Managing product variety through delayed product differentiation using vanilla boxes

Thesis Type: Postgraduate

Institution Of The Thesis: Middle East Technical University, Faculty of Engineering, Department of Industrial Engineering, Turkey

Approval Date: 2004

Thesis Language: English

Student: Özlem Burhan



In an attempt to reduce costs and improve customer satisfaction, manufacturers have been adopting strategies such as Delayed Product Differentiation (DPD) while managing broader product lines. In this study, first a general framework on DPD is formed in the light of basic articles in the literature. The vanilla box assembly process which is a special form of modular design type of DPD is modeled and analyzed. In the vanilla box assembly process, inventory is stored in a special form of semi-finished products, called vanilla boxes, that can serve more than one final product. We model the vanilla box assembly process considering the costs of inventory and unsatisfied demand under the capacity limitations, stochastic demand and bill of material requirements. We formulate the model as an extensive form of stochastic integer program in which stochastic demand is modeled using a set of demand scenarios each of which is assigned a probability of occurrence. The model is solved as a standard integer programming model that minimizes the expected value of the objective function. The impact of product demand scenarios, common component levels, shortage penalty cost to holding cost ratio levels and capacity restrictions on the total cost and fill rates is studied. We compare the performance of vanilla box assembly process to assemble-to-order process and provide insights on their performances. Computational results indicate that the vanilla box assembly process is a promising alternative to the assemble-to-order process in most of the problem instances