A conceptual model of product variety

More individual customer requirements and increasing competition due to the Internet technologies are just a few of the reasons that force manufacturers to react accordingly, e.g. by providing a higher product variety. Managing product variety is a great challenge that manufacturers have to address to be successful. The associated complexity makes product variety difficult to manage, although adequate management is essential to guarantee revenue and profit. Before making the decision to broaden the product range, it is recommended to check whether the profit of product variety outweighs the effort. There is also the question regarding the optimal product variety that enables the maximum net benefit for the manufacturer. Moreover, decisions on product variety are far-reaching due to their interconnectivity to almost all other managerial decisions. If manufacturers were capable to understand and oversee all the drivers and enablers of product variety, they would be in a better position to weigh all the pros and cons before arranging changes in the product portfolio. How to support decision-makers in this process? The approach presented in this paper addresses challenges by creating a unified framework of the factors impacting product variety. This is achieved by systematically studying management literature and integrating the found mechanism in a conceptual cause-effect model created with Garp3 – a workbench which offers meaningful visualization and simulation opportunities. After selecting appropriate literature, the relevant concepts are represented in a knowledge graph using the Garp3 software. The consequent preparation of the concepts enables deliberate decisions on wordings (types), number of model fragments, and level of abstraction. The simulation tool works without any numerical information, but still enables users to start from different scenarios (e.g. manufacturer with a single product starts to increase its portfolio) and observe the behavior of the system and its underpinning explanation in terms of cause-effect relationships.