SBIR Phase I: Reducing Lead Time and Inventory by Using Optimized Product Configurations

This Small Business Innovation Research (SBIR) Phase I project addresses the impact of product variety on the customer order fulfillment process. It aims to help the manufacturers of highly configurable products with many possible "variants", or "configurations", or "build combinations", to maximize product availability and order fill rates. Some industries that qualify are automotive, heavy machinery, consumer durables, and electronics. Prior research by Emcien has created a methodology for representing product variants and computing an optimal set of product configurations to maximize margins. These configurations are optimal in the sense of satisfying the most demand while maximizing profitability. The proposed research will try to measure the impact of these optimal configurations on operational metrics - inventory levels and customer lead time, hence addressing the broader challenge of product availability at the variant level. This will involve imbedding the existing optimization results in a time-based simulation, to model impact of variants on the order fulfillment process. The intellectual innovation of this line of research is the systematic representation and treatment of product configurations. The result of the research will be experimental software that will serve as the basis for a commercial product. More manufacturers are moving in the direction of "mass customization", which means allowing each customer to choose the features and options. Mass production of a uniform product, or one with a small number of variants, is evolving into flexible production as more and more choices are offered to the customer. But customers not only want to customize their product, they also want to get it quickly. Pure build-to-order systems can result in unacceptably long customer lead times when demand has seasonal ups and downs. This forces manufacturers to build partially finished or fully finished units for inventory, in order to smooth production and reduce customer lead time. Unfortunately, this causes high inventory levels, and determining what variants to stock is a non-trivial problem. Commercial applications for Emcien's proposed research include discrete manufacturing - with a focus on automotive, heavy machinery, consumer durables and electronics. It will enable these manufacturing verticals to reduce product cost and be more competitive in the global market.