With the growing competition in businesses, satisfying customers' individual requirements has turned into a competitive edge. Highly diversified customer needs lead to not only high product variety but also the associated cost implications. In order to handle the complexity and intertwining relationships of variety and cost, a systematic approach is proposed based on product and process modeling. This approach includes two phases: phase I models product and process variety and studies their relationships; and phase II investigates the relationships between product variety and costs and identifies major additional cost contributors, namely variety cost drivers in the product family design. A case study is presented to demonstrate the feasibility and potential of the proposed approach
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