The other day, an executive asked me “at what revenue leveldoes it make sense to adopt mass customization to improve business execution?” From the perspective of manufacturingproducts, it is one thing to be a “customizer” and quite another to be a “masscustomizer.” Here’s how business leaders need to think about this issue.
It is possible to produce customized products withinefficiencies that only grow as revenue and product variety increase. The level at which a company performance “hitsthe wall” can vary greatly starting at $10, $20 or $50 million revenue level ora revenue level 10 or 20 times these amounts.If a manufacturer knows that revenue and product variety will onlyincrease over time, the best practice is to proactively address the situation byembracing mass customization.
Leaders in manufacturing companies need to understand a few keythoughts about “mass customization:”
- “Mass customization” is a business paradigm forproducing customized products based on a specific customer order with the same efficiencyas a mass-produced product.
- A mass customized product is driven by customer requirementsbased on previously rationalized product features and options. Products are onlyproduced for a specific customer order, not for a marketplace or for finishedgoods inventory.
- Mass customization—an organizing principle formanufacturing companies—can be applied to manufacturers producing customizedproducts 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 simplybecause they produce customized products.
Here are some important signs indicating the need foradopting mass customization:
- Company profits erode as demand for customizedorder configurations increases.
- Customers presently cannot see first-hand whatorder configuration possibilities exist.
- Customers learn after they’ve placed orders thattheir order cannot be produced.
- Manufacturers end up giving away features andoptions just to make orders complete.
- Engineering is mission critical to validatingorder configurations and supporting production.
- When it comes to expert knowledge about whatorder configurations can be produced and how they can be produced, themanufacturer is people-dependent rather than process-dependent.
- There is no central repository of expertknowledge about what product configurations can be produced that is shared withthose quoting and selling products that aligns with the understanding atheadquarters.
- There is no business process owner for makingdecisions about and managing the addition of new features and options into the offerings.
- There is an in-house process bottleneck in termsof validating order configurations.
- Customer deliveries are often late based oncustomer 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 andforth rework loops rather than steady, forward progress.
It is always preferable to initiate a mass customizationtransformation to ameliorate the operational and financial challengesassociated with product configurability before a leadership team is forced toreact to it. I’ve yet to have a clientwho has done that. Most wait until the pain is excruciating.
I’d love to hear what youthink about this.
Dave Gardner is a management consultant, speaker,author of Mass Customization: An Enterprise-Wide BusinessStrategy and blogger who resides in Silicon Valley.He helps his clients conquer the challenges that plague manufacturers ofconfigurable products. He can be reachedthrough his website at www.mass-customization-expert.com.