A methodology for integrating supplier selection with product line design

Abstract

Product line design involves design of various product variants under a product line which aims to satisfy the needs of various market segments. In the development of product lines, it is quite common for companies to adopt sourcing strategy nowadays for reducing product cost and development time, and improving product quality. One major issue of the sourcing is supplier selection. Previous studies have shown that companies commonly spent 60% of product cost on sourcing. Conventionally, product design and supplier selection are dealt with separately. Product design is first performed and then suppliers are selected to provide the required components or product modules. Various studies have been conducted in the areas of product line design and supply chain issues. However, only few studies found so far have investigated the optimal product line design together with supplier selection consideration. This project aims to investigate the integration of product line design with supplier selection issue. In this research, a methodology for integrating supplier selection with product line design is proposed. The proposed methodology is able to make up the deficiencies of the previously related studies, which include (1) prices of product variants are pre-defined; (2) only single objective is considered in the integrated problem; and (3) being unable to determine market positions of product variants. The proposed methodology involves the following steps. In the methodology, the customer preferences and their perceptions of competitive products are collected first through a market survey. Then, a joint-space map is constructed, and market share models, cost models, and quality and performance models are developed. The next step is to formulate an optimization model for determining the specifications of product variants of the product line such that the profit, quality and performance of the product line can be maximized. Finally, the optimization problem is solved using a multi-objective genetic algorithm. A case study of the product line design of portable computers was conducted to illustrate the effectiveness of the proposed methodology. The results have shown that optimal product line design with a consideration of supplier selection can be determined, and the specifications of the product variants can be generated. On the other hand, suppliers of components and modules can be selected with the considerations of minimum sourcing cost and maximum performance and quality of products. Price and position of the product variants can also be estimated. The methodology used in the study enables the effective joint decision making of product line design and supplier selection.