Moving into Mass Customization

As many “management philosophies” and business strategies, mass customization is often presented as a panacea for solving business problems. However, from the viewpoint of economic theory, there are almost no concepts that strictly dominate the previous situation. This holds also for the concept of mass customization. The paper discusses the pros and cons of mass customization and develops a model to explain the factors that influence the economics of this concept. The classical Cournot model of determining the maximum profit in a monopolistic situation is enlarged to deal with situations in which mass customization is a possible action, providing additional revenues, but also resulting in additional costs. Formulas for determining the effects of mass customization are developed and the optimal solution is computed.

This article presents a procedure for building product models to support the specification processes dealing with sales, design of product variants and production preparation. The procedure includes, as the first phase, an analysis and redesign of the business processes, which are to be supported with product models. The next phase includes an analysis of the product assortment, and the set up of a so-called product master. Finally the product model is designed and implemented using object oriented modelling. The procedure is developed in order to ensure that the product models constructed are fit for the business processes they support, and properly structured and documented, in order to facilitate that the systems can be maintained continually and further developed. The research has been carried out at the Centre for Industrialisation of Engineering, Department of Manufacturing Engineering, Technical University of Denmark.

Introduced by Joseph Pine in 1993, the marketing strategy of mass customization has rapidly become indispensable for the strategic development of many enterprises. The basic idea of mass customization with all its different facets excites marketing and retail workers as well as marketing directors and CEOs. Nevertheless mass customization is still not yet a world wide standard. The reason for this can be seen in the complexity of implementing mass customization in actual existing mass or serial production. Pioneering examples often focus on newly founded enterprises or exclusively on production lines already set up. Since every product, every form of production and every logistics system have evolved individually no standard solution is or can be offered for implementation in an existing production or joint production line. Thus questions such as which product, which feature and how many features should or could be individualized remain. In addition time becomes an even more crucial factor than it has been before. Logistic systems have to be redesigned in order to face the new challenges. Long transport times have to be reduced within and between production lines. Lot size 1 in the machine does not imply lot size 1 in transport. Both information and goods have to be controlled and steered in order to be at the right place at the right time. Logistics therefore plays an essential role in mass customization.

‘Mass Customization’ can be considered the ‘holy grail’ of manufacturing in which products made are perfectly attuned to customers’ wants and needs. This paper analyses what should be seen as mass customization by developing the mass production/mass customization continuum. In addition, whether all products can be easily mass customized is debatable; where products consist of combinations of goods and services, organizations may find that one component or dimension of the product is more easily customized. The main issue discussed is supply chain change due to mass customization of products. Given that mass customization is significantly different to the mass production paradigm, there should be changes in either the way the supply chain is configured or in the way the supply chain needs to be managed. This paper will consider what changes may impact on a supply chain for mass customized products using the generic supply chain framework. The analysis concludes that both supply chains and their management will be different to supply chains aligned to more traditional manufacturing processes.

The chapter introduces the concept of product key value attributes (KVA) for understanding Mass Customization (MC). The customization potential and desirability of product attributes may be explained in this light. The concept provides a basis to understand the spectrum of MC strategies and the challenges that MC poses operationally. A number of conceptual models are introduced to explore both customization potential and desirability with respect to the customer and the producer. The challenges that MC poses for the design of effective operational systems and for strategy formulation are identified in the context of KVAs. A classification of different types of key value attributes is described and their operational implications discussed. The ideas are examined in the context of the market environment in which MC takes place. The impact of proliferation of product variety is highlighted. The nature of the customer is considered and the need to include business customers demanding product differentiation is noted.

A brief overview of state of the art of mass customization is presented, followed by general architecture for mass customization of manufactured products. The tools required to realize the architecture, and the relationships among them are described. The requirements for document description standards both within the factory and among the business community are outlined, then each of the significant components and tools needed to support the architecture are briefly described. These tools include product configurators, tools to translate customer- configured products into the business objects required for manufacturing and plant management, customer authentication, supply chain management, and by- products of mass customization technology, such as the dynamic promotion of products. The role of XML and related technologies in enabling the development of these tools is discussed.

While pursuing mass customization (MC) strategies, companies often benefit from cooperating with others. From a customer’s viewpoint, cooperating companies become a virtual enterprise (VE) that produces customer-individual goods. Participants of such a VE have to be extremely flexible in planning and executing their business processes. They have to be coordinated and supported by information systems (IS) that are particularly designed for these tasks. By focusing on the MC supply chain the basic data that is relevant to make successful MC strategies possible is identified. At first, the MC-macro-process, the supporting IS, and the change of roles of the participants during this process will be discussed. Based on this role concept and the common model of a VE for MC, relevant enterprise resource planning (ERP) data is identified.

Enterprises in all branches of industry are being forced to react to the growing individualization of demand, yet, at the same time, increasing competitive pressure dictates that costs must also continue to decrease. Companies have to adopt strategies which embrace both a closer reaction to the customers’ needs and efficiency. Mass Customization meets this challenge by offering individually customized goods and services at mass production efficiency. However, while Mass Customization has already been discussed in the literature for more than a decade, increased practical implementation of this strategy can been found in business only within the last years. This time lag may be explained by the fact that only since few years sufficient technologies exist to handle the information flows connected with mass customization. Especially as mass customization enters more and more consumer markets, new Internet technologies can be seen as its main enabler. To connect strategies discussed in e-business with the field of mass customization, the paper deploys a structural approach to create mass customized concepts within electronic business.

Generally and especially in EC, customers are confronted with a great variety and quantity of products and / or services. However, the time and effort a customer can spend on searching for his preferred products and deciding about the most preferred one based on his needs and preferences is the limiting factor. The aim of this paper is to transfer the well-known concept of mass-customization to digital products and EC. Thereby, an IT-framework will be developed, that enables intermediaries to flexibly provide personalized and mass-customized customers.

Modern trends in knowledge-dominated economy / society are (i) from “capital-intensive business environment” to “intelligence-intensive business environment” and (ii) from “product push” strategies to a “consumer pull” management. This leads to Mass Customisation (MC), assuming mass productions of individually customised goods and services at mass production costs, and e- Manufacturing, based on intensive use of WWW-technologies in the manufacturing part of e-business. Technology of Knowledge Fusion (KF), based on the synergistic use of knowledge from multiple sources, is a good basis for MC information support in e-manufacturing. The paper discusses a concept of a KF technology and its applications in the area of e-manufacturing based on utilizing ontologies and intelligent agents.

Modularisation is the decomposition of a product into building blocks with specified interfaces. Today many manufacturing companies have faced challenges on an increasingly complex, customer value driven marketplace and a progressively greater number of product variants. A modular product platform is a key to handle these challenges while reducing costs and time to market. The discussed four case studies show how a modular product platform can be achieved by using a systematic working method. The method used to develop a modular product platform is also shortly reviewed in this paper. In this method so called module drivers, the reasons for dividing products into modules, play an important role in several phases of the working process. Experiences from this work with different types of products are presented in this paper. The systematic way of working eliminates market related risks, forces the project team to think in terms of product variants and future changes and to use cross-functional know-how and concentrate on customer demands. The output is a well defined product platform from which all the product variants required can be manufactured.

For about a decade, mass customization is discussed as a generic methodology to individualize products and services while preserving cost-efficient production processes. Particularly for information-oriented industries like financial services, the advent of electronic business may create new opportunities to individualize products and services. In this paper, a product-oriented and a process-oriented approach to individualization of financial services are presented: On the one hand, by adopting configuration methods from mechanical engineering, financial services can be generated according to individual customer needs. On the other hand, by separating a production-oriented ‘factory’ layer and a customer process-oriented ‘integration’ layer in business networks, individual consumer processes can be supported holistically.

Modularity is often considered as the major enabler of mass- customization. This paper introduces modularity in three business dimensions: products, processes and supply chains. The different aspects and opportunities of three-dimensional modularity are investigated in relation to successful mass- customization strategies. The central proposition of this paper is that a network of organizations will be more effective in pursuing a mass-customization strategy when all three dimensions are concurrently designed in a modular fashion. This proposition is validated within the Dutch house building industry, which is currently trying to mass-customize its products. In particular, we focus on an innovative project, called Dwelling on Demand, which is carried out in the city of Almere. This project is one of the first steps the Dutch housing industry takes towards more customer-influence on a serial basis. It is concluded from this project that a concurrent design in all three dimensions often leads to better mass- customization performances, while it assures a better fit between serving the customers’ requirements and the organizational network structure and capabilities.

Customization is nowadays often regarded as a dominant paradigm in many industries. However, the impacts of customization on different business perspectives are still inadequately reported. Especially in the case of long product life cycles, after sales is a very significant business domain. In addition, it is even claimed to be a very profitable one. A distinctive feature of after sales business is the high number of low volume product items. The question is, does customization actually produce more those kinds of items, and thus increase the costs and complexity of operations. A case study is conducted to investigate the implications of customization for the spare part business. In this study, the complete life of one product cycle up to the present is analysed. The main focus is on the change in the number of spare part items and the change in inventory value due to customization. A set of explanations is provided to describe the relationship between after sales and customization. Furthermore, a classification of customizations from the after sales point of view is presented in this paper. As a conclusion, the study suggests that the impacts of customization on the number of items and inventory value are minor.