Redesigning product lines in a period of economic crisis: a hybrid simulated annealing algorithm with crossover

Abstract

The optimal product line design is an NP-hard optimization problem in marketing that involves a number of decisions, such as product line length and configuration. Simulated annealing constitutes the best performing approach so far, but with extremely large running times. In the current study simulated annealing is hybridized with an evolutionary algorithm to improve its search efficiency and alleviate its performance dependence on the selection of the parameters related to its cooling schedule. The presented approach outperforms genetic algorithms and classic simulated annealing, through the use of crossover as a neighborhood operator, along with the restricted tournament selection as the replacement strategy of the evolutionary algorithm’s population. Moreover, the paper describes the way that the proposed hybrid metaheuristic can be used for redesigning a firm’s product line. The issue of redesigning product lines becomes even more important in periods of economic crisis, as firms must adapt their offerings to new evolving patterns of consumer buying behavior and reduced levels of consumer’s purchasing power. The applicability of the proposed approach is illustrated through the case of the 2008 automotive industry crisis, by showing how the North American car manufacturers could have redesigned their lines on time, based on the configuration of the competitive products in the market as well as the new customer preferences emerged during the economic recession.