The other day, an executive asked me "at what revenue level does it make sense to adopt mass customization to improve business execution?" From the perspective of manufacturing products, it is one thing to be a "customizer" and quite another to be a "mass customizer." Here’s how business leaders need to think about this issue.
It is possible to produce customized products with inefficiencies that only grow as revenue and product variety increase. The level at which a company performance "hits the wall" can vary greatly starting at $10, $20 or $50 million revenue level or a revenue level 10 or 20 times these amounts. If a manufacturer knows that revenue and product variety will only increase over time, the best practice is to proactively address the situation by embracing mass customization.
Leaders in manufacturing companies need to understand a few key thoughts about "mass customization:"
- "Mass customization" is a business paradigm for producing customized products based on a specific customer order with the same efficiency as a mass-produced product.
- A mass customized product is driven by customer requirements based on previously rationalized product features and options. Products are only produced for a specific customer order, not for a marketplace or for finished goods inventory.
- Mass customization—an organizing principle for manufacturing companies—can be applied to manufacturers producing customized products under the engineer to order, configure to order, assemble to order, build to order, and make to order business paradigms.
- A manufacturer is not a mass customizer simply because they produce customized products.
Here are some important signs indicating the need for adopting mass customization:
- Company profits erode as demand for customized order configurations increases.
- Customers presently cannot see first-hand what order configuration possibilities exist.
- Customers learn after they’ve placed orders that their order cannot be produced.
- Manufacturers end up giving away features and options just to make orders complete.
- Engineering is mission critical to validating order configurations and supporting production.
- When it comes to expert knowledge about what order configurations can be produced and how they can be produced, the manufacturer is people-dependent rather than process-dependent.
- There is no central repository of expert knowledge about what product configurations can be produced that is shared with those quoting and selling products that aligns with the understanding at headquarters.
- There is no business process owner for making decisions about and managing the addition of new features and options into the offerings.
- There is an in-house process bottleneck in terms of validating order configurations.
- Customer deliveries are often late based on customer expectations by days, weeks or months.
- After receipt of an order, there is no "seamlessness" to the process of producing the order—there are many back and forth rework loops rather than steady, forward progress.
It is always preferable to initiate a mass customization transformation to ameliorate the operational and financial challenges associated with product configurability before a leadership team is forced to react to it. I’ve yet to have a client who has done that. Most wait until the pain is excruciating.
I’d love to hear what you think about this.
Dave Gardner is a management consultant, speaker, author of Mass Customization: An Enterprise-Wide Business Strategy and blogger who resides in Silicon Valley. He helps his clients conquer the challenges that plague manufacturers of configurable products. He can be reached through his website at www.mass-customization-expert.com.