To generate continuing profits as well as to retain market share, companies need to regularly introduce new products into the market, replacing outdated products and enticing buyers to purchase new products. Thus, planning the product transition from the phase-out of a product to the phase-in of a product is a challenging task for both production planners and marketing managers. One significant concern in particular is how to account for the learning effect associated with the production of two successive products that share a single type of production resource. To address this problem of designing production plans for two successive products, we develop an MINLP (Mixed-Integer Non-Linear Programming) model that minimizes the total operating cost for managing the product transition. In doing so, we consider the number of production resources, the lengths of the product production periods, and the number of setups for both products during the ramp-down and ramp-up periods. We study the behaviors of the proposed model with the help of numerical experiments by varying the values of key parameters, including the learning effect and its impact on performance under different operational scenarios. Leveraging the results from the sensitivity analyses, the operational characteristics for managing the product transition are discussed.
