Stochastic Programming Models for Managing Product Variety

Abstract

In the last decade, there has been an increasing emphasis on producing specialized products for different segments in the market as a means for providing better service to customers. Manufacturers have been adopting strategies including (but not limited to) (i) integration of marketing, manufacturing and distribution activities within the supply chain (see Cohen and Lee 1988 and Lee and Billington 1993), (ii) accurate response to changes in market needs (see Fisher et al. 1994), (iii) flexibility in manufacturing process using concepts such as delayed differentiation (see Lee 1996 and Lee and Tang 1998), (iv) incorporation of commonality at the product design stage (see Hayes, Wheel-right and Clark 1988 and Ulrich and Eppinger 1995), (v) adoption of flexible manufacturing technologies and (vi) implementation of just-in-time practices such as set-up reduction (see Hall 1983), in order to reduce costs and improve customer satisfaction. Kekre and Srinivasan (1990) suggest that such strategies may mitigate any possible adverse effect of product proliferation.