Abstract
We develop a three-step methodology to restructure a product line by quantifying the restructuring's likely effects on revenues and costs: (i) Constructing migration lists to capture customer preferences and willingness to substitute; (ii) Explicitly capturing the (positive and negative) cost of complexity across different functional areas, using statistical analysis of cost data; and (iii) Integrating these tools within a mathematical optimization program to produce a final product line, incorporating the possibility of differentiating products by lead-time (into different lanes). Our methodology is highly flexible—each step can be tailored to a company's particular setting, data availability and strategic needs, so long as it produces the necessary output for the next step. We report on the successful application of our methodology to the Backhoe Loader product line at Caterpillar: In collaboration with Caterpillar, we were able to significantly simplify this line, reducing the number of configurations from 37,920 to 135, in three lanes, while increasing sales by almost 7%.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 100-120 |
| Number of pages | 21 |
| Journal | Production and Operations Management |
| Volume | 27 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jan 1 2018 |
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Keywords
- cost of complexity
- machinery
- manufacturing
- product portfolio optimization
ASJC Scopus subject areas
- Management Science and Operations Research
- Industrial and Manufacturing Engineering
- Management of Technology and Innovation
Cite this
Product Portfolio Restructuring : Methodology and Application at Caterpillar. / Shunko, Masha; Yunes, Tallys; Fenu, Giulio; Scheller-Wolf, Alan; Tardif, Valerie; Tayur, Sridhar.
In: Production and Operations Management, Vol. 27, No. 1, 01.01.2018, p. 100-120.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Product Portfolio Restructuring
T2 - Methodology and Application at Caterpillar
AU - Shunko, Masha
AU - Yunes, Tallys
AU - Fenu, Giulio
AU - Scheller-Wolf, Alan
AU - Tardif, Valerie
AU - Tayur, Sridhar
PY - 2018/1/1
Y1 - 2018/1/1
N2 - We develop a three-step methodology to restructure a product line by quantifying the restructuring's likely effects on revenues and costs: (i) Constructing migration lists to capture customer preferences and willingness to substitute; (ii) Explicitly capturing the (positive and negative) cost of complexity across different functional areas, using statistical analysis of cost data; and (iii) Integrating these tools within a mathematical optimization program to produce a final product line, incorporating the possibility of differentiating products by lead-time (into different lanes). Our methodology is highly flexible—each step can be tailored to a company's particular setting, data availability and strategic needs, so long as it produces the necessary output for the next step. We report on the successful application of our methodology to the Backhoe Loader product line at Caterpillar: In collaboration with Caterpillar, we were able to significantly simplify this line, reducing the number of configurations from 37,920 to 135, in three lanes, while increasing sales by almost 7%.
AB - We develop a three-step methodology to restructure a product line by quantifying the restructuring's likely effects on revenues and costs: (i) Constructing migration lists to capture customer preferences and willingness to substitute; (ii) Explicitly capturing the (positive and negative) cost of complexity across different functional areas, using statistical analysis of cost data; and (iii) Integrating these tools within a mathematical optimization program to produce a final product line, incorporating the possibility of differentiating products by lead-time (into different lanes). Our methodology is highly flexible—each step can be tailored to a company's particular setting, data availability and strategic needs, so long as it produces the necessary output for the next step. We report on the successful application of our methodology to the Backhoe Loader product line at Caterpillar: In collaboration with Caterpillar, we were able to significantly simplify this line, reducing the number of configurations from 37,920 to 135, in three lanes, while increasing sales by almost 7%.
KW - cost of complexity
KW - machinery
KW - manufacturing
KW - product portfolio optimization
UR - http://www.scopus.com/inward/record.url?scp=85040795895&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85040795895&partnerID=8YFLogxK
U2 - 10.1111/poms.12786
DO - 10.1111/poms.12786
M3 - Article
VL - 27
SP - 100
EP - 120
JO - Production and Operations Management
JF - Production and Operations Management
SN - 1059-1478
IS - 1
ER -