1. Product Portfolio Restructuring: Methodology and Application at Caterpillar
- Author
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Alan Scheller-Wolf, Valerie Tardif, Masha Shunko, Sridhar Tayur, Tallys Yunes, and Giulio Fenu
- Subjects
Backhoe loader ,021103 operations research ,Operations research ,Restructuring ,Computer science ,05 social sciences ,Final product ,0211 other engineering and technologies ,02 engineering and technology ,Management Science and Operations Research ,Industrial and Manufacturing Engineering ,law.invention ,law ,Management of Technology and Innovation ,0502 economics and business ,Revenue ,Portfolio ,Operations management ,Product (category theory) ,Line (text file) ,050203 business & management ,Cost database - 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 flexibleeach 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%. This article is protected by copyright. All rights reserved.
- Published
- 2017