A mathematical model to determine the optimal size of a product line from the perspective of manufacturing companies

Abstract

The product line optimization plays a key role to increase the revenue by satisfying consumers' various needs. While the extant studies have made the approaches from the perspective of consumers, in this paper, we propose a product line design problem from the perspective of manufacturers. The concept of neighborhood is introduced that parameterizes consumers' tolerance on specification differences. In addition, the maintenance costs are considered in order to cope with the multi-periodic characteristics of the problem. We demonstrated the applicability of the proposed model to a major mobile phone manufacturing company in Korea. The case study shows that the chosen manufacturing company could have reduced the size of its product line by 64.2%, and saved 68.0% of its product line development costs.