An approach to product variety management in the painted sheet metal industry

In the painted sheet metal industry, offering a great variety of colors is an important competitive factor. However, an excessive number of colors can lead to excessive setup costs/times, inventory costs, and administrative complexity. In this paper, we address the case of a large manufacturer of painted sheet metal products located in northern Mexico. Several methods, both exact and heuristic, are proposed to optimize the variety of colors the firm offers. The exact method is based on mixed integer programming and the heuristic methods are variations of greedy algorithms. The methods are tested with real company data. The methods that perform better are identified and considerations are discussed which can affect the choice of method in a practical setting.

[1]  Dimitris Bertsimas,et al.  An Approximate Dynamic Programming Approach to Multidimensional Knapsack Problems , 2002, Manag. Sci..

[2]  P. Appelqvist,et al.  Postponed variety creation: case study in consumer electronics retail , 2005 .

[3]  Soo Wook Kim,et al.  Manufacturing Practices and Strategy Integration: Effects on Cost Efficiency, Flexibility, and Market-Based Performance , 2005, Decis. Sci..

[4]  David W. Pentico,et al.  The Discrete Two-Dimensional Assortment Problem , 1988, Oper. Res..

[5]  Fu Lee Wang,et al.  Exact Algorithm for Concave Knapsack Problems: Linear Underestimation and Partition Method , 2005, J. Glob. Optim..

[6]  P. Kolesar.  A Branch and Bound Algorithm for the Knapsack Problem , 1967 .

[7]  Edward Y. H. Lin,et al.  A Bibliographical Survey On Some Well-Known Non-Standard Knapsack Problems , 1998 .

[8]  Kamalini Ramdas.  MANAGING PRODUCT VARIETY: AN INTEGRATIVE REVIEW AND RESEARCH DIRECTIONS , 2003 .

[9]  R. E. Marsten,et al.  An Algorithm for Nonlinear Knapsack Problems , 1976 .

[10]  Giovani J.C. da Silveira,et al.  A framework for the management of product variety , 1998 .

[11]  Esther P. Y. Tang,et al.  Product variety strategy ‐ an environmental perspective , 1996 .

[12]  D. W. Pentico,et al.  The Assortment Problem with Probabilistic Demands , 1974 .

[13]  Saïd Hanafi,et al.  The Multidimensional 0-1 Knapsack Problem—Bounds and Computational Aspects , 2005, Ann. Oper. Res..

[14]  G. Dobson,et al.  PRODUCT OFFERING, PRICING, AND MAKE‐TO‐STOCK/MAKE‐TO‐ORDER DECISIONS WITH SHARED CAPACITY , 2002 .

[15]  Leslie O. Morgan,et al.  Marketing/Manufacturing Trade-Offs in Product Line Management , 2001 .

[16]  M. L. Wolfson.  Selecting the Best Lengths to Stock , 1965 .

[17]  Warren H. Hausman,et al.  Technical Note: Mathematical Properties of the Optimal Product Line Selection Problem Using Choice-Based Conjoint Analysis.: Mathematical Properties of the Optimal Product Line Selection Problem Using Choice-Based Conjoint Analysis. , 2000 .

[18]  Goutam Dutta,et al.  A Survey of Mathematical Programming Applications in Integrated Steel Plants , 2001, Manuf. Serv. Oper. Manag..