An approach to product variety management in the painted sheet metal industry

In the painted sheet metal industry, offering a great variety of colors is an important competitive factor. However, an excessive number of colors can lead to excessive setup costs/times, inventory costs, and administrative complexity. In this paper, we address the case of a large manufacturer of painted sheet metal products located in northern Mexico. Several methods, both exact and heuristic, are proposed to optimize the variety of colors the firm offers. The exact method is based on mixed integer programming and the heuristic methods are variations of greedy algorithms. The methods are tested with real company data. The methods that perform better are identified and considerations are discussed which can affect the choice of method in a practical setting.