Offering customized products is a strain on a company’s resources. What are the different ways that you can minimize the deterioration in the firm’s operations and supply chain? In part four in this series on mass customization, Frank Piller and Fabrizio Salvador explain the robust process design – whereby the firm reuses or re-combines existing organizational and value chain resources to fulfill differentiated customers’ needs.
A second critical requirement for mass customization is related to the relative performance of the value chain. Specifically, it is crucial that the increased variability in customers’ requirements does not lead to significant deterioration in the firm’s operations and supply chain. This can be achieved through robust process design — defined as the capability to reuse or re-combine existing organizational and value chain resources to fulfill differentiated customers’ needs. With robust process design customized solutions can be delivered with near mass production efficiency and reliability. Hence, a successful mass customization system is characterized by stable, but still flexible, responsive processes that provide a dynamic flow of products.
But what does it take to design a robust value chain? A number of different methods can be employed to reduce these additional costs, or even to prevent their occurrence at all.
Postponement: Delayed product differentiation
A primary mechanism to create robust processes in mass customization is the application of delayed product differentiation (postponement), referring to partitioning the supply chain into two stages:
A standardized portion of the product is produced during the first stage, while the ‘differentiated’ portion of the product is produced in the second stage, based on customer preferences which have been expressed in an order. Prior to the point of differentiation, product parts are re-engineered so that as many parts or components of the products as possible are common to each configuration.
Cost savings result from the risk-pooling effect and reduction in inventory stocking costs. Additionally, as common performance levels of functionalities are selected by a number of customers, economies of scale can be achieved at the modular level for each version of the module, generating cost savings not available in pure customization-oriented production systems.
Flexible automation & modular processes
While postponement starts at the design of the offerings, another possibility to achieve robust processes is through flexible automation. Although the words “flexible” and “automation” might have been contradictory in the past, this is no longer the case. In the automotive industry, robots and automation are compatible with high levels of versatility and customization. Even process industries (pharmaceuticals and food for example), once synonymous with rigid automation and large batches, nowadays enjoy levels of flexibility once considered unattainable. Similarly, many intangible goods and services also lend themselves to flexible automated solutions, often based on the internet. In the case of the entertainment industry, increasing digitalization is turning the entire product system over from the real to the virtual world.
Additive manufacturing (3D printing) technologies play a key role at this stage. Digitalizing manufacturing is an enabler of robust processes in many industries that before has been characterized by high tooling and switching cost. We expect that the shift from “prototyping” into manufacturing technologies that is characterizing additive technologies today will become a major boost of mass customization.
A complementary approach is process modularity. This is achieved by thinking of operational and value chain processes as segments each one linked to a specific source of variability in the customers’ needs. As a result, different requirements in customers’ needs can be served by appropriately re-combining process segments, without the need to create costly ad-hoc process segments. This allows for recombining process segments to deliver tailored solutions.
Consider as an example BMW’s factory producing the Mini. BMW enables its customers to specify a variety of options unrivalled for compact cars by integrating individual mobile production cells, called MobiCells, with standardized robot units into existing facilities. MobiCells are built on a solid steel platen of standard measurements. Welding robots and control systems are mounted on the platform by body construction specialists according to a defined basic pattern, pre-configured and tested. The fully functional MobiCells can then be connected to the power supply and integrated into existing systems in the plant within a few days. In this way, existing capacities of the body shop can be adapted flexibly and quickly without extensive modifications of production areas.
Process modularity also allows for mass customization in the service sector. IBM, for example, has been redesigning its consulting unit around configurable processes (called “engagement models”). The objective is to fix the overall architecture of even complex projects while retaining enough adaptability to respond to the specific needs of a client.
Adaptive human resources
…mass customization is not only about systems, it is also about managerial talent.
Of course, even the most flexible technology cannot be adapted to unpredictable swings in customers’ needs. That’s why firms still have to invest in adaptive human capital. Employees have to become empowered to deal with novel and ambiguous tasks to offset potential rigidities embedded in process structures and technologies. No machine will be ever capable of deciding what the future solutions space will look like, that is clearly a managerial decision, not an algorithm. Simply put, mass customization is not only about systems, it is also about managerial talent. Also BMW realized that there is a time and a place for automation and consistently complemented its state-of-the art automated MobiCells system with flexible, cross-trained teams of workers following the car through the various steps of the manufacturing process. Balancing technology and human flexibility becomes a key success factor of a mass customization system.
Our research revealed that, for example, individuals need a broad knowledge base that stretches beyond their immediate functional specialization, in order to be able to proficiently interact with other functions in the process of identifying and delivering tailored solutions to the customer. Such a broad knowledge base has to be complemented with relational attitudes that allow the individual to easily connect with other employees on an ad-hoc basis.
By Frank Piller & Fabrizio Salvador
About the authors
Frank Piller is a chair professor of management and the director of the Technology & Innovation Management Group at RWTH Aachen University. He also is a founding faculty member and the co-director of the MIT Smart Customization Group at the Massachusetts Institute of Technology, USA. Frequently quoted in The New York Times, The Economist, and Business Week, amongst others, Frank is regarded as one of the leading experts on mass customization, personalization, and open innovation. Frank’s recent research focuses on innovation interfaces: How can organizations increase innovation success by designing and managing better interfaces within their organization and with external actors.
Fabrizio Salvador is Professor of Operations Management at Instituto de Empresa Business School, Adjunct Professor at the MIT-Zaragoza Logistics Program and Research Affiliate at the Massachusetts Institute of Technology. His research focuses on operation strategy in uncertain environments and customer-centric organization design. He has been researching such topics as mass customization, concurrent product-process-supply chain design and organization design for efficient product configuration. His research has been published in many prestigious academic journals, and he is co-authoring the book “Information Management for Mass Customization” . He received a Ph.D in Operations Management from the University of Padova, where he also graduated in Industrial Engineering.
Email: [email protected]
Upcoming articles in this series:
Introduction: A special series of articles on mass customization and customer co-design
Part 1: Competing in the Age of Mass Customization
Part 2: The market for mass customization today
Part 3: Solution Space Development: Understanding where customers are different
→ Part 4: Robust Process Design: Fulfilling individual customer needs without compromising performance
Part 5: Choice Navigation: Turning burden of choice into an experience
Part 6: Choice Navigation in Reality: A closer look into the Customization500
Part 7: Overcoming the Challenges of Implementing Mass Customization
Part 8: A Balanced View: Conclusions and Key Learnings