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Bilevel joint optimisation for product family architecting considering make-or-buy decisions

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  • Xiaojie Liu
  • Gang Du
  • Roger J. Jiao

Abstract

Product family architecting (PFA) aims at identification of common modules and selective modules to enable product family configuration for mass customisation. Due to nowadays manufacturers moving more towards assembly-to-order production throughout a distributed supply chain, the common practice of outsourcing of certain modules entails make-or-buy (MOB) decisions that must be taken into account in PFA. While the PFA and MOB decisions are enacted for different concerns of the manufacturer and the suppliers, it is important to deal with joint optimisation of the PFA and MOB problems. The prevailing decision models for joint optimisation are mainly originated from an ‘all-in-one’ approach that assumes both PFA and MOB decisions can be integrated into one single-level optimisation problem. Such an assumption neglects the complex trade-offs underlying two different decision-making problems and fails to reveal the inherent coupling of PFA and MOB decisions. This paper proposes to formulate joint optimisation of the PFA and MOB problems as a Stackelberg game, in which a bilevel decision mechanism model is deployed to reveal the inherent coupling and hierarchical relationships between PFA and MOB decisions. A nonlinear bilevel optimisation model is developed with the PFA problem acting as the leader and each MOB problem performing as a follower. A nested genetic algorithm is developed to solve the bilevel optimisation model. A case study of power transformer PFA subject to MOB considerations is presented to illustrate the feasibility and effectiveness of bilevel joint optimisation.

Suggested Citation

  • Xiaojie Liu & Gang Du & Roger J. Jiao, 2017. "Bilevel joint optimisation for product family architecting considering make-or-buy decisions," International Journal of Production Research, Taylor & Francis Journals, vol. 55(20), pages 5916-5941, October.
    • Handle: RePEc:taf:tprsxx:v:55:y:2017:i:20:p:5916-5941
    DOI: 10.1080/00207543.2017.1304666
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    References listed on IDEAS

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    1. Winfried Steiner & Harald Hruschka, 2002. "A Probabilistic One-Step Approach to the Optimal Product Line Design Problem Using Conjoint and Cost Data," Review of Marketing Science Working Papers 1-4-1003, Berkeley Electronic Press.
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    Cited by:

    1. Ma, Yujie & Du, Gang & Jiao, Roger J., 2020. "Optimal crowdsourcing contracting for reconfigurable process planning in open manufacturing: A bilevel coordinated optimization approach," International Journal of Production Economics, Elsevier, vol. 228(C).
    2. Wu, Jun & Du, Gang & Jiao, Roger J., 2021. "Optimal postponement contracting decisions in crowdsourced manufacturing: A three-level game-theoretic model for product family architecting considering subcontracting," European Journal of Operational Research, Elsevier, vol. 291(2), pages 722-737.

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