Market Mapping for Production Optimization
This paper describes methods for product optimization using market mapping. It is possible to optimize products by examining market conditions as over time and comparing them with evolving cost structures. Market mapping facilitates this analysis.
Products have important attributes associated with them, which includes their demand curves, prices and costs. Market demand maps reveal market boundaries and underserved price and quantity regions that producers can seek in order to improve product viability through reduced competition.
Sustainable prices derive from product attributes, as demonstrated by regression analysis. Plotting the competing products’ attributes statistically relevant to buyers’ purchase decisions reveals market value maps. Open spaces within those maps are potential attribute set regions welcomed but not yet satiated by and within markets.
As cost structures change for the better, it is possible to enter market regions not previously feasible due to productivity constraints. Comparing producers’ costs to buyers’ values allows selection of the most favorable positions of both. In all markets there are optimized profit vectors the lengths of which predict the potential per unit profits, while their end points forecast costs, prices, two or more valued attributes, and, in another dimension, quantities sold.
In commercial programs, products start generating positive cash when their costs fall below their sustainable prices. If discounted cash flows exceed a certain threshold for potential new products, this indicates that they are likely to produce sufficiently high net present values to warrant production of them.
In government programs, product values often decrease at rates faster than contractors’ recurring costs. In such cases there are intersection points at which customer values equal contractor costs. In the absence of other forces, it is at these points that those programs terminate.
These techniques offer visual and defensible methods to increase the viability of new and existing products.
Douglas K. Howarth
Doug Howarth is the lead of Lockheed Martin’s Advanced Development Projects Parametric Estimating group. Doug has held a number of supervisory positions at Lockheed Martin and has acted as the F-117A Manufacturing Program Manager. A member of Advanced Development Projects for over 28 years, Doug has been a Parametric Analyst for 154 years, specializing in buoyant and Unmanned Air Vehicles. His paper, “Profit as an Independent Variable: The Case of Business Aircraft,” was published in the Spring 2007 edition of The Journal of Parametrics. Last July, he presented a paper to the International Powered Lift Conference (IPLC) put on by the Royal Aeronautical Society (RAeS) in London. In addition to making numerous presentations to ISPA, Doug has presented papers to the American Institute of Aeronautics and Astronautics (AIAA), the Institute of Electrical and Electronic Engineers (IEEE) and the Society of Automotive Engineers (SAE). Doug graduated from Washington State University in 1977, with a Bachelor of Arts in Economics.