Product line design for profit maximization using common parts, features and manufacturing facilities

Designing products is an important managerial problem. In literature, we see this reflected essentially as engineering and marketing issues. However, this problem is tackled in isolation from each other and related production issues, resulting in products which require distinct parts, features and production facilities resulting in higher direct product and manufacturing costs than necessary. The problem of integrating product line design directly with manufacturing cost considerations has only recently received some attention, but the available models do not account for the advantages to be gained by the use of common facilities by products in the product line. In this paper, we formulate the product line design problem considering fixed and variable manufacturing costs and use of common parts, features and manufacturing facilities as an integer program. The objective of the model is to determine the optimal product line design to maximize total profit to the firm. To solve this NP-hard problem, we develop a fast and efficient heuristic based on beam search methods. Computational results on 270 simulated problems and an application derived from real data show that our heuristic identifies optimal (92% of the time) or near optimal solutions (within 99.7% of the optimal on average), is robust, and very fast (less than 7 s on a PC) for practical size problems.