Assortment planning of automotive products with considerations for economic and environmental impacts of technology selection

Abstract

A manufacturer's assortment is the set of products that the company offers to its customers. Assortment planning considerably affects both the sales revenue and product offering costs for the company and it had experienced growing attention across different industries over recent decades. In this study, we propose a modeling framework that seeks to identify the optimal assortment for a manufacturer of configurable products (in particular, automobiles). Our model accounts for environmental considerations (Corporate Average Fuel Economy requirements, tail-pipe emissions, and greenhouse gas emissions related to the production of the fuel used to power the vehicle) during assortment planning. We formulate the economic and environmental requirements in the model through a mixed-integer programming framework and present a hypothetical product case study motivated by an American automaker that involves 120 potential configurations employing different engine technologies (gasoline, diesel, and hybrid technologies). Notwithstanding consideration for consumer perceptions and acceptance, the results of this research work show that diesel technologies are a better choice to satisfy average fuel economy requirements compared to hybrid and conventional powertrains with current technology maturity.

Directions for instilling economic and environmental sustainability across product supply chains

“…While the large number of bill of material (BOM) alternatives in the early concept phase makes it prohibitive to consider as part of DfSCM efforts (Taghavi, 2012;Taghavi and Chinnam, 2014), the accounting for environmental sustainability in addition to standard supply chain cost models and metrics further makes this complexity even more serious (Umpfenbach, 2013). Hence, one main component of this focus area might be to develop novel optimization methods to address these challenges.…”

Technology competition in the internal combustion engine waste heat recovery: a patent landscape analysis

“…Consequently, the automotive industry finds itself in a position where multiple alternative fuel and powertrain technologies are challenging the dominant internal combustion engine vehicle design (Orsato and Wells, 2007;Zapata and Niewwenhuis, 2010). Technology competition in the motor vehicle industry has been intensively studied; from the technological perspective (Hoed, 2007;Bakker et al, 2012), the policy perspective (Browne et al, 2012;Sushandoyo and Magnusson, 2014), the economic and environmental impact perspective (Dhingra and Das, 2014;Taghavi and Chinnam, 2014) and a combination of these viewpoints (Oltra and Saint Jean, 2009). Patent based studies have noted strong interest in radical innovation paths (Rizzi et al, 2014;Golembiewski et al, 2015) and the potential for a new dominant design (Thiel et al, 2010;Bakker et al, 2012).…”

Project portfolio planning under CO2 fleet emission restrictions in the automotive industry

“…In the context of the automotive industry, Maddulapalli et al (2013) show that car manufacturers can achieve higher contribution margins through assortment planning while complying with CO 2 fleet emission thresholds. Taghavi and Chinnam (2014) conclude that, in the short term, the increased sale of diesel vehicles and, in the medium term, the market launch of more mature hybrid and battery electric vehicles is necessary to achieve both financial and environmental goals in the US market. Umpfenbach et al (2017) illustrate the influence of emission thresholds on the characteristics of the optimal product portfolio as well as the resulting sales and profits.…”