Coordination of manufacturing and engineering activities during product transitions

Abstract

Product transitions involve the replacement of products currently being produced and distributed by a firm with new products throughout the firm's supply chain. In high technology industries effective management of product transitions is crucial to long-term success, and involves the coordination of multiple product development units and a manufacturing unit by a product division serving a particular market. Since the different units are organizationally autonomous, and the product division does not have access to their detailed technological constraints and internal operating policies, a decentralized solution is required. We develop a price-based coordination framework using the subadditive dual of a mixed-integer linear program that seeks to maximize the number of units whose proposed plans are included in the final solution. The proposed approach yields superior solutions to a linear-programming-based branch-and-price approach within the same computing budget. We discuss the broader applicability of this integer column generation approach, and suggest directions for future work.

Managing Product Transitions: A Bilevel Programming Approach

“…[5] propose two iterative combinatorial auction schemes for a simpler version of the problem considered in this paper to coordinate the negotiation over factory capacity between manufacturing, acting as the auctioneer, and product development units acting as bidders. A subsequent paper [4] uses mixed-integer programming duality to design a price-based coordination procedure.…”

“…Constraints (2h) ensure that each new product consumes capacity for product development only once in the planning horizon, i.e., all development activities for a product can be completed in a single period. This assumption is easily relaxed by considering multiple product development stages [4]; the proposed bilevel framework remains applicable. Finally, constraints (2i) ensure that new products can only be manufactured after development has been completed.…”

“…Therefore, treating the firm as a monolithic entity making centralized decisions with complete information is neither realistic nor desirable. A growing body of research has addressed aspects of product transitions in a decentralized environment, including capacity planning under uncertainty [23], supply chain coordination [35], capacity coordination and allocation [4,5,24], and the role of capacity conversion on the equipment renewal and upgrade schedule [30]. Most of this work, however, ignores the hierarchical nature of the decision-making environment, in which corporate management takes strategic and tactical resource allocation decisions that drive the operational decisions of the lower-level functional groups [25].…”