A conceptual framework for Mass Customization ...

Third International Conference on Production Research – Americas’ Region 2006 (ICPR(ICPR-AM06) IFPR – ABEPRO - PUCPR - PPGEPS

A conceptual framework for Mass Customization systems from the capability building viewpoint Cláudio Marcos Vigna Universidade de São Paulo, Escola Politécnica - [email protected] Dario Ikuo Miyake Universidade de São Paulo, Escola Politécnica - [email protected] Abstract: Abstract: The customization strategy has been adopted by a growing number of manufacturing firms to strengthen their ability to compete through differentiation. The objective of the Mass Customization strategy is to fulfill the most specific customers’ desires. Firms can only succeed in a Mass Customization strategy if they manage to plan and run manufacturing operations and supply chain transactions assuring competitive costs, quality, and delivery. A number of reports on cases of firms that faced great difficulties in the attempt of becoming a mass customizer indicate the importance of developing conceptual frames and methodological guidelines to support the management of manufacturing firms in the planning, implementation and operation of Mass Customization systems. The purpose of this paper is to develop a discussion on the enablers of Mass Customization considering the issue of building-up an operations strategy relying on capability building perspective. Conceptual definitions for resources, operational techniques, competences, and organizational capabilities required to Mass Customization are presented. The major resources and techniques that have sustained the adherents of Mass Customization were identified in a review of the literature on the subject of planning and deploying initiatives towards this strategy. Keywords: Mass Customization; capabilities; competence, conceptual framework.

1. Introduction Introduction All companies really oriented to market needs wish they could produce exactly what the customers want and when they want it. The ability to be that precise would not only delight customers but reduce costs (HOLWEG and PIL, 2001).


Nowadays, the markets for mass produced low cost standard goods are a hostile environment and of decreasing profitability. Manufacturing firms must thus innovate the way they manage their business, searching alternatives to remain competitive in the market. In this context, in more developed and competitive markets, Mass Customization (MC) is now seen as a foundation to sustain a promising emerging paradigm of business strategy. The term “mass customization” was coined by Stan Davis (1987) in his book entitled “Perfect Future”. However, it only became more well-known in the business environment when Pine (1993) published the book entitled “Mass Customization: the new frontier of business competition”. Since then, it has been observed a gradual growth in the number of research projects and publications on themes related to MC. The capability to operate efficiently and reliably in a MC strategy is an important competitive advantage that is difficult to be accomplished. The effective deployment of this strategy in the operations, seemingly renders a strong competitive edge over rival firms that may not have learnt how to explore it yet (BROEKHUIZEN and ALSEM, 2002; SELLADURAI, 2004). Despite the potential advantages that the MC strategy may bring, most of firms have been reluctant to adopt it or have faced great difficulties to realize it. The primary reason for the low adoption rate of MC is the requirement to change significantly the existing business models (BROEKHUIZEN and ALSEM, 2002). Broekhuizen and Alsem (2002) addressed that relatively little attention has been paid to the critical success factors for the development of MC. The purpose of this paper is to develop a discussion on the enablers of MC exploring the issue of building-up an operations strategy relying on capability building perspective.

2. Mass customization as a strategic issue Lau (1995), Svensson and Barford (2002) asserted that the advent of MC is justified by the fact that the traditional manufacturing strategy was not sufficiently responsive to qualify enterprises to be faster, more agile and more flexible in response to the trend of product life cycle shortening and the consequent transformations in the market place. The MC capability can be seen as an outcome of efforts undertaken by manufacturers to improve their traditional processes in search of greater agility and responsiveness, maintaining competitive costs and high quality levels. In this sense, it is fair saying that


MC represents an evolution or improvement of the traditional mass production paradigm (LAU, 1995; SAHIN, 2000). To Pine (1993) and Lau (1995), MC represents the mass production of goods and services driven by each customer's specific orders, treating them individually at relatively low costs, comparable to those of standard products. MC is not the capacity of a firm to offer a great variety of products, but the capacity to offer exactly the product that is specified by the customer (BROEKHUIZEN and ALSEM, 2002). To make available the product, as the customer wish, a firm needs to adopt different forms of organization and means that enable them operate in closer interaction with their customers. A central implication of this is that the choice of organizing processes for MC impels manufacturers to adopt the build-to-order (BTO) production system, because customized products must be manufactured or built as requested in the customers’ orders (SVENSSON and BARFORD, 2002; KOCHAN, 2003). If a manufacturer can only produce to stock, and fulfill orders from the stock of finished goods, it would have to keep an enormous amount of finished products, covering the most varied configurations that a customer could order, in this way, the MC adoption would be unfeasible. Holweg and Pil (2001), and Holweg and Miemczyk (2003) stand that the operations planning logic applied in the BTO system can also be extended to MC systems. Thus one can suppose that the BTO system and MC sound conceptually similar in terms of purpose. However it is important to clarify that while MC is just dedicated to customized products, the BTO system can be explored either in the production of standard products or in the production of customized products. Therefore, MC depends on processes and resources compatible to the objective of BTO to become operational, but BTO system does not require that MC strategy be adopted. As a matter of fact, many firms have adopted the BTO strategy in the production of standard products, because this makes possible the reduction of inventory costs. Among the reasons why BTO system enables the implementation of effective MC systems is the fact that it brings great sensibility to demand variation and promotes the agility required to respond rapidly to this variation (HOLWEG and PIL, 2001). When a firm decides to embark on a MC strategy, it should clearly realize the requirements to develop the capability to mass customize. Here, it is important to


distinguish the required elements that the firm has already built in from the elements that are enablers of MC but were not developed yet. The complexity degree of this change depends on the scenario in which the firm is established. Three basic scenarios are described below: •

Scenario one (mass production): In this scenario, the subject firm is structurally organized to operate efficiently following a mass production strategy. The higher costs to introduce customizable features in its products maintaining mass production systems and resources make unfeasible the shifting to a MC strategy. This scenario could eventually cause the collapse of the business. If market circumstances justify or require the move towards the MC strategy, the subject firm should migrate towards scenario two or three, as described below.

•

Scenario two (hybrid system): In this scenario, the subject firm operates in a hybrid system, reconciling the BTO and BTF production strategies. This implies that some elements that are enablers of MC have already been implemented by the subject firm however this does not qualify it to undertake MC in its full extent.

•

Scenario three (mass customization): In this scenario the firm is organized and capable to undertake the MC strategy to its full extent. This requires deep changes in the whole business process including the development of competences to sustain effectively BTO systems. The positioning of a firm in one of these scenarios must be in agreement with the adopted business and operations strategy and may be shifted in search of more fitting conditions. Figure 1 illustrates these different scenarios and the possible migrations paths. In scenario one the planning and operating systems of the firm follow the BTF approach, while in scenario three they are managed according to BTO approach. In case MC strategy should be pursued, the ideal positioning scenario is the third one in which the customization cost would be lower. In this drive, to reaching the desired competitive advantage, the firm can migrate from scenario one towards scenario three, passing or not scenario two. The differences among these strategies will be discussed in the next section.


Mass production High

Higher Scenario1 Hybrid System Small changes

Inventory

Customization

Scenario 2

levels

cost Deep changes

Medium changes

Mass Customization Scenario 3

Low

Lower

Mass production

Mass customization

Pure BTF

Pure BTO

Figure 1: 1: Scenarios for the transition of production strategy

3. Mass customization enablers A firm that intends to become a mass customizer, should resolutely create conditions to develop the organizational capability required by MC. An organizational capability is constituted by specific and valuable abilities that are born from complex combinations of resources, operational techniques and organizational competences (PROENÇA, 1999). Mills, Platts, Bourne and Richards (2002) affirm that the building of a competence starts from resources. In the present paper the capability to mass customize is considered from the perspective of organizational competence building, and is based on the premise that it has to rely on a set of fitting resources and operational techniques. Thus the main elements that enable a MC strategy can be divided as follow: •

Organizational Competence (OC);

•

Operational Techniques (OT);

•

Resources (RE).

The adoption of MC implies changing significantly a series of firm’s business processes what may require the application of a reengineering method (SAHIN, 2000; SELLADURAI, 2004; SVENSSON and BARFORD, 2002; LAU, 1995; KARUPPAN, 2004). In deploying a plan to enable a firm to MC, it is necessary to identify


fundamental elements for the effective accomplishment of this objective. With the purpose of assisting decision makers in such an analysis, this paper presents a conceptual structure to consider the main business processes involved when embracing the MC strategy. In this structure, it is considered that this is a far-reaching transformation process that would cause impacts in different critical areas of a firm’s organization. This implies in developing organizational competences to fulfilling the new demands that would be brought to these areas. In this perspective, the following areas are critical in the subject organizational transformation: •

Product and Process Planning;

•

Inbound Logistics;

•

Internal Operations;

•

Outbound Logistics;

•

Marketing and Sales.

Considering the issue of devising a planned process to enable Internal Operations for the realization of a MC strategy, from the perspective of organizational capability building, a literature review was carried out contemplating articles selected in major publications concerning operations management and production engineering. The set of articles reviewed is enumerated in Table 1. Table 1: 1: Listing of references on MC.

Reference

A

Authors Partanen and Haapasalo

Year

Reference

2004

G

Authors Svensson and Barford

Year

B

Sahin

2000

H

Selladurai

2004

C

Holweg and Miemczyk

2003

I

Lau

1995

D

Holweg and Pil

2001

J

Karuppan

2004

E

Alfnes and Strandhagen

2000

K

Feitzinger and Lee

1997

F

Kochan

2003

2002

The examination of these works indicated that the building of an operational system to support a MC strategy demands the articulated development of organizational competences in each critical area (Product and Process Planning, Inbound Logistics, Internal Operations, Outbound Logistics, Marketing and Sales) involving the development of fitting operational techniques and resources.


In this paper, the discussion of the issue of developing organizational competences is confined to the scope of Internal Operations. The organizational competence in Internal Operations, however relates with the organizational competences in other areas.

4. Building capability to sustain mass customization In manufacturing firms, the Production function represents the heart of their business. If a firm intends to provide customized products, the role of the production operations in supporting this objective must be critically examined. If there is a mechanism to promote the functional integration of all areas comprised by a firm, the alignment of internal functions is ensured, and this facilitates the deployment of the MC approach (SELLADURAI, 2004). To paving the way towards MC, some fundamental conditions must be previously assured, otherwise it may be ineffective investing in the development of elements supposed to enable MC. On account of this, the Lean Production (LP) system is mentioned by many authors, as a requisite platform to support the initiative of introducing MC (LAU, 1995; ALFNES and STRANDHAGEN, 2000; SAHIN, 2000). In this sense, MC system can also be understood as an evolution of LP system as illustrated in Figure 2.

Mass Customization

Lean Production Mass Production

Common elements Figure 2: 2: Evolution towards MC (adapted from Slack, 1993)

A distinctive feature of the LP system is the keen focus in the elimination of wastes in the processes and this drive may render greater responsiveness to the customers’ needs (LAU, 1995; SAHIN, 2000; SELLADURAI, 2004). In this way, the objectives of


LP and the means it advocates to accomplishing them are fairly aligned to the initiative of organizing the processes of a firm for the MC strategy. The LP system also leads the firms to the deployment of effective actions to increase operational flexibility (KARUPPAN 2001). Svensson and Barford (2002) assert that a firm should be ready to make efforts to enhance the flexibility and agility of its operations systems to succeed in the realization of a MC strategy. The combination of rapid setup time methods and training of human resources advocated by the LP approach enable the cost efficient production of components and parts in small batches increasing the production flexibility (SAHIN, 2000; ALFNES and STRANDHAGEN, 2000; SAHIN, 2000; KARUPPAN, 2001). It is relevant noting that the prior implementation of LP system is a necessary but not sufficient condition. Alfnes and Strandhagen (2000) posit that although the implementation of LP system support the increase of the flexibility and agility, that does not happen in enough magnitude to support the production of customized products in large scale. Moreover, in addition to the competence in Planning and operation of Lean Production system, as exhibited by Table 2, the references reviewed emphasized the relevance of other complementary competences to strengthen Internal Operations for MC. Table 2: 2: Organizational Competence in Internal Operations for MC

Organizational Competence

B A F

Reference E G H I J

Planning and operation of Lean Production system

√

√

Building customer order fulfilling process with short lead time

√

√

√

√

Human resources development

√

√

√

√

Implementation of agile manufacturing processes √ Functional areas integration

√

√

√

√

√ √

√ √

√

√ √

√

√

√ √

√

D C K

√ √

Table 3 synthesizes the main MC enabling elements identified in this review that contribute to turn Internal Operations processes capable to mass customize products cost efficiently.


To become a successful mass customizer, a firm should reach an excellent performance in all functional areas involved (SVENSSON and BARFORD, 2002). In this sense, the firm should exhibit built-in competences in the five areas pointed out in section 3 that are critical to sustain the drive towards MC. Table 3: 3: Enabling elements for MC in Internal Operations

Operational Techniques

Enabling elements to internal operations

F

Reference E G H I J

B

A

Modular production and assembly

√

√

Postponement of final production process

√

√

Empowerment

√

√

√

Build to Order production system

√

√

√

√

√

√

√

√

Advanced shop-floor information flow control Resources

√

D C K √

√

√

√

√

Multi-skilled workforce

√

Advanced Manufacturing Technology

√

Information technology applications / Enterprise Resource Planning (ERP) system

√

√

√

√ √

√

√

√

√

√ √

√

Synthesizing the perspectives and propositions revealed by the literature review, the following points are emphasized with regard to the nature of mass customization capability: •

a firm’s overall MC capability is supported by MC organizational competences developed in its critical areas,

•

the MC organizational competence developed in each critical area enable it to plan and operate its business processes in such a way to ensure the challenging levels of responsiveness, quality and cost efficiency required,

•

the MC organizational competence in the critical areas involved are mutually dependent and complementary to the firm,

•

each of these organizational competence consist of a combination of enabling elements that can be divided into resources and operational techniques essential to customization.


Figure 3 presents a conceptual framework organizing this capability building perspective suggesting the need of a systemic view to the process of preparing a firm to MC.

Mass Customization

Marketing and Sales

Organizational

Competence in

Outbound Logistics

Organizational

Competence in

Operations

Competence in Internal

Organizational

Inbound Logistics

Organizational

Competence in

and Process Planning

Organizational

Competence in Product

Capability

Operational Techniques Resources Figure 3: 3: Conceptual Conceptual framework for Mass Customization capability (adapted from Pine, 1993; Silveira et al, al, 2000; Gunasekaram and Ngai, 2004)

In the next subsections, some major elements that are directly or indirectly related to the flexibility and responsiveness of a firm are pointed out.

4.1 Modular production and assembly Although the modularization represents a design approach that primarily reinforces a firm’s organizational competence in Product and Process Planning to move towards MC strategy, this approach must also be understood as an input that influences the Organizational Competence in Internal Operations. Feitzinger and Lee (1997), Sahin (2000), Selladurai (2004), and Partanen and Haapasalo (2004) agree that the implementation of modular production and assembly techniques is a critical success factor to a MC initiative. A modular product design brings about larger flexibility to the supply chain, what is indispensable for to MC, but at the same time, this approach increases the costs of freight and of the modular component itself. Therefore a potential mass customizer


should analyze properly the adoption of modular production approach, to verify if its benefits compensate the costs.

4.2 Postponement The so called Decoupling Point (DP) separates the part of the firm’s production system where planning activities and manufacturing operations are based on customers’ orders from the part in which decisions are based on predictions. The DP can also be a point where a buffer of components can be stored to smooth the possible impacts of demand variation. The processes previous to DP are less critical and allow the firm’s planners making decisions focused in cost efficiency (ALFNES and STRANDHAGEN, 2000). The DP is often associated with the concept of postponement. It is better to postpone the DP as close to product completion as possible. The postponement technique provides greater flexibility to the firm, so this approach is very important to MC, because it increases the responsiveness to demand variation. In a context of complex and highly fluctuating demand, it is wise shifting the DP closer to final production stages so as to postpone the finishing of the products ordered by the customer as late as possible in the supply chain. By means of postponement, components and modular parts can be produced in mass production mode and the products can be customized after DP, in agreement to customers’ orders (FEITZINGER and LEE, 1997; ALFNES and STRANDHAGEN, 2000; HOLWEG and PIL, 2001; SELLADURAI, 2004; PARTANEN and HAAPASALO, 2004).

4.3 MultiMulti-skilled workforce Sahin (2000) asserts that development of flexible and multi-skilled work teams and empowerment are an essential resource to enable the processes of a firm to support MC processes, because under this operation strategy, it is critical that workers have a higher autonomy degree to decide rapidly which task is more important and how it should be handled.

4.4 Information Technology applications/Enterprise Resource Planning (ERP) system Among the most important factors that have contributed to the diffusion of the MC in different industries are the emergence of the Internet and the success of information


technology applications (SELLADURAI, 2004). Nowadays, there is great interest in adopting MC because of the new possibilities brought by the advancement of information technologies and its decreasing cost of acquisition (SAHIN, 2000). Integrated

information

systems

are

essential

resources

to

coordinate

the

communication between the customer, the design teams and the shop-floor production (LAU, 1995). It is important to observe that Enterprise Resource Planning (ERP) systems offer the possibility to support reengineered business processes, and it allows the enterprise to optimize the information flow and minimize delay (ALFNES and STRANDHAGEN, 2000). However the adoption of an ERP system can bring some inflexibility to the organization and inhibit the control and coordination of dynamic processes.

4.5 Advanced manufacturing technologies (AMT) Sahin (2000) defines MC as the application of the manufacturing technologies that enable cost reduction in high mix production and, in this way, promote customization through

enhanced

flexibility

and

responsiveness.

In

this

sense,

advanced

manufacturing technologies (AMT) and their systemic application in the construction of flexible manufacturing systems (FMS) and computer-integrated manufacturing (CIM) systems, are important resources to accomplishing MC (LAU, 1995).

5. Conclusion The MC represents a new approach to develop business that has attracted the interest of a growing number of firms. This has stimulated the development of research projects about related issues. The literature review revealed a successful MC strategy may bring about a series of benefits such as higher customer satisfaction, larger market-share, improved knowledge of the customer, lower inventory costs, and higher profit margins (SELLADURAI,

2004;

PARTANEN

and

HAAPASALO,

2004).

However,

the

consequences of an attempt to shift to MC strategy without preparing properly the planning and operating system of the firm may be disappointing bringing disadvantages such as increasing material cost, higher manufacturing cost, lower on-time deliveries, poor supplier delivery performance, and longer order response time.


Business planners and operations managers are still in need of conceptual frames and methodological guidelines to elaborate consistent and systemic plans to leading the drive towards MC. This paper delineated a conceptual framework concerning the MC capability based on organizational competence building perspective. This framework suggests the articulated nurturing of organizational competences in five critical areas of a firm, by the promotion and implementation of operational techniques and resources essential to support competitive mass customizers. Apparently, most of these disadvantages are cost related, and are caused when a firm tries to increase the flexibility and agility required by MC in detriment of the efficiency that is ensured by the standardization and mass production process. The framework present by this paper will be instrumental to support the development of a research project with the objective of investigating empirically the diffusion of MC strategy in some industries where this move has been more evident and critical, such as the industries of computers, automobiles and home appliances.

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A conceptual framework for Mass Customization ...

A conceptual framework for Mass Customization ...

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