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Research Papers: Design Automation

Engineering Product Design Optimization for Retail Channel Acceptance

[+] Author and Article Information
N. Williams

School of Architecture and Construction Management, Washington State University, Pullman, WA 99164

S. Azarm1

Department of Mechanical Engineering, A. J. Clark School of Engineering, University of Maryland, College Park, MD 20742azarm@umd.edu

P. K. Kannan

Department of Marketing, R. H. Smith School of Business, University of Maryland, College Park, MD 20742

1

Corresponding author.

J. Mech. Des 130(6), 061402 (Apr 14, 2008) (10 pages) doi:10.1115/1.2898874 History: Received March 22, 2007; Revised September 20, 2007; Published April 14, 2008

Significant recent research has focused on the marriage of consumer preferences and engineering design in order to improve profitability. The extant literature has neglected the effects of marketing channels, which are becoming increasingly important. At the crux of the issue is the fact that channel dominating retailers, like Wal-Mart, have the ability to unilaterally control manufacturer’s design decisions as gatekeepers to the consumers or market. In this paper, we propose a new methodology that accounts for this power asymmetry. A chance constrained optimization framework is used to model retailer acceptance of possible engineering designs and accounts for the important effect on the profitability of the retailer’s assortment through a latent class estimation of demand from conjoint surveys. Our approach allows the manufacturer to optimize a product design for its own profitability while reliably ensuring that the product will make it to market by making the retailer more profitable with the addition of the new product to the assortment. As a demonstrative example, we apply the proposed approach for product design selection in the case of an angle grinder. For this example, we analyze the market and are able to improve expected manufacturer profitability while simultaneously presenting the designer with trade-offs between slotting allowances, market share, and risk of retailer acceptance.

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Copyright © 2008 by American Society of Mechanical Engineers
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Figures

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Figure 1

The bottom-up framework

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Figure 2

4.5in. angle grinder

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Figure 3

Profit versus probability of acceptance (%)

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Figure 4

Effect of slotting allowance

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