Decision Based Design

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8

Demand Modeling

8.1 Introduction

The general consensus in the engineering design community is that the

main motivation for an engineering rm’s activities is to make money.

There is nothing necessarily unethical about this notion, though. As

Hermann and Schmidt (2006) argue, prot-making enterprises generate

employment, manufacture products, and serve the community in the pro-

cess. Arguably, the contribution to society is greater than the burden, since

we do buy their products, which enrich our lives. This decision to purchase

also allows the customers to decide the fate of a product, and eventually

the company. Of course, the inverse problem of how to make a product

that the customers will buy is central to the decision making in a prot-

making company. Indeed, there are engineering challenges and regulatory

hurdles in making working products; the nal sales determine protability

and are the driving factors that make a product successful. To that effect,

demand modeling, the study of the expected number of sales of a product,

is undertaken.

Understanding the effect of design decisions on eventual product demand

is becoming more and more relevant in today’s era of globalization where

competitive advantage, whether due to price or technology, does not last

long. The focus of this chapter is on understanding how one should think

about demand in the context of engineering design. To that end, we will try

to understand how to incorporate demand in the initial stages of product

design, and what techniques are out there that help predict the expected

demand with or without the presence of competition, which will give us

an idea of how demand can be integrated into the design decision-making

process directly so that the effect of engineering decisions on prot can be

readily observed.