An Integrative Methodology for Product and Supply Chain Design Decisions at the Product Design Stage

Supplier selection is one of the key decisions in supply chain management. Companies need not only to make the “make” or “buy” decisions but also differentiate across potential suppliers in order to improve operational performance. Product design is an engineering based activity that realizes the customer requirements into functions of a new product. Many studies have pointed out that the integration of product and supply chain is a key factor for profitability and efficiency. However, most studies address supply chain performance after freezing the design of the product; only a few studies discuss when and how to incorporate supply chain decisions during product design. This paper presents a graph theory based optimization methodology to tackle this problem. The supplier selection issue is considered by evaluating its impact on both internal (e.g., ease of assembly) and external (e.g., transportation time) enterprise performances, which are aggregated as supply chain performance at the conceptual design stage. A case study in the bicycle industry demonstrates the advantages of this methodology. The presented mathematical programming formulation enables simultaneous optimization of both product design and supply chain design during the early design stages.