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A decision support model for determining the level of product variety with marketing and supply chain considerations

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  • Syam, Siddhartha S.
  • Bhatnagar, Amit

Abstract

We develop a decision support model to determine the optimal product variety for a manufacturer by accounting for both the marketing and supply chain perspectives. While the marketing perspective tends to focus on variety's salience to consumers, the supply chain perspective tends to focus on inventory management and distribution factors such as order fulfillment rates, fill rates, and related costs. In general, the supply chain costs increase as product variety increases, but this overall trend may be arrested to some extent by advanced manufacturing techniques such as modularization. These techniques often generate an irregular cost function that poses a modeling challenge. We address this issue by developing a piecewise ILP (integer linear program) model, and demonstrate its utility by applying it in a systematic managerial simulation study. The simulation examines how the optimal level of product variety and the corresponding selection of products depend on the revenue and cost characteristics of products.

Suggested Citation

  • Syam, Siddhartha S. & Bhatnagar, Amit, 2015. "A decision support model for determining the level of product variety with marketing and supply chain considerations," Journal of Retailing and Consumer Services, Elsevier, vol. 25(C), pages 12-21.
    • Handle: RePEc:eee:joreco:v:25:y:2015:i:c:p:12-21
    DOI: 10.1016/j.jretconser.2015.03.004
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    2. Saxena, Neha & Sarkar, Biswajit, 2023. "How does the retailing industry decide the best replenishment strategy by utilizing technological support through blockchain?," Journal of Retailing and Consumer Services, Elsevier, vol. 71(C).
    3. Lyons, Andrew Charles & Um, Juneho & Sharifi, Hossein, 2020. "Product variety, customisation and business process performance: A mixed-methods approach to understanding their relationships," International Journal of Production Economics, Elsevier, vol. 221(C).
    4. Nikolay Dragomirov, 2015. "Market-oriented Logistics in Bulgarian Trade and Manufacturing Enterprises," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 60-71, December.
    5. García-Arca, Jesús & Prado-Prado, J. Carlos & González-Portela Garrido, A. Trinidad, 2020. "On-shelf availability and logistics rationalization. A participative methodology for supply chain improvement," Journal of Retailing and Consumer Services, Elsevier, vol. 52(C).

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