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© T. W. SIMPSONPENNSTATE
Using Optimization to DetermineStrategic Platform Offerings*
Using Optimization to DetermineStrategic Platform Offerings*
Timothy W. SimpsonProfessor Mechanical & Industrial
Engineering and Engineering DesignThe Pennsylvania State University
University Park, PA 16802 USA
phone: (814) 863-7136email: tws8@psu.edu
http://www.mne.psu.edu/simpson/courses/me546
ME 546 - Designing Product Families - IE 546
© T. W. SIMPSON
*These slides are adapted, with permission, from Prof. Olivier de Weck at MIT.
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MarketSegmentation
Mass Customization
PlatformStrategy
Manufacturing& Supply Chain
Strategy
ProductArchitecture
Regulations & StandardsCustomers:
PerceivedValue
ProductDesign
Competition:New Products
New Technologies
What Impacts Platform Strategy?
What Impacts Platform Strategy?
Blue Factors:-mainly internal
- have control over
?
?
?
?
Red Factors:-mainly external
- uncertain, no control
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The Need for Platform Strategy
The Need for Platform Strategy
• Competition: How to preempt or react quickly to new products from competitors?
• Customers: What product features do all customers value highly? What product features are requested infrequently?
• Technology: Can a product platform be designed such that new technologies can be “easily” infused?
• Regulations and Standards: Can a platform be design to anticipate or meet future regulations (e.g. fuel economy and emission standards in cars)?
Strategy: An adaptation or complex of adaptations (as of behavior, metabolism, or structure) that serves or appears to serve an important function in achieving evolutionary success. (Merriam-Webster, 2004)
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Poor Platform Strategy
Poor Platform Strategy
Source: R. J. Matson, St. Louis Dispatch, 7/17/2008
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ProductPlatforms
ProductionPlants
(Facilities)
VariantsModels
MarketSegments(Customers)
PlatformFamily Plan
ManufacturingPlan
MarketingPlan
to
maps maps
to
assignsPlatform APlatform BPlatform C
ChevroletMalibu
Saturn SL
determines
GMC TruckSierra 1500
places
chooses
in
SUV
PICKUP
SEDANPLANT APLANT BPLANT C
CorporateStrategy
Domain of Product Platform
An Enterprise Framework*An Enterprise Framework*
* Framework proposed by Dr. Olivier de Weck at MIT based on his collaborations with GM
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Product Architecture Business StrategyProduct Architecture Business Strategy
Product Portfolioor
Collection of Products?
Open Systems? Platforms?or
Cost-optimized Products
Organized to supportarchitectural directions?
(More than just an engineering question)
Does the system architecturematch the evolution of keyemerging technologies?
(e.g., the Internet?)
Does the system architecture match the evolution of key
surround business changes?(e.g., competing on cost or function?
Changing product distribution channels?)
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Starting AssertionsStarting Assertions
• Maximize profits …how? … offer family of diverse, competitive product variants, and minimize mfg cost
• Platform strategy = program of deliberate reuse of components and processes within a family How can commonality between products be quantified? commonality indices What components should be shared between products? expensive ones with little effect on variant distinctiveness What is the optimum amount of commonality? difficult to answer in general, depends on market, firm … moving target, changes dynamically from year-to-year
• Without competition, no need for variants, no need for platforms Ford Model T (one size fits all)
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Platform StrategiesPlatform Strategies
Usually start with a market segmentation grid
Low-End
Mid-Range
High-End
Luxury
Brand A Brand B Brand C Brand D
“MarketSegment”
VerticalLeveraging
BeachheadApproach
No Leveraging
HorizontalLeveraging
Which strategy is best in a particular situation ?
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Platform Portfolio ProblemPlatform Portfolio Problem
• How many platforms (N) are optimal to support (V) variants? Optimize Ratio V/N
• What is the optimal assignment of the V variants to the N platforms? Optimize assignment
• How to deploy the V variants across M target market segments? Optimize Market Segment assignment
• Determines Platform “Extent”
Platform Portfolio
ProductFamily
A Y Z Y Z C
GM
N~20
V~100
For large product families, need more than one platform
Ref also: Seepersad, Mistree, Allen, “A quantitative approach to designing multiple product platforms for an evolving portfolio of products”, 2002 ASME Design Engineering Technical Conferences, Paper No. DETC2002/DAC-34096
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Profit MaximizationProfit Maximization
Maximize product family profit, subject to investment cost constraints, by determining the optimal
- number of platforms N- assignment vector - platform design vector set- variant design vector set
1 2, ,...,T
V a
, ,...,T
Nx x x X
, ,...,T
P A B Vx x xX
,1
max PrV
i i PN
i
SV P C
Π Pa,X ,X
revenue cost
Sales volumeActual Sales Price
Total Cost
Sum over allV product variants
de Weck O., Suh E. S. and Chang D., ”Product Family and Platform Portfolio Optimization”, Paper DETC03/DAC-48721, Proceedings of DETC’03, 2003 ASME Design Engineering Technical Conferences, Chicago, Illinois, 2-6 September, 2003
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Product (Variant) Modeling Framework
Product (Variant) Modeling Framework
EngineeringModel
ArchitectureModel
ManufacturingModel
ValueModel
MarketModel
FinancialModel
Jperformance
Vvalue
P
Ddemand
price
Prnet profit
x
Ccost
design vector
ccomponents BOM
BOA
BOP maximize
requires 6 models
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Bi-Level Optimization MethodologyBi-Level Optimization Methodology
Variant Model
Variant Optimizer
Platform Optimizer
Platform Model
ipx iSV,X a
optimize for each N=1,2,…V
Pr
Steps
1. Create 6 models2. Split product
architecture into platform and variant components
3. Select N=1 platforms
4. Perform bi-level optimization for Pr
5. Set N=N+1 if N<V6. Repeat steps 4. and
5. until N=V
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Automotive Case Study (hypothetical)
Automotive Case Study (hypothetical)
What is the “optimal” platform strategy for a family with 7 variants ?• One product (vehicle) per market segment• Basic vehicle architecture is always BOF• Market segments operate independently• Competitors continue to offer the same• MSRP corresponds to actual sales price• Use 2001 database for North America• The platform consists of the chassis
LOWC
MDSD
LXSD
SPTR
SUV
VAN
UtilitySedans Sports
TRCK
Assumptions
low
mid
high
How many platforms?How to optimally assign variants to those platforms?
MarketSegmentationGrid
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Vehicle Data Set for Case StudyVehicle Data Set for Case Study
We are a (new) automotive manufacturer and wantto compete successfully in these market segments:
Symbol Name #vhc Size Mean PriceLOWC Compact Car 30 2,357,802 $13,427MDSD Medium Sedan 33 4,198,028 $19,844LXSD Luxury Sedan 65 1,591,438 $34,238SPTR Sports-Roadster 34 514,837 $23,424SUVC SUV 56 3,519,461 $25,146PUPT Truck 51 2,800,104 $22,805MVAN Van 24 1,589,958 $24,986 16,571,628
Total U.S. Market 2001 ca. 16.8 M/yearNew Vehicle Sales
Source: NIADA National Market Report - 2002
What is the right strategy?
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HT
body
Architecture ModelArchitecture Model
WB
WT
ED
chassis (common)
engine
TWB WT ED HTx
vehicle
Design Vector
Architecture
Chassis Engine Body
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Vehicle Design VectorVehicle Design Vector
(genotype = vehicle “DNA”)
DV=[ WB WT ED HT SF ]T
Example: DV=[ 108.2 61.3 2990 58 1.0 ]T
Platform Engine Body
PDV(k) =[ WB WT]T MDV(j) =[ ED ]
DV’ = [ k j 1400 1.0 ]
DV’’=[ 0 1 1 | 1 1 1 | 1 0 1 0 0 1 1 1 | 0 1 1 1 0 1 0 1 ]
encode decode
Units [in] [in] [ccm] [in] [-]
binary
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Engineering Model (e.g. WB to FE)
Engineering Model (e.g. WB to FE)
SUV
2000
2500
3000
3500
4000
4500
5000
5500
6000
90 100 110 120 130
Wheelbase [in]
Cu
rb W
eig
ht
[lb
s]
SUV
10
12
14
16
18
20
22
24
26
28
2000 2500 3000 3500 4000 4500 5000 5500 6000Curb Weight [lbs]
Fu
el E
con
om
y [m
pg
]
Instead of detailed CAD/CAE-simulation model:- Response Surface Modeling (RSM)- Neural Network Regression Models
x(1)=WB J(3)=FE
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Value ModelValue Model
AC - AccelerationHP - HorsePowerFE - Fuel EconomyPV - Passenger Vol.CV - Cargo Volume
LOWC MDSD LXSD SPTR SUV TRCK VAN
0.1 0.15 0.15 0.4 0.1 0.15 0.05 0.1 0.1 0.15 0.3 0.25 0.35 0.1 0.4 0.2 0.05 0.05 0.05 0.10 0.05 0.3 0.4 0.45 0.2 0.3 0.05 0.4 0.1 0.15 0.2 0.05 0.3 0.35 0.4
Preference weight matrix 0.15
1,
ijiw
(Perceived) Value = Aggregate performance relative to the market segment leader
Value=Relative
Performance
5
, ,1 ,
ˆi
j rel j i ji ML i
JV J w
J
RelativePrice ,
,
jrel j
ML j
MSRPP
MSRP
PerformanceVector J
Attributes
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Example SegmentsExample Segments
Compact Cars -Sales vs MSRP
$0
$5,000
$10,000
$15,000
$20,000
$25,000
0 100000 200000 300000 400000
Sales Volume
MS
RP
Sales Volume vs MSRP - SUVs
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
0 100000 200000 300000 400000 500000
Sales Volume
MS
RP
Compact Cars - LOWC Sports Utility Vehicles - SUV
Who are the leaders? HondaCivic Ford Explorer
Source: AutoPro
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“Sweet Spot” - Market Model“Sweet Spot” - Market Model
Relative Position w.r.t Leader - LOWC
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
$1.60
0.800 0.900 1.000 1.100 1.200
Value = Relative Performance
Rel
ativ
e P
rice
Pre
l
I - Contender
II - OverscopedIII - Noncompetitive
IV - Underscoped
Dw,i
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Demand Sensitivity CurveDemand Sensitivity Curve
Demand Sensitivity - MDSD
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
0.00 0.20 0.40 0.60 0.80 1.00
Weighted Distance from Leader Dw
Dem
and
= S
ales
Vo
lum
e
• Using common components (e.g. platforms) reduces design freedom• Reduced design freedom increases distance from the “sweet spot”• Sales Volume (Demand) drops as we increase the sweet spot distance• Demand Sensitivity Curve quantifies penalty due to platforming
,, 1i w i
w i
SV f DD
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Cost (Manufacturing) ModelCost (Manufacturing) Model
Market LeaderMSRP
VehicleCost
Frame Engine Body
45% 25% 30%
- x%
Include Learning Curve Effect
Total Product Family Cost:
Margins x%:LOWC 5%MDSD 10%LXSD 20%SPTR 15%SUV 15%Truck 25%Van 15%
1 ln(100 / ) ln 2
B
L
C TFU N
B S
# # #
, , , , , ,1 1 1
platform engines bodiesB B B
fam p i p i e i e i b i b ii i i
C TFU N TFU N TFU N
100%
100-x%
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Simulation/Optimization Framework
Simulation/Optimization Framework
i=1,..,7
nnetopt 1
opt 2
mkt
cost
platform
# of platforms
portfolio
Vehicle Level
Family Level
profit
Bi-Level Optimization Framework
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Resulting “Optimal” Platform Strategy
Resulting “Optimal” Platform Strategy
LOWC
MDSD
LXSD
SPTR
SUV
VAN
UtilitySedans Sports
TRCK
1 1 1 1 1 1 1 2 2 2 2 2 1 2 3 3 2 3 2 1 2 4 3 2 4 2 1 24 3 2 4 2 1 5 4 3 2 6 2 1 5 4 3 7 6 2 1 5
Incr
ea
sing
# o
f pla
tform
s
LOW
C
MD
SD
LXS
D
SP
TR
SU
V
TR
CK
VA
N
“Optimal” variant-platform assignment
matrix
Horizontal/Vertical No Levering
7/3=2.3 variantsplatform
1 2 3 4 5 6 7
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Number of Platforms
Pro
duct
Fam
ily P
rofit
[B$]
VN
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Vehicle X1
Vehicle X2
Vehicle X3
Vehicle Y1
Vehicle A4
Vehicle C2
VehiclePlatforms Engine Suspension
ei1 ei2 ei3 ev2 ev3
Platforms BOM
CurrentVehicleFamily
sfl smp srs...
Newlyproposedvehicle
What is the “best fit” existing platform for this new vehicle ?
?Platform
consolidationproposal
??
What are the consequences of consolidating a platform?
Platform Strategy EvolutionPlatform Strategy Evolution
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Architecture Progression: 2003 to 2013
Architecture Progression: 2003 to 20132003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
1 DM -------------------------DM -------------------------DM -------------------------DM -------------------------DM -------------------------DM -------------------------DM -------------------------DM -------------------------DM -------------------------DM -------------------------DM 112 DT -------------------------DT -------------------------DT -------------------------DT -------------------------DT -------------------------DT -------------------------DT -------------------------DT -------------------------DT --X Punto/Gamma -------------------------Punto/Gamma 213 S-GME -------------------------S-GME --X Punto/Gamma -------------------------Punto/Gamma -------------------------Punto/Gamma -------------------------Punto/Gamma -------------------------Punto/Gamma -------------------------Punto/Gamma -------------------------Punto/Gamma DJ --X Delta 314 DJ -------------------------DJ -------------------------DJ -------------------------DJ -------------------------DJ -------------------------DJ -------------------------DJ -------------------------DJ -------------------------DJ Delta T-GME 415 Delta -------------------------Delta -------------------------Delta -------------------------Delta -------------------------Delta -------------------------Delta -------------------------Delta -------------------------Delta -------------------------Delta T-GME V200 516 T-GME -------------------------T-GME -------------------------T-GME -------------------------T-GME -------------------------T-GME -------------------------T-GME -------------------------T-GME -------------------------T-GME -------------------------T-GME V200 Epsilon 617 V200 -------------------------V200 -------------------------V200 -------------------------V200 -------------------------V200 -------------------------V200 -------------------------V200 -------------------------V200 -------------------------V200 Epsilon Premium P 718 J-GMNA -------------------------J-GMNA --X Epsilon -------------------------Epsilon -------------------------Epsilon -------------------------Epsilon -------------------------Epsilon -------------------------Epsilon -------------------------Epsilon Premium P W/MS2000 819 Epsilon -------------------------Epsilon Premium P -------------------------Premium P -------------------------Premium P -------------------------Premium P -------------------------Premium P -------------------------Premium P -------------------------Premium P W/MS2000 Sigma 91
10 N/P90 --X W/MS2000 -------------------------W/MS2000 -------------------------W/MS2000 -------------------------W/MS2000 -------------------------W/MS2000 -------------------------W/MS2000 -------------------------W/MS2000 -------------------------W/MS2000 Sigma V-GME 10111 W/MS2000 Sigma -------------------------Sigma -------------------------Sigma -------------------------Sigma -------------------------Sigma -------------------------Sigma -------------------------Sigma -------------------------Sigma V-GME Y 11112 Sigma V-GME -------------------------V-GME -------------------------V-GME -------------------------V-GME -------------------------V-GME -------------------------V-GME -------------------------V-GME -------------------------V-GME Y Theta 12113 V-GME G -------------------------G -------------------------G -------------------------G -------------------------G -------------------------G --X Y -------------------------Y Theta New S/T 13114 G Y -------------------------Y -------------------------Y -------------------------Y -------------------------Y -------------------------Y H/P -------------------------H/P --X New S/T Lambda 14115 Y H/P -------------------------H/P -------------------------H/P -------------------------H/P -------------------------H/P -------------------------H/P Theta -------------------------Theta Lambda C/K 15116 Theta -------------------------Theta -------------------------Theta -------------------------Theta -------------------------Theta -------------------------Theta -------------------------Theta New S/T -------------------------New S/T C/K Gvan 16117 Uvan -------------------------Uvan -------------------------Uvan -------------------------Uvan -------------------------Uvan -------------------------Uvan --X New S/T Lambda -------------------------Lambda Gvan118 Old S/T -------------------------Old S/T --X New S/T -------------------------New S/T -------------------------New S/T -------------------------New S/T Lambda C/K -------------------------C/K119 New S/T -------------------------New S/T C/K -------------------------C/K Lambda -------------------------Lambda C/K Gvan -------------------------Gvan120 M/L -------------------------M/L --X Gvan -------------------------Gvan C/K -------------------------C/K Gvan121 C/K -------------------------C/K Gvan -------------------------Gvan122 Gvan -------------------------Gvan1
Legend:
"-----------" = Architecture continuesBold = first use of a New Architecture"--X " = last use of an Architecture
* = Architecture not sold in the USEpsilon Does not includes the Premium [Epsilon] Platform: added as separate
V-GME includes the Holden VH
Old S/T supports the GMT-325 pickups & 330 SUVs
New S/T supports the GMT-360 & 370 SUVs, & 305 SUTs
Theta supports the GMT-315 & 318 SUVs
H/P supports the GMT-355 pickups & 345 SUVs
Kappa Cancelled; ("Blue Car")
? = Not sure of Architecture plan
Timeline is in Model Years
Reducing the number of architectures,while maintaining or increasing the number of models (variants)
Architecture “bandwidth” must increase, but how, where ?