Re-Post: I have republished these articles to make them better accessible for search on the blog. This article has been published first in the Newsletter No. 1/2003.
What is mass customization? There is a wide variety of understandings and meanings of mass customization: "Extant literature has not established good conceptual bhttp://www.typepad.com/t/app/weblog/post?__mode=edit_entry&id=14888111&blog_id=202921
Previousoundaries for mass customization", state Duray et al. (2000, p. 606) after a literature review. The same is true for managers and consultants who use the term mass customization nowadays in many forms. In the following, I will share the points which are - from my perspective - the most important ones and which are characterizing the concept.
Just have a look at Google. Its (very helpful) glossary function gives the following definitions covering a broad range of perspectives and views on mass customization:
* Producing in volume, but at the same time giving each individual customer something different according to his or her unique needs. (http://www.winwinworld.net/Network/Glossary.htm)
* The process by which custom-designed products are offered to more consumers at ever lower prices. (http://www.preferredgroup.com/Glossary/m2.htm)
* A manufacturing environment in which many standardized components are combined to produce custom-made products to customer order. (http://highered.mcgraw-hill.com/sites/0072394668/student_view0/chapter2/glossary.html)
* Shorthand for high variability in marketing. Uses the power of the database to vary the marketing message - or the actual product - to fit the characteristics of an individual customer or prospect. (http://www.unitedwire.net/buzzwords/buzzdf01.htm)
* A highly streamlined and flexible approach to production that enables quick and efficient production of customized products and/or services at low cost and high volume. (http://www.risnews.com/glossary.htm)
* A powerful marketing tool that uses a database to tailor a marketing message or the actual product to fit the characteristics of each individual customer or prospect. (http://www.smartdm.com/index.cfm?nav=resources&menu=glossary)
So, what is mass customization? A marketing tool, a manufacturing strategy, an innovation process? Stan Davis, who coined the phrase in 1987, refers to mass customization when "the same large number of customers can be reached as in mass markets of the industrial economy, and simultaneously they can be treated individually as in the customized markets of pre-industrial economies" (Davis 1987, p. 169). In order to address the implementation issues of mass customization, Tseng and Jiao (2001) provide a working definition of mass customization that I find very useful. The objective of mass customization is "to deliver goods and services that meet individual customers' needs with near mass production efficiency".
This definition implies that the goal is to detect customers needs first and then to fulfill these needs with an efficiency that almost equals that of mass production. Often this definition is supplemented by the requirement that the individualized goods do not carry the price premiums connected traditionally with (craft) customization (e.g., Pine uses this definition in his 1993 classic book).
However, mass customization practice shows that consumers are frequently willing to pay a (sometimes huge) premium for customization to reflect the added value of customer satisfaction due to an individualized solution, i.e. the increment of utility customers gain from a product that better fits to their needs than the best standard product attainable (Chamberlin 1962; Du and Tseng 1999).
I consider the value of a solution for the individual customer as the defining element of mass customization. A mass customizer recognizes that customers have alternatives of choice which are reflected through their purchasing decisions: Customers can either choose
* mass customized goods which provide better fit,
* compromise and buy a standard product of lesser fit (and price),
* or purchase a truly customized product with excess features but also at a higher price.
Thus, value reflects the price customers are willing to pay for the increase in satisfaction resulting from the better fit of a (customized) solution for their requirements. Mass customization is only applicable to those products for which the value of customization, to the extent that customers are willing to pay for it, exceeds the cost of customizing (Piller 2003; Tseng/Piller 2003). This implies, that - even while the price of a to-be-customized product may increase - the same group of customers that before was buying a standard (mass) product is now heading towards customized products. Mass customization does not imply a change of market segments as usual its is often the case with (traditionally craft) customized products.
An important indicator of the extent of value being created is the level of customization. Within the EuroShoe project, a large scale European project dedicated to mass customization in the footwear industry (see http://www.euro-shoe.net), the following structure was developed in relation to footwear customization. However, it can be easily transferred to other products.
Customization can be carried out with regard to fit, style, and functionality. In the case of a shoe, fit is mostly defined by its last, but also by the design of the upper, insole and outsole etc. Style is the option to influence the aesthetic design of the product, i.e. colors of the leathers or patterns. A shoe's functionality can be defined by its cushioning, form of heels, structure of cleats (e.g., for sport shoes).
In the case of cereal, these options could be translated into package size (fit), taste (no chocolate and raisins, many strawberries), and nutrition (vitamins, special fibers).
Taking these options, there are three major approaches for delivering customization (at the example of footwear):
* Style Customization: Based on standard lasts (and sizes) customers can choose options of the style (colors, fabrics, applications) within constraints set by the manufacturer.
* Best (Matched) Fit: The feet of each individual customer are examined (by the means of a foot scan or in combination with biomechanical data) and used to match the customer's feet to an existing library of lasts, insoles and soles with a much higher granularity than in today's mass production and retail systems. Additionally, style customization may be possible to a specific extent.
* Custom-Fit: Feet of each individual customer are examined (foot scan and biomechanical data), his/her specific habits are analyzed and used to make an individual last, insole and sole for each customer. Additional, style customization may be possible to a specific extent. Shoes and lasts can only be produced when an order is placed by an end-consumer.
The difference between these approaches is not only the possible degree to address the needs of a specific customers (and, thus, the possibility to create additional value), but also the degree of complexity when manufacturing the product. Obviously, matching a foot to an existing last is much less complex than crafting the last for each individual customer (note: the complexity issue is also important from the customers' perspective as an article below discusses). Here, the divergence between mass customization and (craft) customization is based. The competitive advantage of mass customization is based on combining the efficiency of mass production (stable proceses) with the differentiation possibilities of customization.
Doing so, mass customization is performed on four levels (see the Figure ( only in PDF version)).
While the differentiation level of mass customization is based on the additional utility (value) customers gain from a product or service that corresponds better to their needs, the cost level demands that this can be done at total costs that will not lead to such a price increase that the customization process implies a switch of market segments (Piller 2003). The information collected in the course of individualization serves to build up a lasting individual relationship with each customer and, thus, to increase customer loyalty (relationship level).
While the first three levels have a customer centric perspective, a fourth level takes an internal view and relates to the fulfillment system of a mass customizing firm: Mass customization operations are performed in a fixed solution space that represents "the pre-existing capability and degrees of freedom built into a given manufacturer's production system" (von Hippel 2001).
Correspondingly, a successful mass customization system is characterized by stable but still flexible and responsive processes that provide a dynamic flow of products (Pine 1995). While a traditional (craft) customizer re-invents not only its products but also its processes for each individual customer, a mass customizer uses stable processes to deliver high variety goods.
A main enabler of stable processes is to modularize goods and services. This provides the capability to efficiently deliver individual modules of customer value within the structure of the modular architecture. Setting the solution space becomes one of the foremost competitive challenges of a mass customization company. Taking again the example of custom shoes, a "custom fit" solution for mass customization would be based on stable processes to transfer a customer's foot into a last (today, e.g., by automating the transfer of a 3D-scan into a CAD form, and transferring this model to a flexible milling robot making the last) and adopting a selected model to this last, while a traditional shoe maker needs several steps of measurement and refinement ("trial and error") to build a customer specific last.
What is mass customization? I think the phrase is, first of all, a vision. A vision to perform a company's processes truly customer centric, resulting in products or services which are corresponding to the needs and desires of each individual customer, and doing this without the surpluses traditionally connected with customization. However, in the end it seems to be paradoxically to find a standard definition of mass customization, of a concept that refers to address individuality. But make sure that you have a strong understanding what you personally mean when using the term.
References:
* Chamberlin, E.H. The Theory of Monopolistic Competition, 8. ed., Cambridge: Harvard University Press 1962.
* Davis, S. Future Perfect, Reading: Addison-Wesley 1987.
* Du, X. and Tseng, M.M. Characterizing Customer Value for Product Customization, Proceedings of the 1999 ASME Design Engineering Technical Conference, Las Vegas 1999.
* Duray, R. et al. Approaches to Mass Customization: Configurations and Empirical Validation, Journal of Operations Managements, 18 (2000), pp. 605-625.
* Piller, F. Mass Customization, 3rd edition, Wiesbaden: Gabler: 2003.
* Pine, B.J. Mass Customization, Boston: Harvard Business School Press, 1993.
* Pine , B.J. Challenges to Total Quality Management in Manufacturing, in J.W. Cortada and J.A. Woods: The Quality Yearbook 1995, New York: McGraw-Hill, 1995, pp. 69-75.
* Tseng, M.M. and Jiao, J. Mass Customization, in G. Salvendy (Ed.) Handbook of Industrial Engineering, 3rd edition, New York: Wiley, 2001, pp. 684-709.
* Tseng, M.M. and Piller, F. Towards the customer centric enterprise, in M. Tseng and F. Piller (Ed.) The customer centric enterprise: advances in mass customization and personalization, New York et al: Springer, 2003, pp. 1-27.
* Von Hippel, E. Perspective: User Toolkits for Innovation, The Journal of Product Innovation Management, 18 (2001), pp. 247-257.
Acknowledgment: The text above is taken in part from a chapter I co-authored with Mitchell Tseng, HKUST, for the upcoming book "The customer centric enterprise: Advances in mass customization and personalization" (published at Springer in June 2003).
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