40 pages

Giga-Investments: Modelling the Valuation of Very Large Industrial Real Investments

In this doctoral dissertation characteristics of very large industrial real investments (VLIRI) are investigated and a special group of VLIRI is defined as giga-investments. The investment decision-making regarding to giga-investments is discussed from the points of view of discounted cash-flow based methods and real option valuation. Based on the bacground of establishing giga-investments, state-of-the-art in capital budgeting (including real options) and by applying fuzzy numbers a novel method for the evaluation and profitability analysis of giga-investments is presented. Application of the method is illustrated and issues regarding investment decision-making of large industrial real investments are discussed.Real Options; Fuzzy Real Option Valuation; Giga-Investments; Very Large Industrial Real Investments; Dissertation

The Proportionality Hypothesis in Capital Theory: an Assessment of the Literature

It  is  found  that  the  hypothesis  of  a  constant  replacement  investment  capital  stock  ratio  has several  fundamental  shortcomings.  It  conflicts  with  most  of  the  available  theoretical  and empirical evidence. It is alien to researchers in other fields of economics and related areas; and, perhaps most importantly, it has restrained progress in economic theory and econometric applications  based  on  more  realistic  conceptualizations  of  the  time  structure  of  capital.  On these grounds it is concluded that its abandonment is long overdue

Offshore Exploratory Drilling Campaigns During Low Oil Price Period: Maximizing Value Creation from Flexibility

Master's thesis in Petroleum engineeringDuring severe oil price downturns, many operating companies reduce or eliminate large investments with long time horizons such as exploratory drilling campaigns. This reduction in investments forces rig and drilling services providers to reduce their bids to be competitive. The result of this is lower initial investment in the oil and gas projects. In this research, a valuation approach is implemented to study the impact of this investment reduction on the decision-making process for executing exploratory drilling campaigns during low oil price periods. It is demonstrated that postponing exploration campaigns during low oil price periods does not necessary maximize value creation. Value creation from investment in low price periods results from the combination of uncertainty and flexibility. The analysis of the value of flexibility (optionality) is usually referred to as Real Options Valuation (ROV). In this work, one of the most versatile approach for valuing options is applied: The Least-Square Monte Carlo Method (LSM). Two uncertainties were considered: oil price and drilling cost. Among the different oil price models, the two-factor stochastic price process developed by Schwartz and Smith (2000) was chosen because of its balance between realism and ease of communication to the managers. Drilling cost is modeled as a Geometric Brownian Motion process. By implementing a delayed correlation between the drilling cost and the oil price, the cost reduction observed in the market is accounted for. In this research, it is shown how real option valuation can be used to determine the optimal time to start the exploratory drilling campaign. Furthermore, it is demonstrated that by including the correlation between the drilling cost and the oil price, the optimal time to execute the investment is during the year with the lowest expected oil price. The impact of this correlation is studied through the use of sensitivity analyses of the project value with respect to the correlation factor and the parameters in the stochastic price model. It is concluded that considering this correlation leads to more realistic project value estimations, resulting in portfolio decisions that maximize stakeholder value. The key contribution of this thesis is the use of option valuating methods to demonstrate that value will be created by initiating the exploratory drilling campaigns during low oil price periods. The real option model developed in this research is applicable to all types of exploration projects in the petroleum industry

Recommendation domains for pond aquaculture

This publication introduces the methods and results of a research project that has developed a set of decision-support tools to identify places and sets of conditions for which a particular target aquaculture technology is considered feasible and therefore good to promote. The tools also identify the nature of constraints to aquaculture development and thereby shed light on appropriate interventions to realize the potential of the target areas. The project results will be useful for policy planners and decision makers in national, regional and local governments and development funding agencies, aquaculture extension workers in regional and local governments, and researchers in aquaculture systems and rural livelihoods.Pond culture, Freshwater aquaculture, GIS

Capturing Risk in Capital Budgeting

NPS NRP Technical ReportThis proposed research has the goal of proposing novel, reusable, extensible, adaptable, and comprehensive advanced analytical process and Integrated Risk Management to help the (DOD) with risk-based capital budgeting, Monte Carlo risk-simulation, predictive analytics, and stochastic optimization of acquisitions and programs portfolios with multiple competing stakeholders while subject to budgetary, risk, schedule, and strategic constraints. The research covers topics of traditional capital budgeting methodologies used in industry, including the market, cost, and income approaches, and explains how some of these traditional methods can be applied in the DOD by using DOD-centric non-economic, logistic, readiness, capabilities, and requirements variables. Stochastic portfolio optimization with dynamic simulations and investment efficient frontiers will be run for the purposes of selecting the best combination of programs and capabilities is also addressed, as are other alternative methods such as average ranking, risk metrics, lexicographic methods, PROMETHEE, ELECTRE, and others. The results include actionable intelligence developed from an analytically robust case study that senior leadership at the DOD may utilize to make optimal decisions. The main deliverables will be a detailed written research report and presentation brief on the approach of capturing risk and uncertainty in capital budgeting analysis. The report will detail the proposed methodology and applications, as well as a summary case study and examples of how the methodology can be applied.N8 - Integration of Capabilities & ResourcesThis research is supported by funding from the Naval Postgraduate School, Naval Research Program (PE 0605853N/2098). https://nps.edu/nrpChief of Naval Operations (CNO)Approved for public release. Distribution is unlimited.

Inflation Risk Analysis of European Real Estate Securities

The focus of this paper is the analysis of the inflation risk of European real estate securities. Following both a causal and a final understanding of risk, the analysis is twofold: First, to examine the causal influence of inflation on short- and long-term asset returns, we employ different regression approaches based on the methodology of Fama/Schwert 1977. Hedging capacities against expected inflation are found only for German open-end funds. Furthermore, different shortfall risk measures are used to study whether an investment in European real estate securities protects against a negative real return at the end of a given investment period.

Total Ownership with Lifecycle Cost Model Under Uncertainty

NPS NRP Technical ReportTotal Ownership with Lifecycle Cost Model Under UncertaintyN9 - Warfare SystemsThis research is supported by funding from the Naval Postgraduate School, Naval Research Program (PE 0605853N/2098). https://nps.edu/nrpChief of Naval Operations (CNO)Approved for public release. Distribution is unlimited.