MODELING THE COSTS AND BENEFITS OF DELAYED PRODUCT DIFFERENTIATION

Expanding product variety and high customer service provision are both major challenges for manufacturers to compete in the global market. i n addition to many ongoing programs, such as lead-time reduction, rede signing products and processes so as to delay the point of product dif ferentiation is becoming an emerging means to address these challenges . Such a strategy calls for redesigning products and processes so that the stages of the production process in which a common process is use d are prolonged. This product/process redesign will defer the point of differentiation (i.e., defer the stage after which the products assum e their unique identities). In this paper, we develop a simple model t hat captures the costs and benefits associated with this redesign stra tegy. We apply this simple model to analyze some special cases that ar e motivated by real examples. These special cases enable us to formali ze three different product/process redesign approaches (standardizatio n, modular design, and process restructuring) for delaying product dif ferentiation that some companies are beginning to pursue. Finally, we analyze some special theoretical cases that enable us to characterize the optimal point of product differentiation and derive managerial ins ights.