Product portfolio optimization based on substitution

The development of production capabilities has led to proliferation of the product variety offered to the customer. Yet this fact does not directly imply increase of manufacturers' profitability, nor customers' satisfaction. Consequently, recent research focuses on portfolio optimization through substitution and standardization techniques. However when re-defining the strategic market decisions are characterized by uncertainty due to several parameters. In this study, by using a GAMS optimization model we present a method for supporting strategic decisions on substitution, by quantifying the impact of those parameters. Empirical evidence supplements the research, where a case study from an industry company producing construction material demonstrates the results.