Supply network design for mass personalization in Industry 4.0 era

The manufacturing industry is confronted with the growing demand of personalized products of small batch sizes. In other words, the producers are faced with the satisfaction of heterogeneous customer needs through individualization and the realization of scale effects along the value chain. This study is among the first that proposes a mixed-integer programming model to obtain the optimal configuration of a supply network comprising of a pool of suppliers to satisfy the demand of highly-customized and modular-structured products. The product individualization is incorporated into the model by considering different design complexity levels for the components/sub-assemblies in the bill-of-material. Furthermore, the impact of batch size is modeled by considering piece-wise production cost functions in different echelons of the network. Our numerical results inspired by the case of tunable lasers indicate that the configuration of supply network varies as a function of the demand at different design complexity levels. Whereas, the profitability of supply network is closely tied to the market condition as well as the production capacity, flexibility of processes, and cost structure of manufacturers.