Product Variety Management: Research Advances PDF
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Product Variety Management Research Advances INTERNATIONAL SERIES IN OPERATIONS RESEARCH & MANAGEMENT SCIENCE Frederick S. Hillier, Series Editor Department of Engineering-Economic Systems and Operations Research Stanford University Stanford, California Saigal, Romesh LINEAR PROGRAMMING: A Modern Integrated Analysis Nagurney, Anna/ Zhang, Ding PROJECTED DYNAMICAL SYSTEMSAND VARIATIONAL INEQUALITIES WITH APPLICATIONS Padberg, Manfred/ Rijal, Minendra P. LOCATION SCHEDULING, DESIGN AND INTEGER PROGRAMMING Vanderbei, Robert J. LINEAR PROGRAMMING: Foundations and Extensions Jaiswal, N.K. MILITARY OPERATIONS RESEARCH: Quantitative Decision Making Gal, Tomas / Greenberg, Harvey J. ADVANCES IN SENSITIVITY ANALYSIS AND PARAMETRIC PROGRAMMING Prabhu, N.U. FOUNDATIONS OF QUEUEING THEORY Fang, S.-C./Rajasekera, J.R./ Tsao, H.-SJ. ENTROPY OPTIMIZATION AND MATHEMATICAL PROGRAMMING Yu, Gang OPERA TIONS RESEARCH IN THE AIRLINE INDUSTRY Product Variety Management Research Advances Edited by Teck-Hua Ho and Christopher S. Tang Anderson School at UCLA Springer Science+Business Media, LLC Library of Congress Cataloging-in-Publication Data Product variety management: research advances / edited by Teck-Hua Ho and Christopher S. Tang. p. cm. — (International series in operations research & management science; 10) Includes bibliographical references (p. ) and index. ISBN 978-1-4613-7552-4 ISBN 978-1-4615-5579-7 (eBook) DOI 10.1007/978-1-4615-5579-7 1. Product management. 2. Product lines — Management. 3. Diversification in industry. I. Ho, Teck-Hua. II. Tang, Christophers. III. Series. HF5415.15.P769 1999 658.5-dc21 98-8736 CIP Copyright © 1998 by Springer Science+Business Media New York Originally published by Kluwer Academic Publishers in 1998 Softcover reprint of the hardcover 1st edition 1998 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photo copying, recording, or otherwise, without the prior written permission of the publisher,Springer Science+Business Media, LLC. Printed on acid-free paper. Dedicated with Love To my wife, Ling Ling, To my mother, Ngor TABLE OF CONTENTS Preface IX Acknowledgements XI Introduction Xlll 1 Markets and Product Variety Management 1 Kelvin Lancaster 2 Variety: From the Consumer's Perspective Barbara Kahn 19 3 Product Structure, Brand Width and Brand Share luin-Kuan Chong, Teck-Hua Ho, and Christopher S. Tang 39 4 Value of Postponement Seungjin Whang and Hau Lee 65 5 Designing Task Assembly and Using Vanilla Boxes to Delay Product Differentiation: An Approach for Managing Product Variety Jayashankar M. Swaminathan and Sridhar R. Tayur 85 6 Design for Variety Mark Martin, Warren Hausman, and Kosuke Ishii 103 viii 7 Customer Preferences, Supply-Chain Costs, and Product-Line Design Fangruo Chen, Jehoshua Eliashberg, and Paul Zipkin 123 8 Profit-Optimizing Product Line Design, Selection and Pricing with Manufacturing Cost Consideration Candace Yano and Gregory Dobson 145 9 Managing Product Variety Karl Ulrich, Taylor Randall, Marshall Fisher, and David Reibstein 177 10 Managing Variety in Software Features Mayuram S. Krishnan, Sunder Kekre, Tridas Mukhopadhyay, and Kannan Srinivasan 207 Index 227 PREFACE Product proliferation has become a common phenomenon. Most companies now offer hundreds, if not thousands, of stock keeping units (SKUs) in order to compete in the market place. Companies with expanding product and service varieties face with problems of obtaining accurate demand forecasts, controlling production and inventory costs, and providing high quality and good delivery performance for the customers. Marketing managers often advocate widening product lines for increasing revenue and market share. However, the breadth of product line can also decrease the efficiency of manufacturing processes and distribution systems. Thus firms must weigh the benefits of product variety against its cost in order to determine the optimal level of product variety to offer to their customers. Academics and practitioners are interested in several fundamental questions about product variety. For instance, why do companies extend their product lines? Do consumers care about product variety? Will a brand with more variety enjoy higher market share? How should product variety be measured? How can a company exploit its product and process design to deliver a higher level of product variety quickly and cheaply? What should the level of product variety be and what should the price of each of the product variants be? What kind of 'challenges would a company face in offering a high level of product variety and how can these obstacles be overcome? The solutions to these questions span multiple functions and disciplines. Answers from any single function or discipline are likely to be either partial or inadequate. Consequently, we must adopt a multi disciplinary approach to the problem. This observation has motivated us to invite leading economists, engineers, marketers, and operations management researchers who have worked on product variety for contributions to this book. The chapters presented in this book are based on the presentations given at a conference on product variety management that we organized at the Anderson School at UCLA in January 1997. The conference was jointly sponsored by Hewlett Packard, ffiM, Microtek, Anderson School of Management at UCLA, and the Center for Technology Management at UCLA. Approximately 40 academics and practitioners attended the conference. (The participant list is provided in the acknowledgement section.) x This book contains the state-of-the-art research in economics, engineering, marketing and operations management that deals with product variety. It is written by leading scholars who have shaped their respective field of research on management of product variety. It consists of comprehensive surveys of a sub-field relating to product variety, novel models of a relevant problem, solid empirical studies that test hypotheses, or proven procedures or methods for managing product variety. We enjoyed the experience working on this book and we sincerely hope that this book will stimulate further work in this exciting area of research. Teck-Hua Ho and Christopher S. Tang Los Angeles, California ACKNOWLEDGEMENTS We are indebted to our industry friends who strongly believe in this project and who have sponsored the conference on product variety management that was held at the beautiful Anderson School at UCLA in January 1997. Specifically, we would like to thank Chae An (mM), Corey Billington (Hewlett Packard), Amit Garg (mM), Clark Hsu (Microtek). In addition, we are grateful to our interim Dean John Marner (UCLA), our former Dean Bill Pierskalla (UCLA), and Uday Karmarkar (UCLA) for providing generous support that has made this book possible. Of our academic colleagues with whom we have exchanged ideas about product variety management, we would like to extend special thanks to Fred Hillier (Stanford), the editor of the Kluwer's International Series in Operations Research and Management Science, who has encouraged us to work on this book from the beginning. In addition, this book cannot exist without the commitment from our academic colleagues. On this note, we are grateful to each of the contributing authors for submitting their current research work within a very tight schedule. We would like to show our appreciation to each of the conference participants (see table below) for sharing their thoughts with us. Affiliation (in Conference Participants alphabetical order) (in alphabetical order) Carnegie Mellon Sridhar Tayur University Columbia University Fangruo Chen, Kelvin Lancaster Duke University Paul Zipkin Hewlett Packard Corey Billington Company mM Chae An, Amit Garg Stanford University Kyle Cattani, Warren Hausman, Hau Lee, Mark Martin, Jin Whang University of Jay Swaminathan, Candace Yano California, Berkeley
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