Closing the Loop: An Empirical Analysis of the Dynamic Decisions Affecting Product Variety

Xiang Wan, Martin Dresner. 2015. Closing the Loops: An Empirical Analysis of the Dynamic Decisions Affecting Product Variety. Decision Sciences Journal Vol.46(6), 1141-1164.

38 Pages Posted: 1 Jun 2016

See all articles by Xiang Wan

Xiang Wan

Ohio State University (OSU) - Department of Marketing and Logistics

Martin E. Dresner

University of Maryland

Date Written: May 30, 2016

Abstract

Product variety decisions have become a key issue in managing new product development and innovation. The marketing literature highlights how product variety influences consumer demand. The operations and supply chain management literature discusses the impact of product variety on production and operational costs. However, very little has been found about how these past performance outcomes may influence present variety decisions. We consider product variety and performance outcomes in a dynamic decision loop by testing the forward impacts of product variety on demand and cost, as well as the reverse influences of past performance on present product variety decisions. Using archival data from the distribution network of a U.S.-based soft drink bottler, we develop a balanced panel dataset of 3,666 observations over three years containing product variety, cost and demand data. Our results suggest that both past demand and past cost outcomes may influence present variety decisions, with the demand impact occurring more rapidly than the impact of cost. Moreover, we investigate curvilinear impacts of product variety on the performance measures and find that product variety influences both demand and cost performance at diminishing marginal rates. From a theoretical perspective, our study better models the interplay between product variety and performance outcomes, while from a professional perspective, we help supply chain managers to better plan for the outcomes of their product variety decisions.

Keywords: Product Variety, Modularity, Demand, Cost

Suggested Citation

Wan, Xiang and Dresner, Martin E., Closing the Loop: An Empirical Analysis of the Dynamic Decisions Affecting Product Variety (May 30, 2016). Xiang Wan, Martin Dresner. 2015. Closing the Loops: An Empirical Analysis of the Dynamic Decisions Affecting Product Variety. Decision Sciences Journal Vol.46(6), 1141-1164.. Available at SSRN: https://ssrn.com/abstract=2786750

Xiang Wan (Contact Author)

Ohio State University (OSU) - Department of Marketing and Logistics ( email )

Fisher Hall 524
2100 Neil Ave
Columbus, OH 43210
United States

Martin E. Dresner

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
12
Abstract Views
182
PlumX Metrics