All the R&D projects which the firm has worked on in the previous periods are listed in the R&D section of the company results. The report details completed and uncompleted projects, including the two projects which existed at the beginning of the simulation. A typical report is shown in Figure 16.
Let’s use the following example to illustrate the possible responses from the R&D department after one period of development. The table in Figure 62 summarizes the responses for a new project with identical physical characteristics but with four different requested levels of base cost and allocated budget.
The figure in the middle, Normal budget for completion, is calculated by R&D at an early stage of the project. This figure is internal to the R&D department and is not disclosed to Marketing. It is the same in case A and B, or in cases C and D, because it depends on the technical specifications and on the requested base cost. The project will be completed only if the allocated budget is greater than or equal to the normal budget. This is what happens in cases A and C. Note that the extra budget ($200k in case A and $450k in case B) is not given back to Marketing.
The project is completed in case A despite the fact that the base cost specified ($8.00) was below the minimum base cost ($11.00); it was automatically adjusted and the project is successfully developed at the minimum base cost.
Note that the Minimum base cost is the same in all cases because it only depends on the technical specifications. For case C, the Marketing department could decide to immediately launch a cost reduction project, so as to complete a new project with the same physical characteristics and a base cost of $11.
|
|
|
Case A |
Case B |
Case C |
Case D |
|
Project |
Efficacy |
17 |
17 |
17 |
17 |
|
Safety |
26 |
26 |
26 |
26 | |
|
Packaging |
85 |
85 |
85 |
85 | |
|
Pleasure |
35 |
35 |
35 |
35 | |
|
Usability |
70 |
70 |
70 |
70 | |
|
Requested base cost |
$8.00 |
$8.00 |
$13.00 |
$13.00 | |
|
Allocated budget |
$1 000k |
$300k |
$1 000k |
$300k | |
|
R&D Internal Data |
Normal budget for completion |
$800k |
$800k |
$550k |
$550k |
|
Response from R&D at end of period |
Project successfully completed |
Yes |
No |
Yes |
No |
|
Current base cost |
$11.00 |
$11.00 |
$13.00 |
$13.00 | |
|
Minimum base cost |
$11.00 |
$11.00 |
$11.00 |
$11.00 | |
|
Additional budget for completion |
- |
500k |
- |
250k |
Figure 62 – Interface with R&D department
Uncompleted R&D projects may be continued the following period or may be suspended (shelved) for one or several periods. If you choose to never continue the project, the budget allocated so far is lost. The technical characteristics of a continued project may not be changed from their original values.