EURO 2024 Copenhagen
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575. Feature selection for new product line design with economies of scale

Invited abstract in session WD-49: Mathematical programming for machine scheduling, stream Lot Sizing, Lot Scheduling and Production Planning.

Wednesday, 14:30-16:00
Room: M1 (building: 101)

Authors (first author is the speaker)

1. Shaghayegh Ramezanpour Shalmani
Operations and data analytics, ESSEC BUSINESS SCHOOL
2. Laurent Alfandari
ESSEC Business School
3. Sara Rezaee Vessal
Operations Management, ESSEC Business School

Abstract

Feature selection across different versions of a product, to create a sufficient level of differentiation and yet satisfy customers’ expectations, is one of the complex decisions that companies need to make frequently. In this research, using Mixed-Integer Linear Programming, we decide on the levels of each feature in the various versions of the product line, in the presence of discount on the purchase price of initial components as a function of the purchased quantity. We study the trade-off between the cost of the products, and customers’ utility based on a First Choice model, to maximize the firms’ profit. Since the problem can easily get intractable with an increase in its size, we propose various families of valid cuts to strengthen the model and accelerate solving. Conducting extensive numerical experiments, we provide managerial insights to help manufacturers’ designing their products. We also analyze the impact of varying the purchasing discount rate of components, the degree of market competitiveness, and the degree of heterogeneity of customers’ preferences on the optimal design choices. The impact of these variations is measured in terms of manufacturer’s profit, intensity of economies of scale, and the level of homogeneity vs. heterogeneity of the different versions of the
product line.

Keywords

Status: accepted

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