Redesigning product line for integrated manufacturer-supplier ecosystem in a centralized supply chain: Case of an industrial consumer product

Abstract

To produce quality products rapidly to derive competitive advantage, the original equipment manufacturer (OEM) must work closely with its suppliers in product redesign processes. Previous literature has emphasized that quality products can be produced effectively and will provide better customer service if product redesign is performed considering the broad OEM-supplier(s) ecosystem. To this end, we seek to develop a mathematical model focused on maximizing the objectives of the OEM-supplier(s) ecosystem considering a centralized supply chain in such a manner that operational-level financial objectives are mapped in terms of product line design decisions and attribute-level assignments. By including operational-level supply chain considerations such as service levels and consumers' preferences, we seek to capture key aspects related to customers’ requirements. This research links product-level technical decisions with enterprise-level business objectives, thus bridging engineering and enterprise-level financial nuances. The problem for the manufacturer pertains to the minimization of the manufacturing cost and maximization of the product premium. The problem for the suppliers pertains to maximization of salvage value, minimization of shortage cost, and maximization of sales revenue. These two problems are then sewed together, and a chemical reaction optimization (CRO) based solution methodology has been deployed. To solve and analyze the devised problem, a case study based on an industrial consumer product is conducted. We evolve a comprehensive mathematical framework that mimics the facets related to product line redesign encapsulating considerations pertaining to functional level design, supply chain dimensions, and manufacturer-supplier profitability. Several novel findings are reported based on the study. For instance, we demonstrate that product configurations for respective segments after the redesign process are contingent upon the service level. Further, we demonstrate that in the industrial consumer product market, higher profit for the OEM-supplier(s) ecosystem is achieved at a slightly lower service level as opposed to a higher theoretical service level. The study has important implications for design and product management.