Product Line Flexibility for Agile and Adaptable Operations

Abstract

F irms increasingly need to manage uncertainty and become more agile and adaptable. This study considers how a multi-product firm can use its product mix, resource capacity allocation, and pricing decisions to manage challenges such as structural economic shifts or changes in consumers' willingness-to-pay. Firms that seek to develop and use such a product line face a fundamental trade-off. On the one hand, multiple products compete for the demand externally (i.e., cannibalization effects), as well as for the limited resource capacity internally. On the other hand, a multi-product firm does have the ability to change the product mix and to adjust the production quantity and pricing of each product in order to manipulate supply and demand as conditions change. In this study, we demonstrate that a multi-product firm can become more agile and adaptable under consumer purchasing behavior uncertainty by employing postponement in product mix, quantity, and pricing decisions, and by allocating capacities appropriately. In particular, we show that a firm can use its product line flexibility to make strategic adjustments after understanding the realized economic conditions, and to decide whether to follow a focus or segmentation strategy. We also extend the model to look at the value of resource flexibility and find that it has little or no benefit above and beyond the product line flexibility studied here.

Understanding manufacturing repurposing: a multiple-case study of ad hoc healthcare product production during COVID-19

“…Future research can build on early work that studies manufacturing repurposing using the concept of agile product development. For example, Schmidtner et al ( 2021 ) discuss the role of agile working during the pandemic and its impact on the future of work environments; Janssen and Van der Voort ( 2020 ) explain the complementary (and sometimes contradictory) role of agility and adaptivity governance during the COVID-19 pandemic; and more broadly, Yayla-Küllü et al ( 2021 ) advocate that firms need to increase the extent of their agile and adaptable operations (e.g., by using product-line flexibility or in general resource flexibility) to cope with uncertainties.…”

Resilience through operational flexibility for crisis response: an international investigation of firm responses during COVID-19

“…Flexibility can enable a firm to change its resources and production operations to appropriately react to new environmental challenges (Anand and Ward, 2004; Swafford et al. , 2008; Yayla-Küllü et al. , 2020; Yu et al.…”

“…Hospitals may deter from offering elective services and concentrate on critical care operations. The adjustments of product and service offerings in response to unexpected situations have been conceptualized in prior literature (Graves and Tomlin, 2003;Yayla-K€ ull€ u et al, 2020). Second, firms try to preserve their sales activities by converting or expanding the sales channel through which their product and service offerings are sold and/or delivered to customers.…”

“…Hospitals may deter from offering elective services and concentrate on critical care operations. The adjustments of product and service offerings in response to unexpected situations have been conceptualized in prior literature (Graves and Tomlin, 2003; Yayla-Küllü et al. , 2020).…”

Robust product line pricing under the multinomial logit choice model

“…Therefore, the consideration of consumer choice behavior and purchase decision-making play a significant role during the product line design stage. Several studies (Anderson and Celik, 2015; YaylaKüllü et al, 2021) demonstrate the need to incorporate consumer choice behavior into product line design models.…”