A heuristic genetic algorithm for product portfolio planning

Product portfolio planning has been recognized as a critical decision facing all companies across industries. It aims at the selection of a near-optimal mix of products and attribute levels to offer in the target market. It constitutes a combinatorial optimization problem that is deemed to be NP-hard in nature. Conventional enumeration-based optimization techniques become inhibitive given that the number of possible combinations may be enormous. Genetic algorithms have been proven to excel in solving combinatorial optimization problems. This paper develops a heuristic genetic algorithm for solving the product portfolio planning problem more effectively. A generic encoding scheme is introduced to synchronize product portfolio generation and selection coherently. The fitness function is established based on a shared surplus measure leveraging both the customer and engineering concerns. An unbalanced index is proposed to model the elitism of product portfolio solutions. (c) 2005 Elsevier Ltd. All rights reserved.