Modelling the Costs and Benefits of Delayed Product Differentiation

Abstract

Expanding product variety and high customer service provision are both major challenges for manufacturers to compete in the global market. In addition to many ongoing programs, such as lead-time reduction, redesigning products and processes so as to delay the point of product differentiation is becoming an emerging means to address these challenges. Such a strategy calls for redesigning products and processes so that the stages of the production process in which a common process is used are prolonged. This product/process redesign will defer the point of differentiation (i.e., defer the stage after which the products assume their unique identities). In this paper, we develop a simple model that captures the costs and benefits associated with this redesign strategy. We apply this simple model to analyze some special cases that are motivated by real examples. These special cases enable us to formalize three different product/process redesign approaches (standardization, modular design, and process restructuring) for delaying product differentiation that some companies are beginning to pursue. Finally, we analyze some special theoretical cases that enable us to characterize the optimal point of product differentiation and derive managerial insights.product/process redesign, product differentiation, mathematical models

Time Value of Commercial Product Returns

“…A number of researchers have contributed to the development of design strategy for forward supply chains and our models are motivated by this work (Swaminathan and Tayur 2003, Fisher 1997, Lee and Whang 1999, Lee and Tang 1997, Feitzinger and Lee 1997. We are able to confirm a set of design principles for reverse supply chains.…”

Inventory Management: Information, Coordination, and Rationality

“…At the end of this phase, the manager must decide on how much of each differentiated item to produce from the batch of the common intermediate product. This interpretation forms the basis of postponement strategies; see the papers by Lee, Padmanadbhan and Whang (1993) and Lee and Tang (1997). We conclude this section by noting that at the heart of all complex inventory systems lies the single location (stage, product, item) model that we addressed in the previous subsections.…”

OM Forum—Three Simple Approaches for Young Scholars to Identify Relevant and Novel Research Topics in Operations Management

“…However, in our context, the lead time at each stage is a decision variable that is dependent on the location of the "pushpull" boundary associated with a particular postponement strategy. By using this metaphor, we managed to apply and adapt Eppen and Schrage's analysis to evaluate different postponement strategies in the context of product/process redesign approaches (standardization, modular design, and process restructuring) pursued by different companies (Lee and Tang 1997).…”