Production Planning & Control, Vol. 15, No. 4, June 2004, 459–471 Mass customization: the key to customer value? BRIAN SQUIRE, JEFF READMAN, STEVE BROWN and JOHN BESSANT Keywords Mass customization, value criteria, customer focus tool Abstract. The purpose of this paper is to ask the question – does mass customization really hold the key to customer value? It is argued that while mass customization can, and often does, increase the value of an offering, it is not always the case. In other words, mass customization does not represent the best strategy for all firms in all cases. It is critical that manufacturing firms understand whether their customers (existing and potential) really do value customization. The paper introduces the responsive agility tool that may provide the basis for an informed decision. The tool differentiates a number of value criteria and a method of selecting between them. Further, the tool identifies four levels of customization distinguished by secondary value criteria. We provide a case study demonstrating how the tool may operate in practice. The case study suggests that the tool may effectively differentiate customer types according to their value criteria. Finally the paper proposes that a value judgement is dependent on the negotiated process between a manufacturer and customer. 1. Introduction Davis (1987) introduced the notion of mass customization – defined for the purposes of this paper as ‘. . . the ability to quickly design, produce, and deliver products that meet specific customer needs at close to mass-production prices’ (Tu et al. 2001). A number of papers have explored how product strategies (Pine 1993, Eastwood 1996, Duray 2002), process technology (Hart 1995, Lau 1995, Kotha 1996) and organizational factors (Hart 1995, Vickery et al. 1999) can aid the implementation of mass customization. Despite the valuable contribution of such work, the magnitude of demand for mass customized products Authors: Brian Squire, (corresponding author) and Steve Brown, Centre for Technology and Innovation Management, School of Management, University of Bath, Bath, BA2 7AY, UK. E-mails: mnpbcs@management.bath.ac.uk and mnsseb@management.bath.ac.uk. Jeff Readman, Centre for Research in Innovation Management, University of Brighton, Falmer, Brighton, BN9 1NP, UK. E-mail: J.A.Readman@bton.ac.uk. John Bessant, Cranfield Management School, Cranfield, MK43 0AL, UK, E-mail: john.bessant@cranfield.ac.uk BRIAN SQUIRE is a research officer with the Centre for Technology and Innovation Management (CENTAIM) at the University of Bath. His current research project examines ‘the role, process and content of manufacturing strategy in pursuing mass customization within firms’. He is also a part-time doctoral student. His current research interests include mass customization, theories of the firm and inter-firm collaboration. JEFF READMAN is working on a mass customization project exploring the strategic and operational issues companies consider when offering different product varieties and volumes to customers. He is also working on several value-chain projects, specifically those that reveal the links involving manufacturers from developing countries and buyers from OECD countries. Other research work includes agile capabilities and continuous improvement in SMEs. Jeff was also a member of an EU consortium that investigated services supporting innovation activities. Previous work experience includes four years in East Africa as a business adviser and as a trade officer with the Canadian government. Production Planning & Control ISSN 0953–7287 print/ISSN 1366–5871 online # 2004 Taylor & Francis Ltd http://www.tandf.co.uk/journals DOI: 10.1080/0953728042000238755 460 B. Squire et al. STEVE BROWN leads the Operations Management Group and is Director of the Centre of Technology and Innovation Management (CENTAIM) at the University of Bath. He is a Visiting Professor to Baruch College, City University, New York, and is also Visiting Professor at NIMBAS in Holland. He is listed in who’s Who in Europe. His management experience was gained in both public and private sectors including large and SME organizations. He is actively involved in consulting in a range of organizations in manufacturing and service sectors. He has published numerous articles and his books include Manufacturing the Future – Strategic Resonance for Enlightened Manufacturing (2000, Financial Times Books) and Strategic Manufacturing for Competitive Advantage – Transforming Operations from Shop Floor to Strategy (1996, Prentice Hall). JOHN BESSANT is Professor of Innovation Management at the School of Management, Cranfield University. He also holds a Fellowship of the Advanced Institute for Management Research, which he was awarded in 2003. He graduated from Aston University with a degree in Chemical Engineering in 1975 and later obtained a PhD for work on innovation within the chemical industry. After a spell in industry he took up full-time research and consultancy in the field of technology and innovation management, working at Aston’s Technology Policy Unit, the Science Policy Research Unit at Sussex University and at Brighton University where he has held the Chair in Technology Management since 1987. Prior to joining the faculty at CranfieId, John was Director of Brighton University’s Centre for Research in Innovation Management which he set up in 1987. He oversaw its development into a research institute with a staff of 30 people working on around 50 projects for public and private sponsors in the field of effective innovation management. He is an Honorary Professor at SPRU, Sussex University, and a Visiting Fellow at several UK and international universities. In 2003 he was elected a Fellow of the British Academy of Management. His areas of research interest include the management of discontinuous innovation, strategies for developing high involvement innovation and enabling effective interfirm collaboration and learning in product and process innovation. He is the author of 20 books and many articles on the topic and has lectured and consulted widely around the world. He has acted as adviser to various national governments and to international bodies including the United Nations, the World Bank and the OECD. remains elusive. Firms are still mass-producing standardized and high variety goods in many industries and customers are still buying these goods. Indeed, a focus group conducted on buyers in the auto sector found that ‘there appeared [to be] no real drive to have a ‘‘different car’’ to others by adding features, and most of those interviewed were happy with a standard specification’ (Waller 2000: 33). Authors have argued that mass customization offers superior consumer value compared to other strategies (Gilmore and Pine 2000, Tu et al. 2001). This paper asks whether mass customization really does hold the key to customer value – is mass customization the only way to create superior customer value? It is argued that while mass customization can, and often does, increase the value of an offering, it is not always the case (Zipkin 2001). In other words, mass customization does not represent the best strategy for all firms in all cases. Customers must value customization before manufacturers should allocate resources to a mass customization manufacturing strategy. Anecdotal evidence aside, mass customization remains an important and powerful strategic option for many firms. The strategic imperatives for managers are, first, to ascertain if customers value direct input into the design or configuration of a product before purchase and, where they do, identify the appropriate level of customer involvement. This paper explores how companies can answer these two questions regarding value and the level of involvement. The paper begins by defining what we mean by customer value – on what basis do customers select products? The paper then presents the responsive agility tool. The tool enables managers to make an informed decision about their customers’ immediate and foreseeable needs. It is developed further in the next section identifying the different types of customization available to customers. The final section of the paper suggests that customers cannot recognize the tradeoffs required in an informed value-judgement until manufacturers configure their internal resources. The key to providing customer value is a negotiated process even when companies pursue a customer-focus manufacturing strategy. 2. Value criteria The nature of customer demand is partly based on a set of prioritized criteria. A customer value criterion has been defined as, an attribute (or characteristic) of a product or service considered by a purchaser to be a primary reason for selecting a specific product (or service) 461 Mass customization: the key to customer value? Value Criteria Price Quality Delivery Technical Product attributes variety New products Flexible volume Design Brand name Services Customization Figure 1. Expanding value criteria. because it enhances the value of the purchaser’s output (business to business customer sales) or improves their lifestyle (business to consumer sales). (Walters and Lancaster 1999: 697) Whereas, in the past, customer value criteria could be easily defined, the fragmentation of markets means the concept of value has expanded to include several further factors. Markets are fragmenting, individual needs and wants are increasingly prone to shifts and changes (Hart 1995), or, as Kotler (1989) succinctly puts it, ‘the mass market is dead’. Marketers are reaching similar conclusions – the dream of a ‘global village’ where products and marketing strategies can be standardized enabling economies of scale, is proving unrealistic (Mueller-Heumann 1992). Rather, marketers are talking of ‘market fragmentation’ (Shani and Chalasani 1992), ‘customized mass marketing’ (Mueller-Heumann, 1992), ‘micro marketing’ (Kara and Kaynak 1997), and ‘markets of one’ (Pine et al. 1995, Andel 1998). This fragmentation may be associated with the advent of post-modernistic culture (Firat and Schultz 1997). The dawn of post-modernity calls into question concepts of ‘mass’ and results in ‘bricolage markets’ (Firat and Schultz 1997: 191); that is, consumers cannot be easily categorized and are prone to shifting tastes. While modernity created mass markets of identifiable market segments, post-modern customer value criteria have exploded. Market fragmentation has salient ramifications for manufacturing strategy. Porter (1980) argued that strategy could be defined on two dimensions: cost leadership or differentiation. Hill (1983) maintained the cost dimension (price) but considered differentiation in terms of quality and delivery. Market fragmentation does not make such classification obsolete, but further refines the dimensions to target specific niche markets. We suggest that, besides price, quality and delivery, value criteria are now defined in terms of variety (MacDuffie et al. 1996, Da Silveira 1998, Kahn 1998), flexibility (Hill and Chambers 1991, Gerwin 1993), customization (Pine 1993, Gilmore and Pine 2000), and variations on themes related to location (Levitt 1980), seasonality (Radas and Shugan 1998) and marketing (Keller 1993, Michell et al. 2001). Figure 1 illustrates a possible, but not exhaustive, list of customer value criteria. The fragmentation of markets may present an interesting extension to the debate surrounding tradeoffs and cumulative capabilities. The notion of tradeoffs can be traced back to the seminal work of Wickham Skinner. Skinner (1974) argues that manufacturing cannot simultaneously pursue all performance objectives, variables such as cost, time, quality and customer satisfaction are at odds with each other. In other words, superior performance in one of these variables meant lowering, or trading off, performance in another variable. Since Skinner’s article a number of authors have found support for the notion of tradeoffs (Hayes and Wheelwright 1984, Fine and Hax 1985) and have refined the performance criteria to include quality, delivery (speed and reliability), cost, flexibility and innovation (Leong et al. 1990, Mapes et al. 1997). That is not to say that the idea of tradeoffs is universally accepted. Schonberger (1986) argues that world-class manufacturers have eschewed tradeoffs with the introduction of new, innovative practices, such as JIT, total quality control, and employee involvement. The sand cone model (Ferdows and De Meyer 1990) contends that competences are cumulative and that performance criteria can be concurrently improved through a logical sequence starting with quality, advancing to reliability, flexibility and finishing with cost. The empirical research suggests that although tradeoffs do exist, they are dynamic in nature and that, in the long term, levels of compatibility do exist between performance criteria (Filippini et al. 1998, Da Silveira and Slack 2001). The fragmentation of markets may mean that manufacturing has to cope with an increasing number of performance criteria, such as customization and service variables. It is beyond the scope of this paper to explore this concept, but represents an important avenue of future research. 462 B. Squire et al. 2.1. Perceived customer value Manufacturers not only have to meet the value criteria of customers but they should also be aware that customers are evaluating the benefits and sacrifices entailed with any buying decision. Perceived customer value is a tradeoff of benefits and sacrifices. Zeithaml (1988: 14), for example, states, ‘perceived value is the consumer’s overall assessment of the utility1 of a product based on perceptions of what is received and what is given’. Several authors emphasize that this benefit–sacrifice tradeoff includes non-monetary considerations (Monroe 1990, Mazumdar 1993, Patterson and Spreng 1997, Woodruff 1997). For other writers, value is relevant only in terms of monetary costs and benefits (Walters and Lancaster 1999, Anderson et al. 2000). Customers do not make this assessment of utility in isolation; rather, products are assessed relative to a reference product (Mazumdar 1993). Where no comparable product exists, there are still competitive alternatives (Anderson and Narus 1998). Customers may seek alternative means of needs fulfilment by choosing different configurations, systems or even to undertake the manufacturing process themselves. Furthermore, perceived value is highly individualized: ‘what constitutes value – even in a single product category – appears to be highly personal and idiosyncratic’ (Zeithaml 1988: 13). Perceptions of value may vary from customer to customer: however, even at this level perceptions are not static. The utility of a product is situationspecific (Ravald and Grönroos 1996). A product which is considered to be over-priced and of low quality in one context, may represent good value in a different situation. 2.2. Value in customizing A strategy of mass customization may create value for a consumer by closely matching a product to his or her needs at prices reflecting the efficiencies of a mass-produced item. Because value originates in a person’s needs system (Connor and Davidson 1985), a product closely matching those needs may be perceived to be of higher value. Firms have known this for centuries, offering bespoke solutions to consumer needs. 1 However, as we noted above, value is not just made up of benefits, but a tradeoff between benefits and sacrifices (Zeithaml 1988, Mazumdar 1993, Patterson and Spreng 1997). Customization may increase the perceived benefits of a product, but in turn may raise the sacrifices, in terms of time and price for example. Before a significant number of customers recognize positive utility in any customization venture, manufacturers must configure their resources sufficiently to reduce these customer sacrifices. Mass customization, in theory, aims to reduce these sacrifices (Pine 1993). Advances in process technology (Piller and Moeslein 2002), product architecture (Duray 2002) and organizational practices (Vickery et al. 1999) mean that price and time sacrifices, while often marginally higher than standardized, volume production, have been minimized. From the point of view of the customer, mass customization combines the benefits of direct customer input with the negligible sacrifices found in the manufacturers’ ability to produce a low priced, high quality product (Fralix 2001). As such, the overall value or total utility of a product is augmented. Perceptions of value are subjective, albeit at times highly informed. Customers may be indifferent to customization; their value criteria lie elsewhere (for example, delivery or brand name). It is critical that firms understand whether their customers (existing and potential) really do value customization (Pine et al. 1993, Zipkin 2001). Once the customers’ interest is revealed, companies can direct attention to a manufacturing strategy. The next section outlines a tool that may provide the basis for an informed decision. 3. Revealing customer value criteria The starting point to understanding customer value is to have customers prioritize their value criteria. Customers are asked to rank the value criteria discussed in figure 1, which includes price, quality, delivery, technical attributes (features), variety, new products, flexible volume, design, customization, services and brand name. As noted earlier, this list is not exhaustive but it does cover many of the issues customers often consider. Value criteria are not static and what customers demand today may be different tomorrow. Manufacturers should ask their customers to consider not only their current value criteria but also what they Neoclassical economists tend to examine the concept of value in terms of utility. Utility is a measure of satisfaction a consumer receives from consumption of goods or services. Utility theory states that consumers spend their income to maximize their satisfaction or utility (Bowman and Ambrosini 2000). In this light, the concept of value delves deeper into the reasons behind consumer choice; in other words, how do consumers decide which offering will bestow maximum utility? For example, Zeithaml incorporates the notion of utility in her definition but goes further to encompass the basis on which utility is assessed, i.e. through what is given and what is received. Mass customization: the key to customer value? may want in the future. In turbulent markets such as in the multi-media games industry where product life cycles are short, value criteria can change monthly, while in mature markets such as the industrial pump industry, value criteria may evolve more slowly. In other words, industry clockspeed (Fine 1996) plays a key role in the speed with which value criteria change. The ‘responsive agility tool’ is a company–customer insight communication technique. This tool is structured so that product attributes desired by customers are translated into a manufacturing strategy. Each product and market segment that the manufacturer currently produces for, or is contemplating producing for, requires a different application of the tool. A representative sample of the customer base should be surveyed. The tool is segmented into two sections, each section consisting of three steps. We now discuss each of these in turn. The first section examines value criteria at a macro level. The first step of this section asks, customers to rank the importance of each value criterion using a Likert scale (with 1 representing not important, 3 somewhat not important, 5 important and 7 representing crucial). The value criteria are expressed in terms of generalized leading questions. Companies may tailor (customize) the questions to fit their situation. The tool is designed to discover the value customers place on each different criterion for a particular product.2 The value criteria we use in our example were drawn from, first, the literature and, second, modified by our collaborating firms.3 The second step asks customers to rank their satisfaction level on each of the identified criteria (if appropriate), again using a Likert scale method (with 1 representing not satisfied, 3 somewhat not satisfied, 5 satisfied and 7 representing very satisfied). Figures 2(a) and 2(b) illustrate an example of the value criteria ranking scheme. The third step in the first part of the tool is to identify possible customer opportunities using an algorithm introduced by Ulwick (2002). Unlike traditional marketing satisfaction measures, the opportunity score places more weight on the customer importance score than on the customer satisfaction score4. The value criterion yielding the highest score from the opportunity algorithm becomes the customer’s ‘primary 2 463 value criteria’. Other value criteria may have also registered a significant score – this is often a judgement call between the customer and the producer – and these criteria become the customer’s ‘secondary value criteria’. Companies should now collect more detailed information about the primary and secondary value criteria before committing resources to their manufacturing strategy. The second section of the tool explores in greater detail issues pertaining to the primary criteria and directs attention to different possible sub-types or value deliverables. We now turn our attention to the example of customization to illustrate this part of the tool. 4. Primary value criteria: the example of customization We have shown that mass customization is not the only way to provide customer value. Firms may use the responsive agility tool to ascertain whether mass customization is appropriate for their customers (existing and potential). For customers who identify customization as a primary value criterion we may further distinguish the type of customization that offers the greatest perceived value. Customization is the inclusion of customer input before the product is purchased and may be differentiated according to the stage in the value chain at which that input occurs (Lampel and Mintzberg 1996). Some authors (Gilmore and Pine 1997, Alford et al. 2000, Duray et al. 2000, Da Silveira et al. 2001) have constructed typologies for mass customization; however, the majority use the ‘point of customer involvement’ for at least one their variables. The paper draws upon the Lampel and Mintzberg (1996) framework and associates the different forms of customization with four manufacturing functions: (1) Distribution customization: customers may customize product packaging, delivery schedule and delivery location. The actual product is standardized. (2) Assembly customization: customers are offered a number of pre-defined options. Products are made to order using standardized components. In the first iteration of the tool, the authors used the framework developed by Terry Hill 1983, Hill 2000). Each customer was given 100 points to allocate among the different value criteria. Although a useful device, the tool proved inconclusive because the scoring system proved to be ambiguous. Customers were uncertain about the weight they should give to the importance and satisfaction of each criterion. For instance, despite asking customers to only consider the criteria in terms of importance, many customers were influenced by pressing (i.e. real) satisfaction issues relating to recent performances. Our test firms expressed an interest to separate satisfaction and importance measures. 3 We draw upon the value strategies identified in section 2 which have been deemed successful as the starting point for our value criteria categories. 4 The opportunity algorithm is defined as: O ¼ I þ (I
S), where I equals the importance score of each criterion and S equals the satisfaction score of each criterion. The amount in parenthesis can never be less than zero to ensure integrity of the formula. 464 B. Squire et al. Importance 1 Price 2 Quality 3 Delivery VALUE-ADDING CRITERIA We value low price We value high quality 3a We value on-time delivery 3b We value fast delivery 3c We value flexible delivery times 3d Other time criteria? 4 Technical attributes 4a We value optional extras 4b We value durable/reliable products 4c Other technical criteria? 5 5a Product variety We value an extensive product range 5b 6 Other variety criteria? New products 6a We value new products 6b Other new product criteria? 7 7a Flexible volume We value the ability to order any quantity of a product 7b 8 Other volume criteria? Design 8a We value a low-cost designed product 8b We value fast designs 8c We value an innovative design 8d Other design criteria? 9 Customization 9a We value input before product purchase 9b Other customization criteria? 10 Services 10a We value after-sales technical support 10b We value product training 10c Other service criteria? 11 11a 1 Brand name We value the brand name associated with the product Figure 2(a). Importance of customer value criteria. 3 5 7 465 Mass customization: the key to customer value? Satisfaction VALUE-ADDING CRITERIA 1 Price We are satisfied with prices 2 Quality We are satisfied with quality levels 3 Delivery 3a We are satisfied with on-time delivery 3b We are satisfied with the speed of deliveries 3c We are satisfied with the flexibility of delivery times 3d Other time criteria? 4 Technical attributes 4a We are satisfied with the range of optional extras 4b We are satisfied with the durability/reliability of products 4c Other technical criteria? 5 5a Product variety We are satisfied with the variety in the product range 5b 6 Other variety criteria? New products 6a We are satisfied with the number of new products 6b Other new product criteria? 7 7a Flexible volume We are satisfied with the ability to order any quantity of a product 7b 8 Other volume criteria? Design 8a We are satisfied with the cost of designed products 8b We are satisfied with the speed of designs 8c We are satisfied with the innovation in design 8d Other design criteria? 9 Customization 9a We are satisfied with the degree of customer input 9b Other customization criteria? 10 Services 10a We are satisfied with after-sales technical support 10b We are satisfied with product training 10c Other service criteria? 11 11a 1 Brand name We are satisfied with the brand name associated with the product Figure 2(b). Customer satisfaction with value criteria. 3 5 7 466 B. Squire et al. (3) Fabrication customization: customers are offered a number of predefined designs. Products are manufactured to order. (4) Design customization: customer input stretches to the start of the production process. Products do not exist until initiated by a customer order. the customization specifications and the two ranking exercises. Having completed the importance and satisfaction ranking exercises, companies can complete an opportunity algorithm to ascertain the ‘primary customization type and specification’. Manufacturers may now consider how best to configure their resources to meet the demand for this primary customization type should a customerfocused manufacturing strategy be the goal of the company. Each customization type has an associated set of unique customization specifications such as delivery demands and technical options. Customers are asked to rank the importance of each customization specification using Likert scaling (the scale categories are defined as 1 equal to not important, 3 somewhat not important, 5 important and 7 crucial). Furthermore, customers are asked to rank their level of satisfaction of each specification using a Likert scale method with 1 representing not satisfied, 3 somewhat not satisfied, 5 satisfied and 7 representing very satisfied. Figures 3(a) and 3(b) present 1 Type of customization and specifications DISTRIBUTION CUSTOMIZATION 1a Do you value individualized delivery? 1b Do you value individualized packaging? 1c Other? 2 ASSEMBLY CUSTOMIZATION 2a Do you value a number of customized optional extras? 2b Pre-defined size options … 2c Pre-defined colour options … 2d Pre-defined technical options … 2e Other? 3 FABRICATION CUSTOMIZATION 3a Do you value a product that has a predefined design but can also be tailored to your needs? 3b Any size … 3c Any colour … 3d Any technical option (that does not impede the design) … 3e Other? 4 CUSTOMIZED DESIGN 4a Do you value a unique product design? 4b Other? 1 5. Case example We now turn to demonstrate how this tool works in practice. One of the companies we collaborated with for the development of the tool was a UK-based 2 3 4 5 Figure 3(a). Importance of customization types and specifications. 6 7 467 Mass customization: the key to customer value? 1 1a Type of customization and specifications DISTRIBUTION CUSTOMIZATION We are satisfied with individualized delivery 1b We are satisfied with individualized packaging 1c Other? 2 ASSEMBLY CUSTOMIZATION We are satisfied with the number of customized optional extras 2a 2b Pre-defined size options … 2c Pre-defined colour options… 2d Pre-defined technical options … 2e Other? 3 FABRICATION CUSTOMIZATION We are satisfied with products that can be tailored to our needs 3a 3b Any size … 3c Any colour … 3d Any technical option (that does not impede the design) … 3e Other … 4 CUSTOMIZED DESIGN 4a We are satisfied with unique product designs 4b Other? N/A 1 2 3 4 5 6 7 Figure 3(b). Satisfaction with customization types and specifications. medium-sized firm with sales of £15 million in 2002. The firm produces products for an integrated system used in the retail industry and sells to end-users, OEMs and distributors throughout Europe and Asia. The company manufactures both standardized and all four types of customized products: customized designed products, fabrication customization, assembly customization and individualized delivery. The company was interested to discover if it was really necessary to offer all four types of customization. The responsive agility tool was first tested with the collaborative firm’s international marketing and sales team to ensure the appropriateness and usefulness of the tool’s questions and the scoring system. The authors of this paper adjusted the questions and applied the tool to three key customers (representing the two largest buyers in the UK and the sole distributor in the Benelux). As this was a proto-type tool, the authors undertook this endeavour to gauge customer responsiveness. The benefits of using a third-party facilitator can also ensure impartiality but the tool is designed for the company to use without outside assistance (in fact, our collaborator is preparing to use a variation of the tool with all international customers in the autumn of 2003). Here we present the results of the second section only. The results of the ranking are presented in figure 4. Taken on their own, each customer ranking illustrates the importance and satisfaction of each customization type and specification but companies have to judge which areas deserve attention, i.e. should a company focus more on improving areas of high importance or areas of low satisfaction? Combining the two measures 468 B. Squire et al. Importancea Type of customization and specifications DISTRIBUTION CUSTOMIZATION Individualized delivery a b Satisfactionb Customer A Customer B Customer C Customer A Customer B Customer C 5 1 5 3 3 5 Individualized packaging 4 1 3 3 3 5 ASSEMBLY CUSTOMIZATION (wide array but limited number of features) Pre-defined size options 5 2 3 5 5 3 Pre-defined colour options 5 5 3 4 5 5 Pre-defined technical options 5 3 3 5 5 3 FABRICATION CUSTOMIZATION (pre-defined design but can also be tailored to their needs Any size (pre-design) 4 3 3 3 5 3 Any colour (pre-design) 5 5 1 3 5 3 Any technical option (that does not impede the design) CUSTOMIZED DESIGN 5 3 1 3 5 3 Unique product design 4 5 1 4 5 5 Importance scales: 1 represents not important, 3 somewhat not important, 5 important and 7 crucial. Satisfaction scales: 1 represents not satisfied, 3 somewhat not satisfied, 5 satisfied and 7 very satisfied. Figure 4. Example of responsive agility tool: customization type and specification, importance and satisfaction rankings. using the opportunity algorithm provides companies with a method to prioritize the customization types with a balanced approach. The results from the application of the algorithm are presented in figure 5. The figure illustrates that our collaborator’s customers want different types of customization. The primary customization types and specifications for Customer A (a system integrator) were individualized delivery, any colour and any technical option (that did not impede the design). Customer B (a large distributor) wanted either a choice of pre-defined colours or to have the option of picking any colour, while Customer C (a systems integrator representing an OEM) wanted the company to meet individualized delivery specifications. All three customers indicated a set of secondary customization types and specifications that the company may have to consider as well. For the managers of our collaborative company, this tool revealed that customization can present opportunities but also challenges. The three customers – significant buyers in terms of volume and sales – tend to demand different customization specifications, which the company is capable of providing through a local and highly responsive manufacturing operation. But listening to the customer also means that the company cannot focus on only one or two customization types and steer resources away from those areas not in demand. The ability to deliver all the specification types is explicitly required. It appears from this case that customers will press for the full gambit of customization specification once they are aware that customization is a possibility. The use of tools such as the responsive agile tool should not replace direct contact with customers. In fact the tool should be seen as a complementary technique, one that can provide additional insight into customer–producer relations. The results generated from the ranking exercises and from the opportunity algorithm are ordinal at best and remain highly subjective, but they can be a focal point for the marketing and manufacturing departments. 6. Determining perceived customer value? The identification of the primary value criterion focuses the company to a particular product attribute but the customer may also value other criteria, hence the importance of the secondary value criteria. We suggest that each level of customization may create tradeoffs with factors such as cost, quality, speed of delivery, delivery reliability, flexibility and rate of new product introduction (Yeh and Chu 1991, Mapes et al. 1997). Schonberger (1986) suggests that such tradeoffs are ‘myths’ and it is possible to achieve success on several 469 Mass customization: the key to customer value? Individualized delivery 8 Unique product design 6 Individualized packaging 4 2 Any technical option (not to impede the design) Pre-defined sizes 0 Any colour Pre-defined colours Any size Customer A Pre-defined technical options Customer B Customer C NB: The largest number for each series indicates the primary customization type and specification. Figure 5. Primary customization types and specifications example. competitive priorities. Although these tradeoffs may be overcome in the long term, especially by agile manufacturing capabilities (Slack 1991, Bessant et al. 2001), they still represent real compromises for manufacturing firms in the present (Da Silveira and Slack 2001). For example, at the distribution stage, the degree of customization is minimal, while at the product design stage the degree of customization is substantial. Distribution customization may not incur any tradeoffs with price and delivery factors while prices may be higher and the delivery time longer for products at the design customization stage. A customer may have identified customization as a primary value criterion and fast delivery as a secondary value criterion. This may lead the customer to identify a form of distribution customization as their primary customization type. Staying with this example, the customer will not know the complete composition of this tradeoff until the manufacturer proposes a price and delivery schedule for the product. On the other hand, the manufacturer cannot propose a price or delivery schedule until their internal manufacturing resources have been configured. Companies that follow a customer-focus manufacturing strategy will identify the primary value criterion from a representative sample of customers. Should customization be the key value criterion then a further step is required to determine the level of customization. Only at this point can manufacturers consider reconfiguring their internal resources (processes, technology, people and supporting networks) to meet this demand. Customers cannot determine the real value of the product until the manufacturer proposes a real value proposition. 7. Conclusion This paper asked whether mass customization is the only way to create customer value. Customer-perceived value consists of benefits and sacrifices (Zeithaml 1988). Mass customization may raise the benefits by closely matching a product to a customer’s needs, while simultaneously reducing the sacrifices typically associated with a customized offering. However, fragmenting markets suggest customer value criteria are defined on an everincreasing number of dimensions, of which customization is one. It is argued that mass customization may augment customer perceived value, but only for certain customers, in certain markets, at certain times. It is critical that firms understand whether their customers (existing and potential) really do value customization. The paper presents a tool that may provide the basis for this decision. With the use of the responsive agility tool, managers can make use of a proxy customer value system by measuring criteria in terms of importance and satisfaction. Often, the results of the customer satisfaction surveys rarely influence the manufacturing department but we stress that the questions used to reveal the value criteria should reflect a range of possible manufacturing strategies. Should a company want to follow a customer-focus strategy, the opportunities revealed by 470 B. Squire et al. this tool will be a starting point from which all activities, processes and structures would be aligned. It is suggested that customization represents a tradeoff with several factors, such as price, speed of delivery, and effort. Future research is required to validate such a view and to uncover the nature of the tradeoff. The tradeoff requires the input of both the customer and manufacturer. The manufacturer must negotiate the level of sacrifice the customer is prepared to accept for the benefits customization can bring. Such a negotiated process may also be an important area of future research. Acknowledgements This research was partly funded by a grant from the Engineering and Physical Sciences Research Council, no. GR/R26559/01. This manuscript has benefited from the helpful comments of three anonymous PPC reviewers. References ALFORD, D., SACKETT, P., and NELDER, G., 2000, Mass customization – an automotive perspective. International Journal of Production Economics, 65, 99–110. ANDEL, T., 1998, Mass customization for markets of one. Transportation and Distribution, 38(11), 59–61. 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