# 1.

Introduction A firm’s ability to create a value for a product is the most important factor that determines the extent of competitive advantage (Porter, 1998). In this context, offering variety in products seems to be a source of competitive advantage because the ability to develop new products which customers can differentiate with the competitor’s products. Generation of new product variety needs more information about the product at upstream stages in product development such as, product design, process design, and manufacturing and marketing stages. The requirement of additional information results from increased complexity of the product development at these stages whenever a new variety is introduced. The main concern of a variety is to cope with the complexity stemming from the product (e.g. number of parts, components, and variants) as well as the complexity acting on the product (e.g. market diversity, production flows) by means of suitable instruments. As variety generation is a continuous process, firms face an issue of how to decrease the complexity that arises at design and marketing stages, due to accumulation of product variety. If a firm fails to control this complexity, it may result in failure of the product at commercialization stage. Marketing researchers have studied various aspects of this, and many new methods exist to aid a manager in implementing a successful launch of a new product. However, all these methods focused their attention on market related variables such as, product diffusion in the market, and uncertainty in consumer preferences and market segments etc. These approaches of launching the products are reactive in nature. Some of the proactive approaches such as postponement strategy are also found in the literature. In this paper, two measures of product variety that focus on different aspects of variety: the entropy measure indicating the statistical variety on the basis of frequency distribution and the Weitzman’s measure which is based on a distance measure between entities are used in order to decrease the complexity of the new product variety at product commercialization stage. The first method of generating new variety is to add new functions to the product. Often, this results from changes in technologies. This type of variety has a stable, predictable demand and long life cycles. The second method is to generate variety based on aesthetic characteristics. This changes rapidly over time and it poses three important questions to the designers viz., (i) which of the available options in functional variety is to be used for the new aesthetic design?, (ii) whether the new product variety is to be added to the existing variety in the market or to replace some of the existing ones?, and (iii) which product variety is to be chosen for replacement when the new product variety is

colour. Section 3 studies the various measures of product variety and the contexts in which they are most appropriate to use. new product family can be introduced in the market by changing the features to suit customer requirements. They are briefly explained below: • Impact of product variety on design stage: As discussed earlier. Variety can thus be generated by adding additional functions and/or features in a product. Finally. 1996. The rate of changes in functional variety of the products in the market is low compared to that of changes in physical shape/form (features). A great variety can be generated with the combination of functions and features. delayed product differentiation (Lee and Tang. Gupta and Srinivasan. finish etc. Section 4 presents the heuristics step-wise and section 5 presents a case study of a hypothetical wrist watch manufacturing firm. 1998). Features refer to the physical shape.introduced? In addition to introduction. 1997. and (iii) marketing functions. Complexity in design is measured in terms of number of components. Here form features refer generally to shape and characterizing features of product. section 2 discusses the product variety concepts and the impact of product variety on various stages of product development. of the components used in the product. 1998) are found in the literature. Number of strategies for variety management such as. parts. section 6 presents a summary of results and
. The impact of product variety on different stages of product development is studied by number of researchers in terms of complexity it induces in (i) design. When a new product is to be introduced. In addition to this. Product Variety Concepts The group of products which share common form features and functions targeting one or multiple market niches is defined as product family. addition of a new function may result in introduction of a new product family in market. product variety increases complexity in design when new functions/features are added. standardization of parts (Fisher et al. Technology changes may result in introduction of new functions in a product. 1997. 2. Based on these additional functions. conclusions. Thus. (ii) manufacturing. and function refers generally to the utilization intent of a product. He and Kusiak. the extent of coupling between components is also used for measuring complexity. Huang and Kusiak. it has to cope with the existing complexity in the product. and variants.. 1999) and modularization of product (Kusiak and Huang.

and (ii) Weitzman’s diversity measure. Because of difference in number of components. As a result. Both are used in different contexts with an aim of minimizing the information entropy. The process complexity and equipment cost increase because of required flexibility in handling components. In both cases. feeding complexity. • Impact of product variety on marketing: The introduction of new product variety in market causes variations in demand for the existing products. the line balancing becomes difficult.Hartley and Shannon were among the first to use entropy as a measure of information content that may also be used for measuring complexity.
. Additional equipment needs to be installed to assemble the parts of different types. discrete scales are used. Product Variety Measures Product variety is measured in terms of diversification and amount of information required. change in assembly sequence and complexity in line balancing. Clearly the availability of a wider variety of goods represents a benefit for the customer. • Impact of product variety on manufacturing: Product variety causes changes in product structure and the impact of structural change of the product on the manufacturing processes is simply an increase in complexity. excessive capital investment. exceeds the number of existing products replaced. some of the existing products may have to be withdrawn from the market due to low demand. resulting in low utilization of facility. it may cause an increase in the new variety and it is grows over time. 3. The two measures of product variety used in this paper are (i) Information entropy measure. Some of the direct impacts of varieties on manufacturing are: high inventory. If the number of new products introduced. Demand variations are so much so that. or subassemblies of different shapes or configuration. the total number of product varieties offered to the customer has to be limited and the new product variety should be able to replace some of the existing ones. it may also require additional assembly stations and floor space. greater variety of product in the market increases the need for more information requirements. Even then. complexity in positioning and insertion. In order to overcome this. Information is required to describe variations in demand for the intra function and inter functional variations in the products.

E2. and brand purchasing behaviour (Herniter. and ‘g’ for the total number of classes along dimension P1.. based on feature requirements. pp26) devise an entropic measurement for evaluating complexity in manufacturing. In management sciences..g )
………………………… (1)
When all states are equally probable (Pi = 1/n). The products can be classified based on the function it performs.1 Entropy measure Entropy provides the measure of the amount of information associated with practical manufacturing. we define entropy of the distribution P by: H ( Pi ) = ∑ pi ∗ log(1/ pi )
i =1 g
(i = 1. The entropy can also be computed for dependent activities. p3. variety can be generated. En. For example. An important drawback of the entropy measure on product characteristics is that it cannot be applied in a straight forward manner to continuous product characteristics.. Let Ei stand for a product family (e. product P1 satisfies a function in which there is ‘g’ number of variety based on the feature requirements. 1973). …………. The logarithmic can be 2 for variety in bits or the natural logarithm for ‘nits’. The measure applies to data that are classified in discrete classes in which each datum exclusively assigned to one of the classes. 2. the entropy value is maximum.. For this case. The entropy formula expresses the expected information content or uncertainty of a probability distribution. In the above formula. Let there be ‘n’ product families. E4. with probabilities p1. among the other things. p4.. pn.. p2. it has been used to measure diversification. 1995). E3.3.. H max = ∑ (1/ n) log2 ( n) = n(1/ n) log2 (n) = log2 (n)
i =1 n
………………………… (2)
Where Pi stands for relative frequency of products classified in class ‘i’ along product dimension P1. individual decision-making strategies (Gensch and Soofi. …………. Frizzlle/Woodcock (1995. For each function. If demand for ith product has dependency over demand for i+1th product assuming that both are from the same class. E1. a technical product may have some functions and features. Then the entropy of i th product with respect to i+1th product is given by
. one technology adoption of technology ‘i’) and pi for the probability of a product family Ei to be chosen by customer.g.

d(x. hamming distance measure‘d’ is used for finding out the dissimilarity between two members in the population. Similarly. y ))
y∈s
where s\y stands for a set ‘S’ without product ‘y’ and d (s\y. 1993.165).H ( Pi / Pj ) = ∑∑ p( P i / Pj ) log(1/( p ( P i /P j ))) ………………………. plus the diversity of population without that member. The solution of the recursion is unique once the initial conditions. If ‘x’ and ‘y’ stands for different members of a population.y) ≥ 0. Description of Heuristic Method A heuristic method is developed with the following objectives: 1. Ways to reduce the complexity in design and manufacturing. this measure is ideally suited when it is to be identified in which group of products. Normally. 2. Weitzman. Hamming distance is the number of discrete characteristics in which two products differ (cf. V(x) ≡ do.2 Weitzman’s Measure of Diversity The measure of diversity of Weitzman (1992) is based on a maximum likelihood grouping procedure.
. 1992): d(x. The following assumptions are made. are specified for any do (we simply take do=0).x) For a set ‘S’ not empty. and 4. Identification of product variety that should be withdrawn. Thus. of the distance of a member from its closest neighbour.y) for the distance between this set with product ‘y’. The crucial difference of entropy measure with Weitzman measure holds that the former takes into account the relative of frequency of product variants while Weitzman is solely based on their distance. entropy measure may be useful to adopt a product variety that decreases the total entropy. the value of V(S) of the diversity of ‘S’ is the solution of the recursion: V ( S ) = max(V ( s \ y ) + d ( s \ y. Selection of a functional group for a new product. 3.x) = 0. ∀ x. (3)
i =1 j =1
n
m
this entropy measure is used to decrease the complexity in manufacturing. This formula holds that the diversity of a population is the maximum. 3. the distance measure needs to satisfy the following conditions (Weitzman. 4. p.y) = d(y. over all members in that population. d(x. the newly designed product could lie. Selection of features (aesthetic characteristics) to be used for the new product.

The notations used are as follows: 4. PRODNEW: [akl]MxN. indicates the probability of kth component and lth level. 4.2 Notations: Input variables: VMAX : Maximum variety that can be allowed in the market. M = 1. The profit margin for all the product varieties is more or less same. The demands for products with in functional groups are dependent on each other. PRODij : Product variety of ith function and jth variation. PROD :[akl]10x6 for all k.3 Heuristic Procedure: Step-1: Compute the probability matrix PROBMxN from the demand data for each component. PROB :[pkl] MxN..2. New product variety results from incremental innovation.…….10 indicates there are ten components in the product and ‘N’ indicates the number of levels for each component.1 Assumptions: 1. 4.l WGTk :Weight of the kth functional variety gk :Number of product variations in function ‘k’. 3. f :Total number of functional varieties. Competition in the market is assumed to be time independent. The variation is
. HAMM : Hamming distance between two products PRODij and PRODNEW DEMij : Demand for product ith function and jth variation in the market. PROBna : Probability of new product with respect to ath product in kth functional variety Auxiliary variables: HAMM: Hamming distance between two products PRODij and PRODNEW WEITk = Weitzman’s measure for product varieties in kth function. DEMnew : Demand for new product. LTT : The lower limit for hamming distance UPLT : Upper Limit for Weitzman’s measure of product variety. negligible.4. The demands for products across the functional groups are independent to each other. 2. 5. The cases where in major changes in technology takes place are not included in this study. H(k) = Entropy of kth variety Output variable: HMIN = Minimum entropy at the end of 100 trials.

5. H(k). Stop. go to step-3..
kr HAMM (r ) = ∑∑ PRODNEWij − PRODij
Step-5: If HAMM(r) ≤ LTT replace the product ‘kr’ with PRODNEW. Start counts k=0. H(2). Step-7: Compute Weitzman’s measure WEITk for kth function.. Select function ‘k’ for PRODNEWMxN. HMIN(2).….. go to step-9 else y-y+1. else go to step-6. If WEITk >UPLT. r = r + 1.. else go to step-3. y=0. Step-3: k=k+1. H(3). Case study of a hypothetical wrist watch manufacturing firm A wrist watch manufacturing firm may be selected as it is one of the best examples for variety intensive product. Step-8: if k ≥ f. ……………. go to step-2.. 1 gk 1 g k −1 p new H n ( k ) = p new log + p log + p log ∑ ∑ kr nr p p p r = 1 r = 1 new kr nr
gk f 1 H (k ) = H n (k ) + ∑ WGTb ∑ pba log p b =1 a =1 ba
Step-10: If k ≥ f. VMAX. LTT. The variation points in a watch are shown in figure-1 and table-1..……HMIN(100)) Select the function corresponding to HMIN(y). go to step-2 else go to step-7. M
Enter the weight matrix [WGT]fx1. Step-9: Compute the entropy H (k) by using the following equations. It is
.…………. Step-12: HMIN = min (HMIN (1). Step-6: If r < gk. go to step-10. PRODMxN ... UPLT. HMIN(y). go to step-4.PROB
kl
D = N kl ∑Dkl l =1
∀ k = 1. Step-2: Enter the matrix PRODNEWMxN for the new product. Step-4: Compute hamming distance between new product and the other product varieties of function ‘k’.H(f)) If y ≥ 100.. Step-11: HMIN(y) = Min (H(1).2.. Set count r =0.

display zone. Watch Model
Functional Unit
V1 V5 V11
Non Functional Unit (Aesthetics) Time Unit Hand s
V10
Movement
Bracelet
V4
V2
Basic Function Time
Action
Dial
Display Zone
V3
V9
Additional Functions
Markings
V8
Crown
V7
Buttons
V6
V12
Case
Figure-1: Variation Points in a Watch
Table 1: Variation in the Components of Watches
Variation V1 V2 V3 Description Movement is available in number of sizes to fit into the case (1…M) Time units and markings can vary depending on style and application (1…10) Additional functions can be added by additional sub assemblies (1…k)
. They offer both functional variety and feature variety in all their watches. a product family may be developed by offering various designs in bracelet. Functional variety can be offered by various movement designs. 1. markings. buttons. With each movement design. dial.assumed that the requirement for development of new watches mostly comes from marketing function of a firm through customer requirements survey. case and crown as shown in fig.

N) Display zone can be available in number of variations based on print (1…4) The bracelet can be available in number of variations based on material.ì Modelling the Cost and Bene?ts of Delayed Product Differentiation. M. and Tang. 2. Application of Entropy and Weitzman’s diversity measures may not be suited for firms with less number of varieties of products viz.. automobile. New York: The Free Press.N)
The design. H.40ñ53(January1997)
. shape. C. Vol. televisions. colour. Which product variety should be withdrawn from the market? and 4. 1985.No. Competitive Advantage: Creating and Sustaining Superior Performance. The objective of this also covers minimization of the complexities in design and marketing. design and clasps (1…N) The case can be available in number of variations based on material.. But.S. Porter.E. At this stage. the firm may face problems that are given in section3 that are reproduced here.L. the firm may not be able to compete effectively in the market.1. width. shape.. The methodology is applicable for variety intensive manufacturing firms. profit margin will be maintained or improved. it has to take decisions regarding withdrawal of some of the product varieties when ever new products are introduced. Conclusion
A methodology to fit new product model in the existing product variety groups is explained. computers etc. Lee. increases. finish. manufacturing and the marketing becomes complicated as the product variety offered to the customers.3) Unit of time can vary depending on application (1…3) Number of buttons can vary depending on application The shape of the crown can vary depending on case design (1…3) Number of markings can vary and the size can vary (1…4) The size.pp. If a firm has to maintain certain amount of variety in the market. This helps the management to take decisions about which models should be withdrawn from the market so that optimum number of models may be offered to customer. 1. References 1. (1…. refrigerators. At the same time.V4 V5 V6 V7 V8 V9 V10 V11 V12
The number of hands can vary depending on application (2. if the product variety decreases. What should be its features (aesthetic characteristics)? 3. and colour of the dial can vary (1…. î Management Science. How to reduce the complexity in design and manufacturing? 6. finish.43. Which functional group should be selected for a new product? 2.

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