INTRODUCTION TO MASS CUSTOMIZATION

1. INTRODUCTION

With the increasing competition in the global market, the manufacturing industry has been facing the challenge of increasing customer value. Much has been done to reduce costs and improve quality. Quality does not mean only conforming to specifications. More importantly, quality means ensuring customer satisfaction and enhancing customer value to the extent that customers are willing to pay for the goods and services. To this end, a well-accepted practice in both academia and industry is the exploration of flexibility in modern manufacturing systems to provide quick response to customers with new products catering to a particular spectrum of customer needs. Consequently, there is a growing trend toward increasing product variety, as evident in supermarkets. Various food and bev- erage companies are fighting for shelf space to display the explosive growth of product varieties. Rapidly changing design and product technologies further accentuate this trend. The key to success in the highly competitive manufacturing enterprise often is the company’s ability to design, produce, and market high-quality products within a short time frame and at a price that customers are willing to pay. These counterdemands for final products create enormous productivity challenges that threaten the very survival of manufacturing companies. In addition, increasingly high labor and land costs often put developed countries or regions at a disadvantage in attracting manufacturing plants com- paring with neighboring developing countries. In order to meet these pragmatic and highly compet- itive needs of today’s industries, it is imperative to promote high-value-added products and services (Ryan 1996). It was reported that 9 out of 10 bar code scanner vendors were planning to repack- age their product offerings in 1997 to include a larger scope of value-added features and pursue application-specific solution opportunities (Rezendes 1997).

This chapter discusses the opportunities brought by mass customization for high-value-added products and services. Mass customization enhances profitability through a synergy of increasing customer-perceived values and reducing the costs of production and logistics. Therefore, mass cus- tomization inherently makes high-value-added products and services possible through premium profits derived from customized products. The chapter also introduces techniques of integrating product life- cycle concerns in terms of how to connect customer needs proactively with the capabilities of a manufacturer or service provider during the product-development process. Major technical challenges of mass customization are also summarized.

Concept Implication

Mass customization is defined here as ‘‘producing goods and services to meet individual customer’s needs with near mass production efficiency’’ (Tseng and Jiao 1996). The concept of mass customi- zation was anticipated by Toffler (1971) and the term was coined by Davis (1987). Pine (1993) documented its place in the continuum of industrial development and mapped out the management implications for firms that decide to adopt it. Mass customization is a new paradigm for industries to provide products and services that best serve customer needs while maintaining near-mass pro- duction efficiency. Figure 1 illustrates the economic implications of mass customization (Tseng and Jiao 1996). Traditionally, mass production demonstrates an advantage in high-volume production, where the actual volume can defray the costs of huge investments in equipment, tooling, engineering, and training. On the other hand, satisfying each individual customer’s needs can often be translated into higher value, in which, however, low production volume is unavoidable and thus may lend itself to becoming economically not viable. Accommodating companies to garner economy of scale through repetitions, mass customization is therefore capable of reducing costs and lead time. As a result, mass customization can achieve higher margins and thus be more advantageous. With the increasing flexibility built into modern manufacturing systems and programmability in computing and com- munication technologies, companies with low to medium production volumes can gain an edge over competitors by implementing mass customization.

In reality, customers are often willing to pay premium price for their unique requirements being satisfied, thus giving companies bonus profits (Roberts and Meyer 1991). From an economic per- spective, mass customization enables a better match between the producers’ capabilities and customer needs. This is accomplished through either developing the company’s portfolio, which includes prod-

ucts, services, equipment, and skills, in response to market demands, or leading customers to the total capability of the company so that customers are better served. The end results are conducive to improvement in resources utilization. Mass customization also has several significant ramifications in business. It can potentially develop customer loyalty, propel company growth, and increase market share by widening the product range (Pine 1993).

Technical Challenges

The essence of mass customization lies in the product and service providers’ ability to perceive and capture latent market niches and subsequently develop technical capabilities to meet the diverse needs of target customers. Perceiving latent market niches requires the exploration of customer needs. To encapsulate the needs of target customer groups means to emulate existing or potential competitors in quality, cost, quick response. Keeping the manufacturing cost low necessitates economy of scale and development of appropriate production capabilities. Therefore, the requirements of mass custom- ization depend on three aspects: time-to-market (quick responsiveness), variety (customization), and economy of scale (volume production efficiency). In other words, successful mass customization depends on a balance of three elements: features, cost, and schedule. In order to achieve this balance, three major technical challenges are identified as follows.

Maximizing Reusability

Maximal amounts of repetition are essential to achieve the efficiency of mass production, as well as efficiencies in sales, marketing, and logistics. This can be attained through maximizing commonality in design, which leads to reusable tools, equipment, and expertise in subsequent manufacturing. From a commercial viewpoint, mass customization provides diverse finished products that can be enjoyed uniquely by different customers. Customization emphasizes the differentiation among products. An important step towards this goal will be the development and proliferation of design repositories that are capable of creating various customized products. This product proliferation naturally results in the continuous accretion of varieties and thus engenders design variations and process changeovers, which seemingly contradict the pursuit of low cost and high efficiency of mass production. Such a setup presents manufacturers with a challenge of ensuring ‘‘dynamic stability’’ (Boynton and Bart 1991), which means that a firm can serve the widest range of customers and changing product demands while building upon existing process capabilities, experience, and knowledge. Due to sim- ilarity over product lines or among a group of customized products, reusability suggests itself as a natural technique to facilitate increasingly efficient and cost-effective product realization. Maximizing reusability across internal modules, tools, knowledge, processes, components, and so on means that the advantages of low costs and mass production efficiency can be expected to maintain the integrity of the product portfolio and the continuity of the infrastructure. This is particularly true in savings resulting from leveraging downstream investments in the product life cycle, such as existing design capabilities and manufacturing facilities.

Although commonality and modularity have been important design practices, these issues are usually emphasized for the purpose of physical design or manufacturing convenience. To achieve mass customization, the synergy of commonality and modularity needs to be tackled starting from the functional domain characterized by customer needs or functional requirements, and needs to encompass both the physical and process domains of design (Suh 1990). In that way, the reusability of both design and process capabilities can be explored with respect to repetitions in customer needs related to specific market niches.

Product Platform

The importance of product development for corporate success has been well recognized (Meyer and Utterback 1993; Roberts and Meyer 1991). The effectiveness of a firm’s new product generation lies in (1) its ability to create a continuous stream of successful new products over an extended period of time and (2) the attractiveness of these products to the target market niches. Therefore, the essence of mass customization is to maximize such a match of internal capabilities with external market needs.

Towards this end, a product platform is impelled to provide the necessary taxonomy for posi- tioning different products and the underpinning structure describing the interrelationships between various products with respect to customer requirements, competition information, and fulfillment processes. A product platform in a firm implicates two aspects: to represent the entire product port- folio, including both existing products and proactively anticipated ones, by characterizing various perceived customer needs, and to incorporate proven designs, materials, and process technologies.

In terms of mass customization, a product platform provides the technical basis for catering to customization, managing variety, and leveraging existing capabilities. Essentially, the product plat- form captures and utilizes reusability underlying product families and serves as a repertoire of knowl- edge bases for different products. It also prevents variant product proliferation for the same set of customer requirements. The formulation of product platform involves inputs from design concepts,

process capabilities, skills, technological trends, and competitive directions, along with recognized customer requirements.

Integrated Product Life Cycle

Mass customization starts from understanding customers’ individual requirements and ends with a fulfillment process targeting each particular customer. The achievement of time-to-market through telescoping lead times depends on the integration of the entire product-development process, from customer needs to product delivery. Boundary expansion and concurrency become the key to the integration of the product development life cycle from an organizational perspective. To this end, the scope of the design process has to be extended to include sales and service.

On the other hand, product realization should simultaneously satisfy various product life cycle concerns, including functionality, cost, schedule, reliability, manufacturability, marketability, and serv- iceability, to name but a few. The main challenge for today’s design methodologies is to support these multiple viewpoints to accommodate different modeling paradigms within a single, coherent, and integrated framework (Subrahmanian et al. 1991).

In other words, the realization of mass customization requires not only integration across the product development horizon, but also the provision of a context-coherent integration of various viewpoints of product life cycle. It is necessary to employ suitable product platforms with unified product and product family structure models serving as integration mechanisms for the common understanding of general construction of products, thereby improving communication and consistency among different aspects of product life cycle.