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Mass Customization
Mass Customization
MASS CUSTOMIZATION
PREPARED BY:
RAUL LEYTE-VIDAL
Mass customization is, according to Joseph Pine “the development, production, and
delivery of customized products and services on a mass basis”. In order to keep afloat of
narrowing market niches, many organizations are adapting their capabilities to release
(BTO) replaces the make-to-stock (MTS) approach many companies follow. For this
product and option selection must be carefully modeled in order to capture the customer’s
needs without straining the organization’s core manufacturing capabilities. Many firms
use the concept of building smaller subsystems, designed independently, that are able to
function properly when assembled. In order to reach this level, organizations must create
standardized parts, thus reducing duplicates, and increasing the flexibility of use among
different product lines. Configuration systems thereby represent the crucial interactive
customer satisfaction and loyalty, as well as high manufacturing costs and poor quality.
Mass customization success depends not only on the configuration system, but on making
delivery chains. An example of this can be seen in the rental car business where they
upgrade to higher end vehicles if the requested one is unavailable. The demand of certain
un-stocked items has evolved into a process called downward substitution, where a
higher functionality item may be substituted for a lower one if the lower end item is not
available. Mass customization overall success is based on creating variety and
customization through flexibility and quick responsiveness. Mass customization shifts the
focus from the product’s price, to buying on satisfied needs and wants at a competitive
and affordable price. Companies that focus on mass customization fragment the market
through economies of scope, in contrast to mass producers who seek to reduce choice
Mass customization provides benefits as higher profits can be seen because comparative
shopping is more difficult and the customers’ focus shifts from price to benefits and when
properly implemented could augment not only the company's performance on price and
According to Joseph Pines, in his book Mass Customization: The New Frontier in
Business Competition, explains that there are four types of mass customization. The first
individual customers to determine the precise product offering that best serves the
customer’s needs. This information is then used to specify and manufacture a product that
suits a specific consumer. The next type is called Adaptive customization, which is when
firms produce a standard product, but this product is customizable in the hands of the end
user. The other one is Transparent customization, where firms provide consumers with
unique products, without explicitly telling them that the product is customized, and
finally, the Cosmetic customization approach, where firms produce standardized physical
products, but sell and market them to different customers in unique ways.
The primary challenges using mass customization include an increased complexity and
uncertainty in business operations, which result in higher operational costs. A higher level
of product customization, in return requires greater product variety, which involves a
greater number of parts, processes, suppliers, retailers, and distribution channels. A direct
This increase in system complexity can drive the operational cost up even more due to
more complex planning, resource usage, more complex production setups, use of
inventory, and higher distribution costs become more spread throughout the supply chain.
Moreover, there is a sizeable increase in costs to support the customer co-design interface
via a Web site or in a physical store. These additional expenses can be counterbalanced
by a number of new profit or cost saving potentials. First, customers are many times
willing to pay a premium for customization, to an extent. Second, a well planned and
and Tseng there are mechanisms to reduce cost and time, mainly referred to as delayed
product differentiation (DPD), which partitions the supply chain into two stages: a
standardized portion of the product is made during the first stage, while the differentiated
portion is made in the second stage. The success of these mechanism is directly related to
the fact that most companies offer a portfolio of product that consists of families of
closely related products that differ from each other in a limited number of features. In the
auto industry for example, a standard version of a car is partially equipped, however
dealer ships can install options based on specific customer requests at a competitive
premium.
customization, is an integral feature of mass customization and one that extends this
and aligns the customer with the company’s strategic goals. The information acquired
during this process allows firms to cut back on fixed costs necessary to maintain a high
level of operational flexibility. This knowledge may lead to reduced or eliminated need
for forecasting product demand, reduced product return, reduced obsolescence, and field
failure costs.
Another method of mass customization is the use of partial standardization, where firms
offer customers a limited number of options to choose from while keeping their product
mostly standardized. Alienware Corporation, a small computer firm that has recently
merged with Dell computers uses this approach. When ordering from Alienware, a
customer may select a standardized system but may also purchase it by selecting from
different options. For example, when buying a laptop computer, the customer may select
from several types of processors, memory, or video cards as well as other similar options
for all the other specifications of the system. All at different specific prices so that
customers may select options according to their specific needs. This type of
The main benefits encountered by using this approach are an increased customer
conducted by Ahlstrom and Westbrook, it was recorded that the benefits companies
experienced with mass customization were related more to the customers and market
impact than profit and cost factors; However, they also encountered some disadvantages
including increased material cost and manufacturing cost, lower on-time deliveries,
supplier delivery performance, increase in order response time, and reduction in product
quality. Apparently most of these disadvantages were cost related. Although cost could be
premium cost that the production system incurs for including the flexibility of
customization, and sacrificing some degree of cost efficiency that usually is associated
with standardization. Furthermore, the production process at most companies may not
have fully evolved into a mass-customizing one, but continues to produce batches of
standardized products.
economy, some difficulties have been experienced with the implementation of mass
customization practices, and they acknowledge that this has also contributed to Toyota's
lower profits and declining competitive strength. Toyota executives discovered the hard
way that mass customization is clearly different from continuous improvement and was
an unfamiliar way of doing business for them. They found out that both continuous
values, management roles and systems, learning and training techniques, and customer
relations. Therefore, implementing mass customization was proving for them more costly
and more difficult than what they expected resulting in a weaker competitive position and
declining profits. Although mass customization appears to have some disadvantages, the
benefits that a company enjoys from its use seem to far outweigh the negatives. To
need to change their structure to fit the progression from standardization toward mass
that are adaptable to the changing environment and tailored to specifically meet the
customer demands/expectations are more likely to be effective. Dell for example has
eliminated any intermediaries in its production chain and interacts directly with its
customers especially via the internet. This eliminates the need to use the expensive
salespeople and/or wholesalers, retailers, and middlemen thus making the whole
marketing within the firm needs to be developed; internal and external flexibility should
be enhanced; and the integration of the entire information technology and support system
must be strengthened.
customization. Ahlstrom and Westbrook found that the three top methods used by
of stock, and assembly of core modules. The production factory is considered the heart of
the business; operations should work together with other functions in the firm to provide
products and services that anticipate and respond specifically to customers' needs.
The product nature also impacts the degree of mass customization. Some products and
markets may not be appropriate for such mass customization changes. Customers of
commodity products like oil, gas, and wheat for example may not expect product
differentiation. Also, some other products and markets especially in public utilities and
rules and regulations may prohibit any form of variations from a standardized product.
Electricity and water supplies, for example, cannot be offered on a customized basis to
customers for obvious reasons in that the high risks to human life and safety may be
avoided.
In addition, a quick integration and instantaneous production and delivery to customer are
essential for effective mass customization. Companies use specific software and the
internet to quickly record customer needs and specifications; then they use their
production and operations to change these into customized product designs and
processes; and integrate all these to produce the final product and service, which are then
delivered to the customers as soon as possible and often within few days of receiving the
order. The whole process of mass customization from initial order receiving to final
product delivery should be smoothly coordinated and integrated with very little friction to
be effectively implemented.
factory, the whole production system must add as little as possible to the cost of
production of the product or service. Dell, for example, has a very low expense operating
ratio of about nine percent which makes it extremely cost-effective for the company and
also contributes to its profitability. Finding other ways to lower the cost of production and
design and production of the product are based on the appropriate combination of
in various options for each module. The best illustration of modularity may be seen in
Lego's toys where various pieces or components may be fit together in a variety of shapes
and forms and these may be changed several times to fit the customized preferences. The
personal computer manufacturer offers the modularity feature in terms of memory size,
processor speed, video card, hard disk size, and peripherals, and customers may select
from a variety of options for each of these modules. Similarly, a modular process causes a
product to go through a specific set of operations and enables the storage of inventory in
semi-finished form; and products differ from one another based on the types of operations
Mass customizers need to automate as many tasks as possible to make use of the benefits
of automation and standardization. Also, the links between modules must be automated
and the activities of integrating people and tools to perform them must be integrated
technology related resources must all be integrated to ensure that the company uses the
right resources to serve and satisfy its customers' unique and specific needs/wants.
between the firm and its customers. By being in constant touch with its customers, the
firm can find out what its customers specifically need and produce products and services
to meet these needs and deliver them quickly and efficiently. This is an important key
factor for the mass customization success. Without strong customer relations, a firm
cannot effectively meet customers' demands and implement the mass customization
strategy. All of the firm's activities should be coordinated to focus on and achieve close
Overall when firms that used mass customization were evaluated in terms of financial
investments, and profit margins than their counterparts that did not use mass
customization. Successful mass customizing firms may continually use and transfer the
valuable information into the organization's knowledge base as well as adapt and
customize to customers' needs. Therefore, with the focus on these eight strategies
effectively implemented, mass customization clearly would benefit the firm in terms of
overall and financial performance over the years provides an excellent corroboration to
this point.
Customization may also lead to new complexity from the customer perspective. More
customization does not necessarily mean greater delight, and therefore greater value, for
the customer. Customer satisfaction may not only plateau after a certain customization
level of the product, it may decrease because of the frustration a customer feels due to
excessive choice or variety. Setting the right degree of customization and carefully
selecting the options for customization are crucial for mass customization success.
Finally and perhaps most important, mass customization demands strong change
management capabilities. Business managers and their employees often get accustomed
to a dominant logic that is shaped by the attitudes, behaviors, and assumptions they have
witnessed in their environments for a long time. Today, the thinking of many managers is
conditioned by managerial routines, systems, and incentives created under the mass
production framework. Firms must begin at the level of normative management with the
challenge to change the old and adversarial perceptions of the customers and develop an
management. Combining the two opposite terms of mass production and customization
used to appear virtually impossible; however, today it is not an oxymoron but a clear
reality. Several major firms including Dell, Motorola, General Motors, Toyota, Hewlett-
Packard and others are actively using mass customization in their production. Models to
show the operational strategies that facilitate the mass customization process and the
presented. Due to its widespread use among many major production companies and the
strong contribution it makes toward a firm's overall performance and success, this unique
production trend mass customization will continue to dominate production and operations
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