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Flexibility and marketing/manufacturing coordination

Author: De Groote, Xavier INSEAD Area: Technology and Operations Management Series: Working Paper ; 91/60/TM Publisher: Fontainebleau : INSEAD, 1991.Language: EnglishDescription: 29 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: This paper explores some economic and strategic aspects of the flexibility of manufacturing processes. Two related problems are formulated: the marketing choice of the breadth of the product line, and the manufacturing choice of the flexibility of the production process. Their analysis leads to the joint problem of marketing/manufacturing coordination. Operating costs provide the key linkage between the two functional decisions: changeover costs and inventory costs critically depend on both product variety and process flexibility. One of the key results is that -due to non-convexities- the decentralized solution of the above two problems typically yields a globally suboptimal solution. The analysis sheds light on recent developments in manufacturing, such as flexible manufacturing systems and just-in-time production
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This paper explores some economic and strategic aspects of the flexibility of manufacturing processes. Two related problems are formulated: the marketing choice of the breadth of the product line, and the manufacturing choice of the flexibility of the production process. Their analysis leads to the joint problem of marketing/manufacturing coordination. Operating costs provide the key linkage between the two functional decisions: changeover costs and inventory costs critically depend on both product variety and process flexibility. One of the key results is that -due to non-convexities- the decentralized solution of the above two problems typically yields a globally suboptimal solution. The analysis sheds light on recent developments in manufacturing, such as flexible manufacturing systems and just-in-time production

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