Mass Customization

Mass Customization Prepared for „Infotech Applications in Marketing‟ Group, University of Delaware, 31 October 2005 Donal Reddington, Editor, MadeForOne.com Introduction       Mass Customization – How it evolved Significant Events in Development of MC Types of Mass Customization Examples – Manufacturing and Services Future Developments MadeForOne.com – Story of MC News website Copyright MadeForOne.com 2005 31 October 2005 Mass Customization – How It Evolved (1)  Middle Ages – Craft Production   Master Craftsmen and Apprentices One off products, high labour content, expensive Movement of people off land to towns and cities Sub-division of work  loss of traditional skills Copyright MadeForOne.com 2005  18th Century – Industrial Revolution   31 October 2005 Mass Customization – How it evolved (2)  United States – Industrial Development started later, from mid-19th Century     Industrial workers had greater skills More use of these skills in U.S. factories Greater innovation – Colt weapons company developed standardised parts to assist battlefield repairs Development of mass production in early 20th Century  U.S. becomes global power Copyright MadeForOne.com 2005 31 October 2005 Mass Production to Mass Customization (1)  Mass Production – example: Ford     Division of work Low variety of output – „any colour as long as it‟s black‟ Constantly rising volume sales, and lower input costs = lower prices (economies of scale) OK in permanently expanding economy with favourable demographics Copyright MadeForOne.com 2005 31 October 2005 Mass Production to Mass Customization (2)      1970‟s – Slowing Economy – Rising Oil Prices Need for alternative approach 1970‟s-1980‟s – Increasing competition within U.S. market from outside countries, esp. Japan Late 80‟s-early 90‟s: Literature proposing MC Development of internet (esp. product configuration systems) in mid-1990‟s opens door to widespread use of Mass Customization Copyright MadeForOne.com 2005 31 October 2005 Significant Literature  1970 – Alvin Toffler: „Future Shock‟  “Consumers and producers working together” = “Prosumers” First use of the term „Mass Customization‟  1987 – Stan Davis: „Future Perfect‟   1991 – B. Joseph Pine: Mass Customization – The New Frontier in Business Competition  First detailed description of mass customization concept – replace economies of scale with ‘Economies of Scope’. Copyright MadeForOne.com 2005 31 October 2005 Types of Mass Customization (1)  The Four Faces of Mass Customization –   Joseph Pine and James Gilmore - Jan.-Feb. 1997 Harvard Business Review 1. Collaborative Customization:   Consumer and producer engage in a dialogue to determine customer requirements Computers, clothing and footwear, furniture, some services Product is designed so that users can alter it themselves to fit unique requirements on different occasions High-end office chairs, R7 golf club, certain electronic devices Copyright MadeForOne.com 2005  2. Adaptive Customization:   31 October 2005 Types of Mass Customization (2)  3. Cosmetic Customization:    Product is unique in appearance only Customer‟s chosen text or image on T-shirts, mouse mats, baseball caps, mugs etc. Also called „Personalization‟  4. Transparent Customization:    Producer provides customized product without consumer being necessarily being aware that it has been customized Can be used when consumer‟s needs are predictable or can be easily deduced, and when customers do not want their requirements repeated. Example- repeat orders for customized clothing, chemicals Copyright MadeForOne.com 2005 31 October 2005 True Mass Customization  True Mass Customization requires:   System for customer to specify requirements easily e.g. online ordering, call center Advanced manufacturing systems  Enable economies of scope (keep cost and price low) product is not made until order is received (Book: Build to Order and Mass Customization – David M. Anderson)  Build-to-order approach   Minimum order quantity of one 31 October 2005 Copyright MadeForOne.com 2005 Advantages of MC       Customer has control over product Does not have to pay for features he/she does not want (computers etc.) „Not in your size‟ becomes a thing of the past Company does not have finished product inventory  better use of working capital Easier for company to differentiate product Levels out economic fluctuations    When slowdown occurs, less backlog of inventory Prices do not have to be cut as much Therefore, less likelihood of recession Copyright MadeForOne.com 2005 31 October 2005 What Mass Customization Isn‟t  Massive Product Variety – Customer has Choice but not Control;  E.g. „Personalize your cellphone with any of our 2000 skins‟ Example: Well known snowboard maker – customer can specify exact requirements online but boards are handmade Use of knowledge about customer to personalize marketing of standard products. Data gathered from loyalty schemes, etc.  Advanced ordering system linked to craft production;   Personalization or mass customization of Marketing:    Customized products with minimum quantities  „Your design on a T-shirt, minimum order 100‟ 31 October 2005 Copyright MadeForOne.com 2005 Examples of Mass Customization  Dell      Build to order computers Assembly, not manufacture (modular components) MC sometimes associated with higher prices but Dell cheaper than most Why? Massive efficiency of supply chain management „Living in Dell Time‟ - Fast Company, Nov. 2004 31 October 2005 Copyright MadeForOne.com 2005 Examples of Mass Customization  Clothing and Footwear    NikeID, MiAdidas, Otabo Shoes, Vans Bivolino (shirts), U-Jeans, Land‟s End, Target, Tommy Hilfiger Clothing and footwear very suited to MC due to each person being unique in size and shape Nautilus (treadmills)  Sports Equipment   Industrial equipment, construction  Kingspan – insulated roof and wall panels, made to order for size, colour, insulation type Copyright MadeForOne.com 2005 31 October 2005 Mass Customization of Services    Difficult to define when a service is mass customized rather than just „customized‟ Degree of automation required Examples     MyYahoo, MyMSN, Google Personalized Personalized songs – Instasong.com I.T. – providing services in similar way to object oriented software – small pre-existing components of work combined to create overall service Requires increased efficiency and lower prices so as not to be just „packaging‟ of existing services Copyright MadeForOne.com 2005 31 October 2005 Micro Manufacturing  CafePress.com, Zazzle.com      Offer personalized products themselves Also offer other websites facility to design products and market them Visitor to examplesite.net orders an examplesite.net promotional T-shirt Order is entirely processed by micro-manufacturer Recent investment in Zazzle by John Doerr (KPCB) and Ram Shriram (Sherpalo Ventures) Copyright MadeForOne.com 2005 31 October 2005 Future Developments  MC to be Mainstream by 2009  Prediction by William Halal, management professor at George Washington University Online factories where customers can not design their own products with easy-to-use software EMachineShop.com – download software, design product; send completed design which will be manufactured within a few days  Growth of „Online Factories‟   31 October 2005 Copyright MadeForOne.com 2005 More Future Developments  Personalized location-based services    Jambo Networks (Jambo.net) Uses Wi-Fi to find people you know, or want to meet Sends message to Laptop, PDA, cellphone: “Joe Bloggs is nearby”  Development of Digital Fabrication    Digital Fabrication „3D printing‟ from data files User might buy a product online as a datafile and create it at home using a 3D printer Cost of Digital Fabricators currently prohibitive 31 October 2005 Copyright MadeForOne.com 2005 MadeForOne.com Story    M.Sc. Dissertation on use of e-commerce by mass customizing enterprises Other MC sites good for concept descriptions, but no regular news outlet Content free to readers, revenue raised from advertising  Cost per click (Google AdSense), Cost per action (Affiliate marketing)     Directory of sites, discussion forum Email newsletter about to be launched – retain readers Want greater interactivity with visitors  new mass customized services soon e.g. personalized e-cards Might sell to publishing house if price was right! Copyright MadeForOne.com 2005 31 October 2005 Your Blogs      Potential to develop into long-term projects Try and take a particular angle on your subject Ways of bringing back visitors Useful as a (CV) resume item Interesting topics Copyright MadeForOne.com 2005 31 October 2005 References / Sources of Information       www.MadeForOne.com (naturally!) www.mass-customization.de Living in Dell Time (www.fastcompany.com/magazine/88/dell.html) Pine, B. Joseph, Mass Customization: The New Frontier in Business Competition, Harvard Business School Press, ISBN 0-87584-946-6 (paperback) Pine, Joseph and Gilmore, James (eds): Creating Customer-Unique Value through Mass Customization, Harvard Business School Press ISBN 1-57851-238-7 Anderson, David M.: Build-to-Order & Mass Customization; The Ultimate Supply Chain Management and Lean Manufacturing Strategy for Low-Cost OnDemand Production without Forecasts or Inventory, CIM Press, ISBN 1-878072-30-7 Copyright MadeForOne.com 2005 31 October 2005