Mass customization or mass confusion?

Manufacturing processes that emphasize the ability to quickly customize products to meet a customer’s particular needs has many benefits, but can be costly. Efficiency and obsolescence can be avoided by continually improving a process and its technology.

In the early 1920s the use of rigid, dedicated automation changed the face of America forever. By revolutionizing the economics of highvolume manufacturing, this new technology of mass production enabled industry visionaries like Henry Ford to transform the automobile from a toy for the rich–as it was conceptualized in Europe–to a ubiquitous necessity for the American masses.

Today, a new paradigm, mass customization, is entering the lexicon of manufacturing. Simply put, it is the ability of today’s manufacturing technology to bring down the cost of variety.

Anticipated in 1970 by Alvin Toffler’s Future Shock and named in 1987 by Stan Davis in Future Perfect, mass customization has gained a new voice in Mass Customization, The New Frontier in Business Competition, a book written by B. Joseph Pine II when he was a program manager at IBM Corp. (He is now president of a management consulting firm, Strategic Horizons Inc., Ridgefield, Corm.)

Mass customization is more than some oxymoronic marriage of craft-based production to mass production techniques. Instead, the term refers to a new way of conducting business to gain the ultimate competitive edge. Mass customization reaches the goal of customer satisfaction by harnessing the latest business methods and technology. Mr. Pine says the intention is to “create variety and customization through flexibility and quick responsiveness.”

He says a premier practitioner is Motorola Inc.’s Paging Products Group, Boynton Beach, Fla., but others are also achieving significant gains with the technique.

For example, at a Honeywell Inc. facility in Golden Valley, Minn., a single line produces three very different thermostat products that previously required three separate lines.

Honeywell designed the line to speed changeover time from one run to another. Worker productivity tripled, and changeover time has been reduced from 25 minutes to just two minutes. At the company’s Micro Switch Div. plant in Warren, Ill., hundreds of thousands of electromechanical switches are produced annually. Instead of mass-producing one design, the facility can efficiently produce variations to satisfy customer specifications. Production runs can vary from less than a hundred to several thousand.

New enabling technology continues to be introduced. One example is the Smart Distributed Systems (SDS) technology introduced by Honeywell’s Micro Switch Div. “It is the intelligent-sensor network that allows our industrial customers to mass customize,” says Ramon A. Alvarez, vice president and general manager. Sensors on the network communicate with each other and with central control devices. The system allows operators to quickly reconfigure a line from a central computer as necessary to customize products.

“It is our responsibility as providers of automation solutions to support our customers’ ability to be responsive to their customers,” Mr. Alvarez adds. Among the virtues of this emerging technology is its ability to allow rapid conversion of production facilities from one product to another.

If it is true that much of America’s past economic dominance came from mass production, then it is equally certain that future success will depend on using the principles of mass customization, believes Mr. Pine. He notes that “mass production became increasingly inappropriate for the increasingly turbulent market environment of the past 20 years. The seeds of mass production’s decline were always present within the system, but they have not and could not be easily seen or understood by its practitioners.”

In the mass-production model, both product and process change come very slowly to ensure fixed costs are recouped. Then every four or five years, mass producers must devise another new product to be mass-produced. That competitive reality was successful until the Japanese figured out that if they continually improved their processes they could achieve both lower costs and higher quality than the typical mass-producer.

“By embracing dynamic change [continuous improvement], the Japanese discovered they could gain a significant advantage over their competitors,” Mr. Pine says. “That was so different than the old ways of doing things that it took American producers a long time to figure out exactly what was happening. As a result, many of today’s ‘silver bullets’ are aimed right at continuous improvement, using such things as teams, total quality management, benchmarking, and customer-satisfaction measurements.”

Mr. Pine rates continuous-improvement/lean-production as more than an updated mass-production model, but much less than mass customization. He does see it as a necessary intermediate step that can help to break apart the vertical functional silos and other manifestations of mass production.

But while the vertical silos of the mass production model can be dismantled by team building, he warns that “horizontal” versions may appear in the teambuilding process. “Instead of ‘I don’t talk to you because you’re not in my function,’ a team at Toyota might say, ‘You’re not on my team, I don’t have to talk to you.’ In mass customization, the idea is to break down both the vertical and horizontal barriers to communication.”

With mass production, the tendency is to optimize functions, while the constant-improvement/lean production philosophy is attempting to optimize the team. Companies capable ofmass customization instead optimize the relationship with the customer.

Mr. pine doesn’t see hierarchy, command and control, functional silos, and such as necessarily bad. “They are exactly what you want to do when low cost and production efficiency are paramount over everything else,” he says. “The problem with these things is that mass production doesn’t work anymore as a strategic response for industries with turbulent competitive environments-those characterized by more demanding customers, quality consciousness, and accelerated product life cycles.

“That’s why organizations have to change from mass production, with its internal focus on nothing but efficiency, to constant-improvement/lean-production and finally to mass customization. At that stage, all of the characteristics of the earlier models such as efficiency and quality are no longer goals, but conditions necessary to even entering the game of competitive manufacturing. Since mass customization presumes manufacturing technique is already optimized, the focus of a manufacturing organization can be completely external.”

The ultimate benefit, says Mr. Pine, is that the manufacturer and the customer get deeply involved in a learning relationship. Instead of merely selling to a customer, a manufacturer employing mass customization is engaged in a two-way dialog. As customers discover how responsive a manufacturer can be, the relationship becomes impervious to competition.

That’s the ideal. However, the practice of mass customization is still in the early stages of the learning curve. “It is where mass production was in the early 1900s,” says Mr. Pine. And it is not the answer for all situations. “If you can sell everything you make, mass customization is irrelevant.

“For example, when Honda dealers had more buyers than cars, it was obvious they were winning the competitive battle without mass customization. Some customers may have even sacrificed their accessory preferences just to be able to buy one. But how long can such situations last? The capability for mass customization needs to be developed before a competitive crisis occurs .”

Although mass customization is a powerful competitive tool, it is not invulnerable. For example, it can be powerless when confronted with a new major dominant design that makes all previous versions obsolete. The ability of a buggy-whip manufacturer to mass customize will do little to help when carriages are replaced with automobiles.

Also, the ability to mass customize is not always a virtue. That was the discovery that Japanese electronics and automobile manufacturers made as they entered the recession.

“During the ‘bubble economy’ of the 1980s, Japanese executives placed a high priority on satisfying every possible consumer whim, regardless of how marginal its contribution to the bottom line might have been,” explains Masakatsu (Mark) Mori, managing partner in Andersen Consulting’s Tokyo office.

For example, before the recession, Nissan trumpeted its Intelligent Body Assembly System as the company’s approach to building “any volume, anywhere, anytime, of anything by anybody.” And it did. By one assessment it was an example of being able to mass-customize way beyond the ability of customers to absorb or even understand. When the recession struck, Kenichi Sasaki, managing director of Nissan Motor Co. Ltd., noted “the need to confront runaway technology and its associated costs.”

Mr. Pine sees two cost traps in mass customization, and both relate to complexity.

“One is the internal complexity that can arise when the amount of product variety being sought is beyond the ability of the organization to handle it efficiently,” he says. “Either the technology is not there yet to permit mass customization on a low-cost basis, or the implementation may be faulty.”

But adding more features to a product doesn’t necessarily add to internal complexity. For example, General Motors Corp.’s new Lumina and Monte Carlo come with many more features than their pro. decessors, yet utilize several hundred fewer parts and take a third less time to assemble.

The other cost trap is external complexity–where the range of choices overwhelms the customer, creates market confusion, and serves only to delay customer decisions. A better idea, says Mr. Pine, is to offer customization within a cost-effective universe of possibilities. Then, to facilitate ordering, the man ufacturer provides configuration and design tools (See the Harley-Davidson example above.)

Although Mr. Pine believes mass customization i. today’s best way of harnessing the latest organize tional and technological knowledge to achieve customer satisfaction, he also says it is no more than that. He is convinced that the end of business history has not been reached. There is more to come.

DESIGN YOUR OWN HOG

Harley considers a plan to let customers customize.

If mass customization is designed to strengthen the vendor-customer link, then why would a company at the apparent peak of success–one so successful that orders are backlogged into 1995, with customers already reserving the 100th-anniversary models due early in the next century–be studying the concept?

The answer, obviously, is that the company, Harley-Davidson Inc., recognizes the value of this almost mystical bond with its customers. The company knows all too well that such bends are precious and must be carefully nurtured.

Still vivid in Harley.Davidson’s memory is the way its market share went from almost 100% in 1973 to 23% by late 1982 after Japanese manufacturers introduced lower-priced, higher-quality motorcycles. In 1981, at an Andersen Consulting seminar on Japanese productivity methods, Harley-Davidson learned about a different way to manage. The company teamed with Andersen Consulting on a just-in-time pilot project aimed at setup reduction and supplier relationships. The efforts quickly brought results, and the pilot became the basis for a new vision for the company, one involving fundamental changes in operations.

So, today, when the company is ahead of the pack, customer satisfaction remains the prime goal, says Thomas E. Arenberg, the Andersen Consulting industrial-products partner working with Harley-Davidson. One of his projects is directed toward problems brought on by the company’s success. For example: “What can you do to attract a rider into a Harley store and window shop when the company’s production is sold out? Also part of the puzzle is how to develop a learning relationship with ‘rubbies’ [rich urban bikers], a new affluent market sector that knows little about Harleys, except that it is neat to own one.”

A prototype solution now under study at the company is a multimedia configuration and design tool for customers that can help them customize a Harley within the universe of the factory’s production capability. Placed in a dealer’s information kiosk and at the sales closing desk, the multimedia presentation would enable uninformed customers to learn about the mystique of customizing their bikes with genuine Harley accessories. “What we’re trying to do is close the door on competitors so that all the shopping is done at once,” says Mr. Arenberg. “Not only closing the deal, but also the financing, and selection of accessories and clothing.” Utilizing a user-friendly touch screen, customers can easily familiarize themselves with the product possibilities, including colors, the range of product variations, and how they can further customize their selection with genuine Harley accessories.

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