Prescribing the Content and Timing of Product Upgrades

Demand for a family of high-technology products such as notebook computers erodes over time as competitors introduce new products that incorporate improved technologies. A manufacturer may compensate for this by applying the model formulated in this paper to prescribe the content and timing of upgrades to maximize total profit over the life cycle of the product family. The model deals with economies of scale that might be achieved by the upgrading process. It provides decision support by integrating decisions of relevant organizations in the enterprise: marketing (e.g., marketing strategy, pricing), product design engineering, process design engineering, and supply chain management (e.g., suppliers, production, outsourcing, inventory, backorders, and distribution). The paper presents a branch-and-price solution approach that employs an effective, new method for solving associated subproblems. Computations evaluate the efficacy of the solution approach and examples demonstrate contexts in which managers might apply the model to advantage.