Branch-and-price approach for prescribing profitable feature upgrades

Abstract

High technology products such as notebook computers and digital cameras have short life cycles due to global competition and rapid technological advances. As newer products, replete with latest technologies, become available, the demand for older products erodes. To renew the competitiveness of a product, the manufacturer may upgrade its features over time. Since products comprise a set of features with several alternatives for each, design involves complicated decisions: which features to upgrade, what alternatives should be chosen, and when to upgrade. This paper proposes a model to prescribe profitable upgrades of individual features in a family of products. The model integrates decisions traditionally made by various organizations in the enterprise (marketing, product design engineering, process design engineering, production planning and supply chain management). The special structures embedded in the model are identified and decomposition principles are applied to solve large-scale instances of the size and scope encountered in industry. Tests establish computational benchmarks, showing that this decomposition approach outperforms a commercial solver, most dramatically on more challenging instances. The solution obtained by solving the model will aid managers in deciding the content and timing of upgrades to maximize life cycle profit.

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