Managing Broader Product Lines through Delayed Differentiation Using Vanilla Boxes
AbstractIn an attempt to reduce cost while maintaining good customer service, some of the leading manufacturers in the computer industry are delaying product differentiation (by exploiting component commonality) while managing broader product lines. In an environment where demands are stochastic, it seems a good strategy to store inventory in the form of semi-finished products (vanilla boxes) that can serve more than one final product. However, finding the optimal configurations and inventory levels of the vanilla boxes could be a challenging task. In this paper, we model the above problem as a two-stage integer program with recourse. By utilizing structural decomposition of the problem and (sub)gradient derivative methods, we provide an effective solution procedure. A special case, a variant, and several extensions are also discussed. In our computational section, we utilize our model to study several new research issues. We provide insights on the effect of demand variance, correlation, and capacity limitations on the optimal configuration and inventory levels of vanilla boxes and the performance of a vanilla assembly process. In addition, we compare the performance of the vanilla assembly process to make-to-stock and assemble-to-order processes and provide managerial insights on the conditions under which one might be better than the others. Finally, we discuss the characteristics of an IBM product line (which motivated this work) and the effectiveness of a heuristic tailored for that application.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 44 (1998)
Issue (Month): 12-Part-2 (December)
Stochastic Multi-Product Assembly Systems; Product Variety; Component Commonality; Demand Correlation; Inventory Management; Stochastic Integer Programs;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Tibben-Lembke, Ronald S. & Bassok, Yehuda, 2005. "An inventory model for delayed customization: A hybrid approach," European Journal of Operational Research, Elsevier, vol. 165(3), pages 748-764, September.
- Hai Che & Chakravarthi Narasimhan & V. Padmanabhan, 2010. "Leveraging uncertainty through backorder," Quantitative Marketing and Economics, Springer, vol. 8(3), pages 365-392, September.
- Tang, Dong, 2011. "Managing finished-goods inventory under capacitated delayed differentiation," Omega, Elsevier, vol. 39(5), pages 481-492, October.
- Reimann, Marc, 2012. "Accurate response by postponement," European Journal of Operational Research, Elsevier, vol. 220(3), pages 619-628.
- Vliegen, I.M.H. & Kleingeld, P.A.M. & van Houtum, G.J., 2010. "Separate tools or tool kits: An exploratory study of engineers' preferences," International Journal of Production Economics, Elsevier, vol. 125(1), pages 173-184, May.
- Xiao, Yongbo & Chen, Jian & Lee, Chung-Yee, 2010. "Optimal decisions for assemble-to-order systems with uncertain assembly capacity," International Journal of Production Economics, Elsevier, vol. 123(1), pages 155-165, January.
- Langenberg, Kerstin U. & Seifert, Ralf W. & Tancrez, Jean-Sébastien, 2012. "Aligning supply chain portfolios with product portfolios," International Journal of Production Economics, Elsevier, vol. 135(1), pages 500-513.
- Agard, Bruno & Penz, Bernard, 2009. "A simulated annealing method based on a clustering approach to determine bills of materials for a large product family," International Journal of Production Economics, Elsevier, vol. 117(2), pages 389-401, February.
- Brabazon, Philip G. & MacCarthy, Bart, 2006. "Fundamental behaviour of virtual-build-to-order systems," International Journal of Production Economics, Elsevier, vol. 104(2), pages 514-524, December.
- Tang, Christopher S., 2006. "Perspectives in supply chain risk management," International Journal of Production Economics, Elsevier, vol. 103(2), pages 451-488, October.
- Droge, Cornelia & Vickery, Shawnee K. & Jacobs, Mark A., 2012. "Does supply chain integration mediate the relationships between product/process strategy and service performance? An empirical study," International Journal of Production Economics, Elsevier, vol. 137(2), pages 250-262.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.