DTD 5

ARTICLE IN PRESS

Industrial Marketing Management xx (2005) xxx xxx

Applied customer knowledge in a manufacturing environment: Flexibility for industrial firms

Cindy Claycomba,*, Cornelia Drogeb,1, Richard Germainc,2
a b

Wichita State University, W. Frank Barton School Business, Department of Marketing and Entrepreneurship, 1845 Fairmount, Wichita, KS 67260-0084, USA Michigan State University, Department of Marketing and Supply Chain Management, N370 North Business Complex, East Lansing, MI 48824-1122, USA c University of Louisville, Department of Marketing, 154 College of Business and Public Administration, Louisville, KY 40292, USA Received 9 January 2004; received in revised form 6 October 2004; accepted 30 October 2004

Abstract Dynamic business markets are forcing B2B marketers to create flexibility in their firms. The present study investigates: (1) made-to-stock (MTS) versus made-to-order (MTO, which is considered more flexible); (2) production technology routineness (with nonroutine considered more flexible); and (3) a marketing-based enabler of flexibility, i.e., applied customer knowledge. SEM analysis shows that applied customer knowledge completely mediates the relationships of both MTO and routineness with financial performance. This delineates two routes to financial performance, beginning with manufacturing-based flexibility constructs and operating through marketing-based applied knowledge. In addition, exploratory analysis of a subsample confirmed empirically that the financial success of mass customization depends on extensive customer knowledge application and low finished goods inventory levels. Managerial implications are discussed, along with ideas for future research. D 2005 Elsevier Inc. All rights reserved.
Keywords: Business-to-business; Knowledge; Performance; Manufacturing strategy; Flexibility

1. Introduction Business-to-business markets (B2B) have become turbulent, even volatile in todays environment. Shortened product life cycles, increased product variety and customization, and escalating customer requirements mean that managers are forced to be alert, learn quickly, and transform ideas promptly into action (Gerwin, 1987; van Hoek, 2001). Windows of opportunity are narrower and more mutable. To deal with dynamic marketing environments, firms must adopt methods of creating strategic and operational flexibility (Gerwin, 1987, 1993). Flexibility pursued as a competitive priority can create a sustainable competitive

* Corresponding author. Tel.: +1 316 978 6938; fax: +1 316 978 3276. E-mail addresses: cindy.claycomb@wichita.edu (C. Claycomb), droge@bus.msu.edu (C. Droge), richard.germain@louisville.edu (R. Germain). 1 Tel.: +1 517 353 6381. 2 Tel.: +1 502 852 4680. 0019-8501/$ - see front matter D 2005 Elsevier Inc. All rights reserved. doi:10.1016/j.indmarman.2004.10.008

advantage (DeToni & Tonchia, 1998; Narain, Yadav, Sarkis, & Cordeiro, 2000). Flexibility in response to demand fluctuations can be key to fending off competition (Yusuf, Adelye, & Sivayoganathan, 2003). Marketing-based flexibility is designed to cope with dynamic market change (Narain et al., 2000). One approach to marketing-based flexibility is to utilize customer knowledge. Knowledge is the understanding of some phenomenon, created and organized by the flow of information (Nonaka, 1994). Applied customer knowledge refers to creating new knowledge based on information from customers, disseminating it, and embodying knowledge in new technologies or products (Nonaka, 1991). Applied customer knowledge is different from marketing orientation. A marketing orientation is an organizational culture and structure that creates the necessary behaviors to attain creation of superior value for buyers: it includes generation and dissemination, as well as responsiveness to marketing intelligence (Kohli & Jaworski, 1990; Narver & Slater, 1990). Applied customer knowledge is concerned with

IMM-05936; No of pages 12

ARTICLE IN PRESS
2 C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx

creating intangible, knowledge-based assets that are indispensable sources of competitive advantage (Grant, 1996; Teece, 1998). Our focus is on applied customer knowledge about product quality levels, design of products, production plans, and production costs. Flexibility research is driven by market dynamism, but occurs within a context of a supply chain and in relation to manufacturing strategies (van Hoek, 2001). Manufacturing strategies can range from completely make-to-stock (MTS) to completely make-to-order (MTO). MTS products are based on forecasts of overall customer demand while MTO waits until customer orders are received. Generally, MTO strategies are considered more flexible. We also consider routineness of production technology (e.g., batch versus mass production): more routine production is often viewed as less flexible. We argue that MTO and routineness are independent constructs that do not necessarily follow one from the other. We hypothesize that MTO and routineness have independent effects on applied customer knowledge as well as on finished goods inventory levels. In turn, applied customer knowledge (an enabler of marketing-based flexibility) and finished goods inventory levels influence financial performance. The resource-based view of the firm argues that differences in performance are attributable to differences in the organizational resources that firms possess, such as knowledge-based assets (Grant, 1991). Performance differences exist between firms because of asymmetries in knowledge (Kogut & Zander, 1992). The theory suggests that rather than direct effects, manufacturing strategy and production technology indirectly influence performance through applied customer knowledgea knowledge-based asset that firms may possess. The general research question we address is whether applied customer knowledge mediates the relationship between manufacturing strategy and financial performance. Fig. 1 displays our conceptual model. We also introduce an exploratory component to the research. In todays dynamic markets there is often a need for the simultaneous manufacture of small and large volumes, as well as an ability to shift between producing for mass and niche markets. To remain competitive, a firm should be able to simultaneously manufacture both low and high batch using either MTO or MTS strategies without significant changes in the unit cost of manufacture (Yusuf et al., 2003). The study of various combinations of MTO/MTS strategies and production routineness may provide informaMake-to-Order Manufacturing Strategy H1, H2
Production Technology Manufacturing Strategy (Routineness)

tion on different routes to performance. In particular, we focus on the mass customization case (characterized by MTO and routine production) and examine the effects of applied customer knowledge and finished goods inventory levels on financial performance in this important subgroup. From a marketing perspective, it is important to understand how marketing-based flexibility (e.g., applied customer knowledge) can positively influence performance in this context. The paper begins with definitions of the main constructs, followed by the arguments supporting the model hypotheses. After presentation of the main results, selected subgroups are scrutinized. Managerial implications and directions for further research conclude the paper.

2. Conceptual foundation: definition of constructs We begin by defining each of the three major constructs in Fig. 1, i.e., MTS versus MTO manufacturing strategy, production technology routineness, and applied customer knowledge. We show how each of these constructs relates to flexibility. 2.1. Manufacturing strategy: MTS versus MTO Manufacturing strategy is the allocation and coordination of manufacturing resources and activities to support a selected product-process focus aimed at gaining a sustainable advantage (Chase & Aquilano, 1992; Walker, Boyd, & Larreche, 1999). Manufacturing strategies range on a continuum from pure MTS to pure MTO, the basic distinction being the timing of customer orders relative to final assembly. In MTS, final goods are assembled in anticipation of customer orders (Marucheck & McClelland, 1986), and hence demand forecasts are critical in avoiding excessive finished goods inventory. In MTO, manufacturing or assembly is undertaken after the order is received as the product is customized to meet customer preferences (Vickery, Droge, & Germain, 1999). MTO enables agile responsiveness to customers demands and thus is a key aspect of manufacturing flexibility (van Hoek, 2001). Firms use an MTO strategy for a number of reasons (Spring & Dalrymple, 2000). First, MTO creates a competitive entry barrier. Second, MTO is used as a vehicle for learning about new organizational or technological capabilities. Third, an MTO strategy sends symbolic

Applied Customer Knowledge (Flexibility)

H3, H4

Financial Performance

Finished Goods Inventory Level

Fig. 1. Research framework and hypotheses.

ARTICLE IN PRESS
C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx 3

messages to enhance brand or firm image. Fourth, MTO can reduce costs by reducing inventory. Finally, an MTO strategy can make money because customized products may attract higher prices, less financing of finished goods inventory is required, and typically finished goods obsolescence rates are lower. As competitive pressures intensify, MTO strategies are becoming progressively more important as strategic initiatives (Vickery et al., 1999). MTS strategies have traditionally been viewed as entirely distinct from and incompatible with MTO strategies (Tsubone, Ishikawa, & Yamamoto, 2002). However, in todays competitive environment, it is important to recognize that MTO and MTS are not mutually exclusive. For example, increased product variety and drastic changes in market demand may necessitate manufacturing systems that can produce both MTO and MTS products; often, they share a common production line with limited capacity, making changeover flexibility critical. 2.2. Manufacturing strategy: routineness Manufacturing strategies can also be classified on an operations continuum defined by the firms production technology. Production technology is the means for creating outputs from inputs. As originally conceptualized by Khandwalla (1974), it is the mass output orientation of production: mass output orientation is lowest for manufacturers using custom production (e.g., production of a few units at a time) and increases with small batch, then large batch, assembly line, and continuous process production (as in oils and gases). A meta-analysis of the production technology literature found that mass output orientation reflects routineness (Miller, Glick, Wang, & Huber, 1991). Routineness is a continuum ranging from (1) low in the case of custom and batch production involving a wide array of unique goods made in relatively short production runs, to (2) high in the case of mass production and continuous process production. Highly routine processes involve production of a narrow range of high-volume products over long runs. Sometimes these processes are run continuously because of the nature of the materials being processed, not because of volume requirements. Generally, production technology of low routineness is considered the most flexible. Just as MTS versus MTO were considered distinct strategies in the past, specific production technologies have traditionally been associated either with MTS or MTO. In an MTO system, one goal was to shorten manufacturing time to gain competitive advantage (Tsubone et al., 2002) and one characteristic of MTO was small volumes (Marucheck & McClelland, 1986). This implied the use of less routine production technologies (like small batch). On the other hand, a desirable feature of MTS is maintenance of a high fill rate to market demand. MTS strategies that rely on providing a continuous supply of goods based on forecasted

customer demand would be expected to use more routine production technologies. 2.3. Applied customer knowledge Applied customer knowledge is first and foremost a form of knowledge. The central theme in the resource-based literature is that a firms knowledge assets are a basic source of sustainable competitive advantage: performance differences exist because of asymmetries in knowledge, and hence in the associated competencies or capabilities (Hidding & Catterall, 1998; Kogut & Zander, 1992). Applied knowledge is that used to exploit market opportunities (Hidding & Catterall, 1998; Spinello, 1998), and it results in sustainable competitive advantage if a firm can avoid knowledge transfer (i.e., trade) or imitation (Kogut & Zander, 1992). Applied customer knowledge is more specifically a form of supply chain knowledge. One way for firms to prevent transfer or imitation is to develop and apply knowledge assets across the supply chain. Value creation may depend on knowledge application from multiple contributors (Nonaka, 1994), knowledge that is then integrated with the firms existing stock of knowledge (Grant, 1996). This exchange of knowledge cannot be achieved entirely through product exchange in markets (Grant & BadenFuller, 1995). Partial imitation, imitation in a different context, or even moving entire units or individuals may fail because the intra- and inter-organizational linkages are lacking (Grant, 1991; Spender, 1994). Thus distinctive competencies and capabilities associated with knowledge must be developed (Grant, 1996; Teece, Pisano, & Shuen, 1997). Such interfirm knowledge resources and routines embedded in the supply chain relationships among firms are becoming essential to sustainable competitive advantage (Dyer & Singh, 1998; Young, Sapienza, & Baumer, 2003). Applied customer knowledge involves building supply chain knowledge by working across organizational boundaries and looking for efficiencies downstream with distributors and customers (Prahalad & Hamel, 1990). One goal of applied customer knowledge is flexibility: both proactively and reactively, flexibility and timely response are enabled by extensive involvement with the customer and knowledge of what the customer wants. Other goals of applied customer knowledge may be to develop or improve customer relationships (which are perhaps based on complex social ties), improve revenue from increased future transactions, command higher prices, and inhibit competitors because knowledge interaction is difficult to imitate (Moorman & Slotegraaf, 1999). In this research, applied customer knowledge means that customers are actively involved in the design and manufacture of products through involvement in product design, quality levels, and production plans and costs.

ARTICLE IN PRESS
4 C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx

3. Conceptual framework: hypotheses The overall framework comprising the hypotheses is shown in Fig. 1. MTO strategy and production technology routineness are modeled as antecedents to applied customer knowledge and finished goods inventory, which in turn are antecedents to financial performance. No direct effects are proposed from exogenous constructs to financial performance; this means that applied customer knowledge and finished goods inventory are expected to be complete mediators of the relationships of MTO strategy and routineness to financial performance. 3.1. The effects of MTO strategy The degree of uniqueness of a product and the type of customization is related to the level of customer involvement in a firms manufacturing strategy (Duray, 2002). An MTO strategy implies seeking applied customer knowledge to ensure performance to customer specification. For example, applying an MTO strategy may demand knowledge of that customers production plans if the goal is to ship a customized component in a JIT regimen. The ability to respond to individual customer wishes is enhanced by applying customer knowledge (van Hoek, 2001). While MTO and applied customer knowledge should be positively related, MTO and finished goods inventory should be negatively related. In an MTO manufacturing environment, a firm waits to manufacture products until it has orders. There is a reduced need for finished goods inventories because the products are manufactured in response to customer orders and then shipped to those same customers. MTO avoids a build up of inventories of finished goods in anticipation of future orders (Marucheck & McClelland, 1986; van Hoek, 2001). H1. An MTO manufacturing strategy is related (a) positively to applied customer knowledge and (b) inversely to finished goods inventory levels. 3.2. The effects of production technology routineness As stated earlier, the goals and characteristics of MTO versus MTS strategies have historically implied more versus less routine production technologies. Nonetheless, production technology does not determine the level of MTO strategy used by a firm, nor does the level of MTO determine the production technology used by a firm. Thus separate hypotheses are given. Firms identify, create, and manage knowledge in an effort to minimize the negative effects of discontinuities, uncertainty, and ambiguity (Hitt, Ireland, & Lee, 2000). When a firm uses less routine production technology, it is more likely to face discontinuities, uncertainty, and ambiguity and thus the firm is more likely to seek out applied customer knowledge. This suggests that production tech-

nology routineness (highly stable with a low tolerance for change) would be inversely (negatively) related to applied customer knowledge. More routine technologies (i.e., mass production and continuous process) are designed to produce a large number of products at a relatively constant rate. This would result in larger finished goods inventories compared to firms that use custom or job shop technologies that produce a few units at a time. Therefore, the more routine a firms production technology process, the more inventory a firm would store at the finished goods level. Thus: H2. Production technology routineness is related (a) inversely to applied customer knowledge and (b) positively to finished goods inventory levels. 3.3. The direct antecedents of financial performance The criteria for judging the usefulness of knowledge generally include speed, lower costs, higher profit margins, and the degree to which knowledge can contribute to a firms development (Nonaka, 1994); the ultimate goal is marketplace performance, both competitively and financially (Demarest, 1997; Spender, 1994; Teece, 1998). Performance, at least in part, is attributable to applied knowledge (Liebeskind, 1996), and the application of knowledge results in differences across firms that have lasting effects (Kogut & Zander, 1992). Empirical research, although surprisingly limited, supports the attribution of performance to applied knowledge. For example, positive relationships were found between: (1) knowledge application and firm effectiveness (Gold, Malhotra, & Segars, 2001); (2) integration/application of knowledge from three major supply chain members and growth and financial performance (Tan, Kannan, Handfield, & Ghosh, 1999); (3) applied supply chain knowledge and firm performance under varying degrees of environmental uncertainty (Claycomb, Droge, & Germain, 2002); and (4) technology commercialization strategy and financial performance (Young et al., 2003). Thus: H3. Applied customer knowledge is positively related to financial performance. Finally, the higher the finished goods inventory carried, the higher the associated costs and the lower the financial performance. Also, if a firm is carrying finished goods inventory, this may be at the expense of some other opportunity. Therefore, a firms finished goods inventory level should be related inversely with financial performance. H4. Finished goods inventory level is inversely related to financial performance. H1 through H4 as a set means that (1) the effects of MTO/ MTS on financial performance are not direct but indirect through applied customer knowledge (H1a: + and H3:+) and finished goods inventory level (H1b: and H4: ); and (2)

ARTICLE IN PRESS
C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx Table 1 Sample industry distribution 2-digit SIC Food and kindred products Tobacco products Textile mill products Apparel and other products made from fabrics and similar materials 24. Lumber and wood products, except furniture 25. Furniture and fixtures 26. Paper and allied products 27. Printing, publishing, and allied industries 28. Chemicals and allied products 29. Petroleum refining and related products 30. Rubber and miscellaneous plastics products 31. Leather and leather products 32. Stone, clay, glass, and concrete products 33. Primary metal industries 34. Fabricated metal products except machinery and transportation equipment 35. Industrial and commercial machinery and computer equipment 36. Electronic and other electrical equipment and components, except computer equipment 37. Transportation equipment 38. Measuring, analyzing, and controlling instruments; photographic, medical, and optical goods, etc. 39. Miscellaneous manufacturing industries Total One missing value. 20. 21. 22. 23. n 17 1 5 3 6 5 12 9 34 3 18 1 10 21 17 14 10 9 Percent 8.2% 0.5 2.4 1.4 2.9 2.4 5.8 4.3 16.4 1.4 8.7 0.5 4.8 10.1 8.2 6.8 4.8 4.3 5

the effects of routineness on financial performance are not direct but through applied customer knowledge (H2a: and H3: +) and finished goods inventory level (H2b: + and H4: ). As a group, notice that these hypotheses of indirect effects imply that there are no direct effects of either MTO/ MTS or routineness on financial performance: i.e., we implicitly hypothesize and later test complete (as opposed to partial) mediation. The theory of the resource-based view of the firm supports the idea of complete mediation by applied customer knowledge (e.g., see Grant, 1991; Kogut & Zander, 1992). Asymmetries in knowledge result in performance differences among firms, suggesting that the effects of manufacturing strategy and production technology on performance will be indirect through the knowledge-based asset of applied customer knowledge.

4. Method 4.1. Sample A pretested survey was sent to individuals on the executive list of the Institute of Supply Management (ISM, formerly the National Association of Purchasing Management). The ISM, headquartered in Tempe, Arizona, USA, is the largest supply chain management association in the world (www.ism.ws). We restricted the list to manufacturers only (n = 1264). Our goal was to fax a survey to 400 randomly selected potential respondents who met three criteria. They had to (1) pass a key informant check, (2) be willing to participate, and (3) actually be employed by a manufacturer (this catches misclassification errors or changes in employment). The criteria were assessed by phone contact. When a criterion was not met (n = 159), another individual was randomly selected. A total of 402 individuals were contacted. We obtained a second respondent from a limited number of firms. A second survey was faxed to another employee in 78 instances: they were identified by referral, contacted by phone, and met the three criteria. Of the 480 surveys that were faxed, 227 were returned from 210 firms. Two response rates can be estimated: 47% for surveys faxed (or 227 / 480) and 52% for firms (or 210 / 402). Two returned questionnaires were discarded because of excessive missing values. Most respondents selected director as a title (66%), followed by manager (16%), and vice-president (14%). As expected, most were employed in purchasing (72%), followed by materials management (10%), and manufacturing (5%). Average annual sales were $1.406 billion and the average number of employees was 4573. The two-digit SICs are in Table 1. 4.2. Measurement The exact items in all scales are presented in Table 2. An open-ended scale measured the extent to which a firm has

12 207

5.8

adopted an MTO manufacturing strategy. Respondents were asked what percent of output was manufactured to customer order (as opposed to manufactured to stock). This generic measure can be used to assess MTO across industries. Production technology routineness was measured by the mass output orientation scale originally proposed by Khandwalla (1974). Respondents rated reliance on five production technologies (production of single units at a time, small batch, large batch, mass assembly, and continuous process) on 7-point scales anchored by not applicable to principal products and used almost exclusively. The five items were respectively given weights of one through five and the sum was taken. To measure applied customer knowledge, respondents were told that knowledge may be defined as understanding and were asked to rate application of knowledge in four areas: (1) information from customers on their expected product quality levels; (2) joint co-design of products; (3) information from customers on future production plans; and (4) information from customers that lowers your production costs. Seven-point scales with endpoints low application of knowledge and high application of knowledge were used. This scale cannot be ascribed to any single citation. Rather, the definition of knowledge is generally accepted (e.g., Hage, 1980) and the various items were constructed from a literature review (e.g., Frazier, Spekman, & ONeal, 1988; Germain & Droge, 1997; Sakakibara, Flynn, & Schroeder, 1993).

ARTICLE IN PRESS
6 C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx Table 2 Confirmatory factor analysis results of the measurement model q Make-to-order: percentage made-to-order measured on an open-ended scale x1. Make-to-order percentage Production technology routineness: 7-point scales with endpoints of not applicable to principal products and used almost exclusively in response to the following technologies: (1) custom technology (production of a single unit or a few units to customer specification); (2) small batch/job shop technology (batches of less than one week); (3) large batch technology (e.g., of components for subsequent assembly as in fabricating shops, of finished products such as bottles, cans, drugs, chemicals); (4) mass-production technology (as in assembly lines); and (5) continuous process technology (as in production of liquids, gases or solid shapese.g., oil refining). The 5 items were given respective weights of 1 through 5 and the sum was taken x2. Applied customer knowledge: 7-point scales with endpoints of low and high y1. Information from customers on their expected product quality levels y2. Joint co-design of products with customers y3. Information from customers on their future production plans y4. Information from customers that lowers your production costs Finished goods inventory: 7-point scales with endpoints of average is low and average is high y5. Finished goods inventory level Financial performance: 7-point scales with endpoints of well below and well above industry average y6. Average return on investment over the past 3 years y7. Average profit over the past 3 years y8. Profit growth over the past 3 years na rwg .80 .963 na .85 CFA loading

rwgs exceed .70, providing justification for using the mean value across the two respondents (James, Demaree, & Wolf, 1993). The number of observations was thus collapsed to 208 firms. Confirmatory factor analysis (CFA) assessed reliability and validity (Table 2). The overall v 2 statistic was significant (33.927; df = 28; p = .203). The root mean square error of approximation (RMSEA= .032) and confirmatory fit index (CFI = .994) are more than adequate: i.e.,< .07 and > .90, respectively. The standardized loadings all exceed .400 ( p < .01). Scale composite reliabilities (qs) both exceed .70. Thus the CFA supports validity and reliability. An exploratory principal components factor analysis also supports that MTO, routineness, and applied customer knowledge are separate constructs and that the latter is unidimensional.

5. Main results 5.1. Evaluation of the hypothesized model

.998 .71 .71 .434 .511 .723 .778 na .85

.998 .95 .92

.917 .958 .922

Loadings are common metric completely standardized estimates; all CFA loadings significant at p < .01; q = scale composite reliability; rwg = interrater agreement; CFA fit statistics: v 2 = 33.927; df = 28; p = .203; RMSEA= .032; CFI = .994.

Structural equations modeling using LISREL (Joreskog & Sorbom, 1993) was used to test the hypotheses (Fig. 2). A summary of the hypotheses tested is shown in Table 3. The model fit well (v 2 = 37.908; df = 31; p = .183; RMSEA= .033; CFI = .993). H1 is supported because the paths from MTO to applied customer knowledge (c1,1 = .304; t = 3.215; p < .01) and to finished goods inventory levels (c2,1 = .312; t = 4.412; p < .01) are both significant and in the expected directions. H2 related production technology routineness to lower applied customer knowledge (H2a) and to higher finished goods inventory levels (H2b). H2a is contradicted because this relationship is significant but positive (c1,2 = .228; t = 2.657; p < .01). H2b is not supported (c2,2 = .079; t = 1.182, n.s.). H3, stating that applied customer knowledge would improve performance, is supported (b3,1 = .244; t = 2.717; p < .01). The last hypothesis (H4), stating that finished goods inventory would be negatively related to performance, is not supported (b3,2 = .011; t = .163, n.s.). 5.2. Mediation and total effects: two routes to performance The set of model hypotheses in Fig. 2 says that applied customer knowledge and finished goods inventory levels mediate completely the effect of MTO and production technology routineness on financial performance. To assess such, a model was examined wherein the direct effects of MTO and production technology routineness on financial performance were estimated. This model (v 2 = 34.804; df = 29; p = .211) did not fit better than the current model (Dv 2 = 3.104; Ddf = 2; p > .10) and neither direct effect was significant. Thus complete mediation is supported. The total effects of the exogenous constructs on performance (com-

Finished goods inventory level was measured on a sevenpoint scale with endpoints of average is low and average is high. Finally, financial performance was taken from Miller (1991). Seven-point scales had endpoints of well below/well above industry average. 4.3. Reliability and validity Prior to assessing reliability, it is necessary to treat the 17 instances where two respondents per firm exist. Interrater agreement scores (rwgs) were estimated (see Table 2). All

ARTICLE IN PRESS
C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx 7

y1

y2

y3

y4

11

x1

Make-to-order
1 12

Applied Customer Knowledge

1 21

31

y6 Financial Performance
32 3

y7 y8

x2

Production Technology Routineness 2

22

Finished Goods Inventory Level

2

y5
Fig. 2. Empirical model.

prising indirect effects only) were also estimated. Both were significant at p < .05: the total effect was b = .071 (t = 1.931) for MTO to performance; and b = .057 (t = 2.095) for production technology routineness to performance. Thus there are two routes to performance in this model, both through applied customer knowledge.

6. Scrutinizing the case of MTO/routine production We decided to more closely examine production routineness and MTO/MTS groups. First we checked the correlation of MTS with routineness: at 0.068, it is nonsignificant and thus splitting into groups based on these dimensions is justified. This exploratory analysis was
Table 3 Summary of LISREL model results Parameter Make-to-orderY customer knowledge (c1,1) Make-to-orderY finished goods inventory (c2,1) Production technology routinenessY customer knowledge (c1,2) Production technology routinenessY finished goods inventory (c2,2) Customer knowledgeY financial performance (b3,1) Finished goods inventoryY financial performance (b3,2) Standardized Hypothesis Estimate t-value H1a (+) H1b () H2a () .304 .312 .228 Conclusion

3.215* Supported 4.412* Supported 2.657* Contradicted

H2b (+)

.079

1.182

Not supported

H3 (+)

.244

2.717* Supported

H4 ()

.011

.163

Not supported

Estimates are common metric completely standardized estimates. v 2 = 37.908; df = 31; p = .183; RMSEA= .033; CFI = .993. *p < .01.

conducted by first splitting the sample based upon the medians of MTO (greater than 50 percent formed the MTO group) and production technology routineness (greater than 47 out of a maximum of 120 formed the routineness group). Choosing median splits ensures that the four groups will each have adequate sample size for further analyses. As mentioned earlier, MTO tends traditionally to have been implemented with less routine production technology while MTS tends to have been studied in relation to more routine production technologies. The combinations of MTO/routine and MTS/nonroutine can result in inconsistent and conflicting task requirements regarding process design and production volumes (Kotha, 1995). Thus two of the four groups are standard and traditional (MTO/nonroutine and MTS/ routine), while two of the four groups deserve additional justification and discussion. First, consider the case of MTS in the context of nonroutine production technology (such as small or large batch). If customers design/engineering ideas are incorporated at the design stage, then products can be made-to-stock based on design specifications (not based on specific customer orders). For example, Airbus Industrie involves customers in the design and engineering of its aircraft (Hartley, 2004), and each aircraft is manufactured as a oneoff product for a specific customer (e.g., Lufthansa). At times however, Airbus produces what is called a whitetail aircraft (Collins, 2001). These airplanes are designed and engineered by applying knowledge from all customers; however, they are manufactured to stock without a specific customer order. Airbus demonstrates the use of nonroutine production (one-off) with an MTS strategy for whitetail aircraft. Second, consider the case of MTO in the context of routine production technology. This particular subgroup interested us the most because this combination is characteristic of what is known in the literature as mass customization. Mass customization is defined as a process by

ARTICLE IN PRESS
8 C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx Table 4 Subgroup analysis (dependent variable = financial performance) Independent variables Batch/MTS Estimate (t-value) Applied customer knowledge Finished goods inventory Model F R2 .303 (1.962)* .186 (1.202) 2.236 10% Mass/MTO Estimate (t-value) .331 (2.569)** .442 (3.427)** 10.925 35%

*p < .05 (standardized betas), **p < .01.

which firms apply technology and management methods to provide product variety and customization through a focus on flexibility and quick responsiveness (Kotha, 1995, p. 22). The most famous example of mass customization is Dell Inc. (Schonfeld, 1998). Dell makes computers to customer specifications using mass assembly production technologies involving modular components that can be configured into a wide variety of personal computers (Pine, 1993). The modules for each computer are produced along a mass assembly line (and based on demand forecasts), but each completed computer is manufactured to specific customer specification. Suppliers deliver within an hour, and chips, boards, and drives are kept in trucks parked 50 feet from the beginning of the assembly line (Serwer, 1997). Information from customers is applied at the time of production and Dell keeps margins up by holding no inventory of finished goods (Schonfeld, 1998). In summary, mass customization involves the application of customer knowledge at the production stage, allowing the use of routine production technologies within an MTO strategy context. Firms low on routineness were labeled batch manufacturers, while those high on the variable were labeled mass manufacturers. Interest centered on the effects of applied customer knowledge and finished goods inventory levels on financial performance (the dependent variable) in each of the mass/MTO and batch/MTS groups. Regression model results, one for each subgroup, are in Table 4. Each of the regression models is significant, explaining 10% of the variance in the batch/MTS case and 35% of the variance in the mass/MTO case. Applied customer knowledge is a significant predictor of financial performance in each case, consistent with the SEM results. The results for finished goods inventory level contrast those of the SEM model (where finished goods inventory was unrelated to financial performance). In Table 4 it is seen that the anticipated inverse effect of finished goods inventory on financial performance holds for mass/MTO manufacturers (b = .442; t = 3.427; p < .01), but not for batch/MTS.

7. Discussion and conclusion Flexibility is a combination of physical characteristics, operating policies, and managerial practices. Marketingbased flexibility refers to the use of these factors to cope

with market change. In the study, we investigated applied customer knowledge, which enables marketing-based flexibility. Four items were used to measure applied customer knowledgeinformation from customers about their production plans; information from customers about production costs; information from customers about product quality levels; and co-design of products with customers. Acquiring and applying customer knowledge at the design stage (product quality levels; product co-design) and at the production stage (production plans; production costs) enables marketing-based flexibility and probably requires close relationships with customers. In addition, we investigated two manufacturing-related flexibility constructs: (1) MTS versus MTO manufacturing strategy (the latter traditionally viewed as requiring more flexibility) and (2) nonroutine versus routine production technology (the former traditionally more flexible). The results show that first, both MTO and routineness were positively related to applied customer knowledge. We had argued that marketing-based flexibility demands more applied knowledge; thus the result for MTO was expected but we had originally hypothesized an inverse relationship between routineness and applied customer knowledge. Second, applied customer knowledge was in turn positively related to financial performance, as expected. Third, an MTO strategy was inversely related to finished goods inventory levels. This was expected because MTO products are assembled in response to specific customer orders. However, routineness was unrelated to finished goods inventory levels (contrary to expectations). Finally, the level of finished goods inventory was unrelated to financial performance. It is possible that routineness is positively related (rather than negatively related) to applied customer knowledge because production processes are being designed with customer JIT/TQM requirements in mind. JIT requires accurate demand forecasting and close relationships with customers. This possible confounding effect may particularly hold true in our model because our measures of applied customer knowledge focus on customer input to production and product design. These same customer inputs may also be requirements for setting up JIT relationships. A focus on time-based competition might also explain why routineness was unrelated to finished goods inventory levels, at least for the sample as a whole: one goal of JIT is to minimize finished goods inventory levels. We have no way of evaluating MTO versus routineness versus JIT effects, however. The lack of support in the sample as a whole for the hypothesized relationship between finished goods inventory and financial performance may also be related to time-based competition. It was hypothesized that finished goods inventory levels are inversely related to financial performance. While this relationship was not supported for the sample as a whole, it was supported in the subsample analyses. Specifically, the inverse relationship between

ARTICLE IN PRESS
C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx 9

finished goods inventory levels and financial performance was found for mass/MTO producers. These manufacturers keep their finished goods inventory levels low because they rely on production processes that produce on customer orders rather than on forecasted customer demand. Batch/ MTS producers, on the other hand, manufacture on overall forecasted demand. It is also possible that the influence of finished goods inventory level on financial performance is dependent on the role a manufacturer plays in a supply chain (e.g., contract manufacturer; original equipment manufacturer (OEM); assembler). For example, if a firm is a supplier to Dell, its finished goods inventory level might fluctuate based on Dells demand. This manufacturing firm can have strong financial performance because of customer loyalty attributable to a high degree of customer service (i.e., no stock outs); however, finished goods inventory and financial performance are unrelated. 7.1. Routes to performance Taken as a set, the above results mean that applied customer knowledge fully mediates the relationships between (1) MTO and financial performance and (2) routineness and financial performance. The total effect of MTO on financial performance was positive, significant, and indirect through applied customer knowledge. The same is true for the total effect of routineness on financial performance. Thus two routes to financial performance can be identified from our model: the first comprises enhanced MTO operating through applied customer knowledge and the second comprises enhanced production technology routineness operating through applied customer knowledge. This could be interpreted to mean that without customer knowledge input, neither MTO nor routineness affects performance. This can be explained by the resource-based theory of the firm that asserts that performance differences exist because of asymmetries in knowledge-based assets, e.g., applied customer knowledge (Grant, 1991; Kogut & Zander, 1992). Because of these two routes to performance, we decided to scrutinize a subgroup of mass customization manufacturers, characterized by enhanced MTO and enhanced routineness. We also looked at the other nontraditional combination, i.e., batch/MTS. 7.2. Exploring the MTS/non-routine and MTO/routine cases The exploratory component of the research provided some interesting findings. We divided the sample into firms using a predominantly MTO strategy versus a predominantly MTS strategy. Then we further divided the sample by routinenesspredominantly batch assembler or predominantly mass assembler. In both the mass/MTO and batch/MTS subgroups, applied customer knowledge significantly and positively relates to financial performance. Also in the mass/MTO case (i.e., mass customization),

finished goods inventory levels were negatively related to financial performance (as originally hypothesized, but not found in the SEM model). These results confirm empirically that for mass customization, as in the Dell case, applied customer knowledge and low inventory levels are the keys to financial performance. 7.3. Managerial implications Strategic change must inevitably be part of a process of adapting to a changing environment (Easton & Rothschild, 1987). Flexibilitythe ability of firms to respond effectively to changing circumstances (Gerwin, 1987)is a strategic option for firms. Flexibility involves the ability of a system to take on a variety of forms in terms of capabilities and the range of markets served (Easton & Rothschild, 1987). Flexibility also involves the ability to carry out different manufacturing processes and to offer a variety of products in order to obtain other performance benchmarks (DeToni & Tonchia, 1998). From a conventional viewpoint, a tradeoff exists between flexibility and efficiency. A flexible firm typically sacrifices functional specialization, product and process standardization, greater precision, and production volumes that permit more efficient operations (Easton & Rothschild, 1987). However, researchers have questioned the notion of a tradeoff between the two (Kotha, 1995), especially in the context of an organizational climate that nurtures learning and knowledge creation (Garvin, 1993; Kotha, 1995; Nonaka, 1994). Increased knowledge provides greater potential to change, which makes flexibility a competitive priority (DeToni & Tonchia, 1998). Managers that are steeped in the values and assumptions of high-volume, standardized production must be willing to unlearn (Hedberg, 1981), otherwise they will not see the strategic and marketing potential of applying customer knowledge (Gerwin, 1993). Managers can have both flexibility and efficiency by using customer knowledge to deal with market dynamism. Applying customer knowledge across the supply chain creates barriers to imitation by competitors and thus is a source of sustainable competitive advantage just as formidable as product innovation (or maybe even more formidable; Kotha, 1995). As firms respond to customers demands for more choices, competitors can replicate product innovations. Considering a firm like Dell, its future does not rely on product innovations such as faster chips or modemsit relies on greater streamlining of the flow of quality information, that is, applied knowledge (Schonfeld, 1998). Managers should be aware that there are avenues for obtaining competitive advantage by combining what are often considered conflicting production strategies and technologies. By applying customer knowledge at different stages of production, firms can customize products to meet customer demands while routinizing manufacture. Managers should consider several uses of mass customization (van

ARTICLE IN PRESS
10 C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx

Hoek, 2001): (1) modularize components to customize finished goods and services (e.g., Dells use of components to custom-build computers); (2) provide point-of-delivery customization (e.g., custom installation of computer hardware); (3) offer logistics support to sales and marketing incentive programs such as assembly of promotion displays or shelf management to assure availability (e.g., Newell Rubbermaids Phoenix Project; Boyle, 2002); and (4) offer customized logistics service levels (e.g., regionally targeted distribution). Each of these options involves customer knowledge applied somewhere in the value chain and some form of postponement in a manufacturing/logistics system. Postponement allows separate decision-making concerning customization versus speculative MTS manufacturing. This division frees a firm to focus on large economic runs of standard products or generic components and modules while customizing (van Hoek, 2001). Customer knowledge can be applied at the assembly stage, such as Dell does, or during the design and engineering stages of manufacturing. Not all customers want completely different things from a product: it would, in fact, be unprofitable for most firms to provide infinite choices on all product dimensions. The optimum for firms is to give customers the idea of boundless choices by concentrating on variety in product dimensions that might create a competitive advantage (Easton & Rothschild, 1987; Schonfeld, 1998). This is what Airbus Industrie does in its manufacture of whitetail aircraft. It provides variety on product dimensions customers want (e.g., seat configurations), and keeps other product dimensions standard (e.g., cockpits designed for use in more than one aircraft) (Hartley, 2004; Taylor, 2003). This enables Airbus to use custom technology with an MTS manufacturing strategy. The application of customer knowledge in various combinations of manufacturing strategies and production technologies provides flexibility that is far more likely to lead to enhanced product, and therefore market, opportunities. The benefits may include a reduction in risk, a decrease in susceptibility to current industry fads, an increase in product variety and production volume, a gain in experience, and the possibility of finding a market in which a firms product has a substantial competitive advantage (Easton & Rothschild, 1987; Pine, 1993). This is important because existing organizational routines deployed by firms to compete on time-based competition can obstruct a firms recognition of changes in a market and commit an organization to a course of action that does not fit with its environment (Kotha, 1995). Managers should realize that attempting to be all things to all people is not the idea behind flexibility. This results in competitive mediocrity, rather than competitive advantage (Kotha, 1995). Managers can, however, use various combinations of manufacturing strategies (ranging from MTS to MTO) and production technologies (ranging from custom/batch to mass) to create sustainable competitive advantage. The key is making these decisions

within the context of core applied knowledge about customers. 7.4. Limitations and further research We sampled relatively large manufacturing firms. It would be interesting to explore manufacturing strategy, production technology, knowledge, and performance in smaller firms. Different results may be found. For example, smaller firms may be more adept at combining conflicting manufacturing strategies and production technologies (e.g., mass assembly with MTO manufacturing or batch assembly with MTS manufacturing). We examined only one type of knowledgeapplied customer knowledge. There are other types of applied knowledge that may influence a firms performance. Firms can apply supplier or internal knowledge for example. Further research could examine the mediating effects of these knowledge types on the relationships among MTO/ MTS, routineness, and performance. In addition, there are other options to the performance measures we used. Objective measures or market-based performance (e.g., market share) could be investigated. The MTO measurement on the other hand, was an objective, one-item, openended scale that we did not correlate with other possible measurements of MTO; perhaps others could be developed. As in all studies, there are variables of potential interest that we did not study. It would be interesting to investigate the organizational structure of firms that are successfully using conflicting combinations of manufacturing strategies and production technologies. Are the successful firms more formalized, centralized, integrated, or specialized than those that are not as successful? Kothas (1995) findings suggest that centralization of the design and process engineering functions enables NBIC (a Japanese bicycle manufacturer) to introduce new products early and avoids the unnecessary product proliferation characteristic of its competitors. Perhaps centralizing customer knowledge at the point of application could help enhance performance. Further research could examine these relationships. The application of customer knowledge creates strategic flexibility for manufacturers, who then move toward customer-specification (and away from producer-specification) of products. This can establish stable, long-term relationships with customers, presumably creating barriers to switching and entry (Easton & Rothschild, 1987). Further research could investigate these relationships with customers and their influence on customer switching behavior and competitor entry behavior. In many industries options are limited and management does not have the strategic freedom to switch from one end of a manufacturing strategy continuum to another (e.g., from completely MTS to completely MTO). This lack of freedom is often the result of competition, customers, or internal inertia. For example, vehicle manufacturers are not known for their ability to easily absorb special orders from

ARTICLE IN PRESS
C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx 11

customers. Toyota, however, spent the last six years revamping its ordering, manufacturing, and distribution to move from a relatively high MTS strategy toward a more MTO strategy, thus making it easier for customers and dealers to make changes right before production (Fahey, 2004). It would be interesting to study one industry (such as vehicle manufacturing) to see how manufacturing strategy, applied customer knowledge, and performance relate to each other.

References
Boyle, Matthew (2002). Joe Gallis Army. Fortune, 146(13), 134 136, 138. Chase, Richard B., & Aquilano, Nicholas J. (1992). Production and operations management a life cycle approach. Homewood, IL Irwin. Claycomb, Cindy, Droge, Cornelia, & Germain, Richard (2002). Applied product quality knowledge and performance: Moderating effects of uncertainty. International Journal of Quality and Reliability Management, 19(6), 649 671. Collins, Neil (2001, September 21) Flights of Fancy at Airbus. Retrieved: November 10, 2003. Available at:http://www.telegraph.co.uk/money Demarest, Marc (1997). Understanding knowledge management. Long Range Planning, 30(3), 374 384. DeToni, A., & Tonchia, S. (1998). Manufacturing flexibility: A literature review. International Journal of Production Research, 36(6), 1587 1617. Duray, Rebecca (2002). Mass customization origins: Mass or custom manufacturing? International Journal of Operations and Production Management, 22(3), 314 328. Dryer, Jeffrey H., & Singh, Harbir (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660 679. Easton, Geoff, & Rothschild, R. (1987). The influence of product and production flexibility on marketing strategy. In Andrew M. Pettigrew (Ed.), The management of strategic change (pp. 300 326). Oxford Basil Blackwell. Fahey, Jonathan (2004). Just in time meets just right. Fortune, 174(1), 66 68. Frazier, Gary L., Spekman, Robert E., & ONeal, Charles (1988). Just-intime exchange relationships in industrial markets. Journal of Marketing, 52(4), 52 67. Garvin, David (1993, July August). Building a learning organization. Harvard Business Review, 71, 78 91. Germain, Richard, & Droge, Cornelia (1997). An empirical study of the impact of just-in-time task scope versus just-in-time workflow integration on organizational design. Decision Sciences, 28(3), 615 635. Gerwin, Donald (1987). An agenda for research on the flexibility of manufacturing processes. International Journal of Operations and Production Management, 7(1), 38 49. Gerwin, Donald (1993). Manufacturing flexibility: A strategic perspective. Management Science, 39(4), 395 410. Gold, Andrew H., Malhotra, Arvomd, & Segars, Albert H. (2001). Knowledge management: An organizational capabilities perspective. Journal of Management Information Systems, 18(1), 185 214. Grant, Robert M. (1991). The resource-based theory of competitive advantage: Implications for strategy formulation. California Management Review, 33(3), 114 135. Grant, Robert M. (1996). Prospering in dynamically competitive environments: Organizational capability as knowledge integration. Organization Science, 7(4), 375 387. Grant, Robert M., & Baden-Fuller, Charles (1995). A knowledge-based theory of inter-firm collaboration. Academy of management conference,

best paper proceedings (pp. 17 21). Vancouver, British Columbia, Canada Academy of Management. Hage, Jerald (1980). Theories of organizations: Form, process, and transformation. New York John Wiley & Sons. Hartley, Robert F. (2004). Airliner wars: Boeing vs. Airbus. Marketing mistakes and successes (ninth edition) (pp. 42 58). Hoboken, NJ John Wiley and Sons, Inc. Hedberg, Bo L. T. (1981). How organizations learn and unlearn. In P. C. Nystrom, & H. Starbuck (Eds.), Handbook of organizational design (pp. 3 27). New York, NY Oxford University Press. Hidding, Gezinus J., & Catterall, Shireen M. (1998). Anatomy of a learning organization: Turning knowledge into capital at Andersen Consulting. Knowledge and Process Management, 5(1), 3 13. Hitt, Michael A., Ireland, Duane R., & Lee, Houk (2000). Technological learning, knowledge management, firm growth and performance: An introductory essay. Journal of Engineering and Technology Management, 17(3/4), 231 246. James, Lawrence R., Demaree, Robert G., & Wolf, Gerrit (1993). rwg: An assessment of within-group interrater agreement. Journal of Applied Psychology, 78(2), 306 309. Joreskog, Karl G., & Sorbom, Dag (1993). LISREL 8: Users reference guide. Chicago, IL Scientific Software International. Khandwalla, Pradip N. (1974). Mass output orientation of operations technology and organizational structure. Administrative Science Quarterly, 19(1), 74 97. Kogut, Bruce, & Zander, Udo (1992). Knowledge of the firm, combinative capabilities, and the replication of technology. Organization Science, 3(3), 383 397. Kohli, Ajay K., & Jaworski, Bernard J. (1990). Market orientation: The construct, research propositions, and managerial implications. Journal of Marketing, 54(2), 1 18. Kotha, Suresh (1995). Mass customisation: Implementing the emerging paradigm for competitive advantage. Strategic Management Journal, 16, 21 42. Liebeskind, J. P. (1996). Knowledge, strategy, and the theory of the firm. Strategic Management Journal, 17(10), 93 108. Marucheck, A. S., & McClelland, M. K. (1986). Strategic issues in maketo-order manufacturing. Production and Inventory Management Journal, 27(2), 82 95. Miller, Chet C., Glick, William H., Wang, Yau-De, & Huber, George (1991). Understanding technology structure relationships: Theory development and meta-analytic theory testing. Academy of Management Journal, 34(2), 370 399. Miller, Danny (1991). Stale in the saddle: CEO tenure and the match between organization and environment. Management Science, 37(1), 34 52. Moorman, Christine, & Slotegraaf, Rebecca J. (1999). The contingency value of complementary capabilities in product development. Journal of Marketing Research, 36(2), 239 257. Narain, Rakesh R., Yadav, R. C., Sarkis, Joseph, & Cordeiro, James J. (2000). The strategic implications of flexibility in manufacturing systems. International Journal of Agile Manufacturing Systems, 2(3), 202 213. Narver, John C., & Slater, Stanley F. (1990). The effect of a market orientation on business profitability. Journal of Marketing, 54(4), 20 35. Nonaka, Ikujiro (1991, November December). The knowledge-creating company. Harvard Business Review, 69, 96 104. Nonaka, Ikujiro (1994). A dynamic theory of organizational knowledge creation. Organization Science, 5(1), 14 37. Pine, Joseph B. II (1993). Mass customization. Boston, MA Harvard Business School Press. Prahalad, C. K., & Hamel, Gary (1990). The core competence of the corporation. Harvard Business Review, 68(3), 79 91. Sakakibara, Sadao, Flynn, Barbara B., & Schroeder, Roger B. (1993). A framework and measurement instrument for just-in-time manufacturing. Production and Operations Management, 2(3), 177 194.

ARTICLE IN PRESS
12 C. Claycomb et al. / Industrial Marketing Management xx (2005) xxx xxx Shawnee, Vickery, Droge, Cornelia, & Germain, Richard (1999). The relationship between product customization and organizational structure. Journal of Operations Management, 17(4), 377 391. Walker Jr., Orville C., Boyd Jr., Harper W., & Larreche, Jean-Claude (1999). Marketing strategy planning and implementation. Boston, MA Irwin McGraw-Hill. Young, Greg, Sapienza, Harry, & Baumer, David (2003). The influence of flexibility in buyer seller relationships on the productivity of knowledge. Journal of Business Research, 56(6), 443 451. Yusuf, Y. Y., Adelye, E. O., & Sivayoganathan, K. (2003). Volume flexibility: The agile manufacturing conundrum. Management Decision, 41(7), 613 624. Cindy Claycomb obtained a Ph.D. from Oklahoma State University and is an associate professor of Marketing and Entrepreneurship and the Neff Family Fellow in Business at the W. Frank Barton School of Business at Witchita State University. Cornelia Droge obtained a Ph.D. from McGill University and is currently a professor in the Department of Marketing and Supply Chain Management at Michigan State University. Richard Germain obtained a Ph.D from Michigan State University and is the Challenge for Excellence Chair in Supply Chain Management in the Marketing Department at University of Louisville. Schonfeld, Erick (1998). The customized, digitized, have-it-your-way economy. Fortune, 138(6), 115 124. Serwer, Andrew (1997). Michael Dell turns the PC world inside out. Fortune, 136(5), 78 86. Spender, J. C. (1994). Organizational knowledge, collective practice and Penrosian rents. International Business Review, 3(4), 353 367. Spinello, Richard A. (1998). The knowledge chain. Business Horizons, 41(6), 4 12. Spring, Martin, & Dalrymple, John F. (2000). Product customisation and manufacturing strategy. International Journal of Operations and Production Management, 20(4), 441 467. Tan, Keah-Choon, Kannan, Vijay R., Handfield, Robert B., & Ghosh, Soumen (1999). Supply chain management: An empirical study of its impact on performance. International Journal of Operations and Production Management, 19(10), 1034 1052. Taylor, Alex III (2003). Lord of the air. Fortune, 148(10), 144 152. Teece, David J. (1998). Capturing value from knowledge assets: The new economy, markets for know-how, and intangible assets. California Management Review, 40(3), 55 79. Teece, David J., Pisano, Gary, & Shuen, Amy (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509 533. Tsubone, H., Ishikawa, Y., & Yamamoto, H. (2002). Production planning system for a combination of make-to-stock and make-to-order products. International Journal of Production Research, 40(18), 4835 4851. Van Hoek, R. I. (2001). The rediscovery of postponement a literature review and directions for research. Journal of Operations Management, 19(2), 161 184.