Mass customization design of engineer-to-order products using Benders' decomposition and bi-level stochastic programming

Leveraging product differentiation and mass production efficiency in mass customization basically entails a configure-to-order paradigm. In the engineer-to-order (ETO) business, however, companies build unique products in response to 'foreseeable' customer specifications. The key challenge of ETO mass customization lies in the complexity of accommodating future design changes when customers are involved in customizing design specifications. This paper proposes a two-stage, bi-level stochastic programming framework to tackle ETO mass customization. At the first stage, product platform configuration is integrated with production reconfiguration, which is formulated as a shortest path problem with resource constraints (SPPRC) to optimize production delays within the capabilities of the process platform. Benders' decomposition algorithm is applied to solve this optimal configuration problem owing to its high computational efficiency. The second stage scrutinizes the optimal configuration resulting from the first stage for scaling optimization of design parameters (DPs) for each module. All DPs are differentiated by standard or customizable DPs. A bi-level stochastic program is implemented to leverage conflicting goals between the producer (leader) and consumer (follower) surpluses. As a result, ETO customization design is anchored with optimal values of standard DPs and optimal value ranges of customizable DPs. A case study of ship engine and power generator ETO design is presented, demonstrating the feasibility and potential of the ETO mass customization framework.