Marc Wouters

2022

This work addresses target costing of modularity-based product portfolios. The aim is to determine the target costs for each component in the product structure based on market prices of products. A multi-objective optimization model is formulated as a mixed-integer problem. The model determines target costs and prices for each component, taking into account a given product structure, upper and lower bounds for prices for components and products and a maximum allowable reduction for target costs for each component. Objectives and constraints are derived from the requirements of a real-world engineer-to-order case company. The model considers three objectives in a lexicographical order. The first objective minimizes the deviation between the aspired and the actual product prices, the second one maximizes the effect of the target costs on the product prices, and finally, the profit is maximized over the entire product portfolio. In our case study, we solved real-world instances with an off-the-shelf solver using three alternative key figures for the selection of components for cost reductions that characterize the components according to their cost and price influence on the product portfolio. Further, we evaluate the impact of the target cost reductions on the product prices and the profit in relation to the alternative key figures for the selection of components. The results show that the instances can be solved in reasonable computation time and the key figure for component selection with focus on the cost reduction potential performed best. From a managerial point of view, this work demonstrates the applicability of a model for target costing in modularity-based product portfolios and the impact of key figures.