Operations Notes – Mass Customization

Mass production: producing products to prediction (“inside-out”)
Custom production: no production happens before an order is received; production as a response (“outside-in”)

Things to Expect from Mass Customization

• short product life cycles
• short product development cycles
• flexible production and low cost of variety
• low overhead and inventories
• high utilization of and investment in worker skills
• supplier interdependence
• quick response to changing customer desires
• affordable, high-quality, customized products

Benefits to a Firm

• less FGI
• can charge a premium
• source of competitive advantage
• more satisfied customers
• enhanced market research
• spill-over to other areas of the business

Benefits to a Customer

• fits your needs more closely
• prestige from being unique
• better satisfaction
• more utility
• lower search costs

Disadvantages to a Firm

• customization takes more work
• price premium
• higher parts inventory
• supply chain mgmt critical
• possibly higher investment needed

Disadvantages to a Customer

• has to wait longer
• price premium
• less returnable

Managing Complexity of Custom Production

• re-design the process to lower lead time
• decide where customization is needed
• focus on flexibility
• focus on change-over issues

Postponement

• understand where customer desires variety/choice
• design process to do this customization as late as possible
• keep the rest of the process highly automated