Assortment planning of automotive products with considerations for economic and environmental impacts of technology selection

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Assortment planning of automotive products with considerations for economic and environmental impacts of technology selection

Taghavi, Ali / Chinnam, Ratna Babu

A manufacturer's assortment is the set of products that the company offers to its customers. Assortment planning considerably affects both the sales revenue and product offering costs for the company and it had experienced growing attention across different industries over recent decades. In this study, we propose a modeling framework that seeks to identify the optimal assortment for a manufacturer of configurable products (in particular, automobiles). Our model accounts for environmental considerations (Corporate Average Fuel Economy requirements, tailpipe emissions, and greenhouse gas emissions related to the production of the fuel used to power the vehicle) during assortment planning. We formulate the economic and environmental requirements in the model through a mixed-integer programming framework and present a hypothetical product case study motivated by an American automaker that involves 120 potential configurations employing different engine technologies (gasoline, diesel, and hybrid technologies). Notwithstanding consideration for consumer perceptions and acceptance, the results of this research work show that diesel technologies are a better choice to satisfy average fuel economy requirements compared to hybrid and conventional powertrains with current technology maturity.