Abstract

The article develops an approach to the product line selection problem that combines the company's intuitive understanding of the market and its actual experience with sales and production. The manufacturer has problems in deciding on the number of different items to produce and offer to his customers. Additional items in the line provide an assortment of merchandise appealing to a wider range of buyers in more markets, but increase both the complexity of manufacturing and size of the inventory required to maintain customer service. Adding styles to the line does not bring a proportionate increase in sales, for each store is limited in the number of styles it can carry. An item added to the line obtains part of its sales at the expense of other items, a phenomenon often referred to as "substitutability." A larger product line is more complex and costly to manufacture. Production set-ups and new style and pattern development are responsible for part of this increased cost. Larger in-process inventory and more complex scheduling also contribute to the added cost. The lower sales per item that accompany the larger product line bring a higher finished goods inventory cost.