Optimal information exchange policies in integrated product development

This article considers information exchange in an Integrated Product Development (IPD) environment. First, a dynamic programming model is formulated that is able to capture upstream partial information flow in a two-activity IPD process. A simple threshold policy is derived that aids the downstream activity in deciding whether to consider or ignore this upstream information as a function of information quality and its associated setup and rework penalties. Then, this formulation is expanded to model analytically, for the first time, information flow in a three-activity IPD process. In this case, the focus is on aiding the midstream activity in deciding whether to consider or ignore partial upstream information, taking into consideration downstream concerns. Because it is difficult to derive threshold policies in this case, the dynamic program has to be solved directly and then an extensive Monte Carlo simulation study is performed to analyze the behavior of the optimal policy. The simulation results suggest several important insights regarding the timing and frequency of considering partial information in an IPD environment.