Product Design: Subassemblies for Multiple Markets

A firm may cut costs by installing more parts than its products require. Each product or application requires a specified number of parts such as inductors, resistors and capacitors. For assembly and maintenance reasons, parts are grouped into subassembly modules. If there are economies of scale in manufacturing sub-assembly modules, it may be worthwhile to standardize on a few module designs that will be used in all products or applications even though a few more parts than needed are installed. The cost of giving away extra parts by using few standard modules must be balanced against the fixed costs of producing more types of standard modules. In the multi-market problem there is a fixed cost with the production of a module, and then another fixed cost when the module is used in a market. The paper presents a solution procedure and the time results of computer runs for the problem of finding the best standard modules for a multi-product, multi-market corporation.