Assessing the Benefits of Integrated Vehicle Life Cycle Planning

Many decisions are involved in managing the vehicle life cycle. These include product portfolio planning (which models to launch at which times), plant assignment (which plants to use to produce each vehicle) and production allocation (how much of each vehicle to produce in each plant). Since these decisions are complex and made at different points in time they are typically decoupled in practice. But they clearly impact one another, since portfolio decisions constrain assignment decisions, which in turn constrain the allocation decisions. We present a Markov Decision Process model, which maximizes expected long-run average profit, to assess the value of integrating portfolio planning and plant assignment. Our analytical and numerical results suggest that decoupling these decisions can lead to substantial loss of profit, particularly when plant capacity utilization is moderate and flexible tooling makes it significantly cheaper to introduce new models into plants.