Dynamic programming for delayed product differentiation

Product proliferation and demand uncertainty result in material requirement planning difficulties, which give rise to high inventories and low customer service. A design concept, delayed product differentiation, is advocated for reducing the impact due to inaccurate forecasts and shortening the order response time. In this paper, a dynamic programming model using an AND/OR graph is constructed to determine the product differentiation points. Taking into account the costs and benefits associated with delayed product differentiation points, we proposed an approach to suggest whether the designer ought to differentiate specific products from the common part set at each design stage. Finally, we illustrate an example to characterize the optimal product differentiation points.