A JOINT OPTIMIZATION OF PRODUCT VARIETY AND ORDERING APPROACH

It has been generally recognized that the product variety or product l ine decision is one of critical importance to marketing and product ma nagers. Product line composition is one of the most pervasive problems that includes analysis of product additions as well deletions and the degree of complementarity and substitutability among the different it ems within the product line. Equally important is the ordering decisio n which determines the order size and timing of the order for replenis hing the stock of each of the products that constitute the given produ ct line. We develop a model, OPROVAR (optimization of product variety and ordering strategy) that considers simultaneously the order quantit y decision of a product and the stocking decision of a product line to maximize total profits. (C) 1998 Elsevier Science Ltd. All rights res erved.