The Implementation of a Cash-Flow-Based Mathematical R&D Project Selection Model

Abstract

Customer project selection is a challenge for many industrial companies. An inappropriate project selection approach can lead to constraint violations, high fixed costs, and suboptimal portfolios. To overcome these problems a cash-flow-based linear optimization model was developed in partnership with a tier-1 automotive supplier. Implementation barriers had been verified through a case study conducted at two organizational hierarchies. Results suggest that an application at the operating levels is possible. At higher levels, though, product and firm complexity require major implementation efforts. This article serves theorists as well as practitioners in multiple regards. First, an overview of existing project selection methods and their application in practice is provided. Additionally, the supplier's current appraisal process is depicted. Second, operations research implementation barriers are identified and validated for the adoption of the proposed mathematical project selection approach. Third, a guideline including procedures to overcome experienced difficulties is presented.