Saturday, May 14, 2005

Supply chain impacts of mass customization

I argued in a previous post that the trend in the future will be mass customization at a small markup will be the wave for the "trading up" items and "make it cheap in China" will be the wave for the "trading down" items. What is the impact of that on supply chains?
The internet has created a community so large, so easily accessible, and so easily segmented (hence targeted) for the purpose of transacting business that there is now ability to make money off of customized products that appeal to only niches. Exhibit A is the store front for left-handed rulers that my friend Narayan Venkatasubramanyan pointed me to. As explained in this article (subscription required) in Fortune, some large vendors, hawking physical goods including Lands' End, Levi's, Nike, M&M's, and even the U.S. Postal Service, have tried mass customization with very mixed results. Levi's has stopped offering its customized versions of its classic denims, for example. A few notable exceptions, such as Dell PCs, have succeeded though. More vendors will start succeeding in mass customization and this will impact the logistics, the manufacturing process and the manufacturing location. Here are some illustrations:
  1. Delivery: An article (subscription required) in Fortune says about Fedex Freight, its Less Than Truck Load business: "At the moment, though, the business is wildly lucrative. Although it accounts for only 11% of FedEx's total revenue, FedEx Freight is growing faster than any other unit." When there is mass customization in products, you are not going to want to wait around for consolidating shipments into container loads.
  2. Manufacturing Process: In another article (subscription required), we find Xerox and Kodak are going head-to-head in a fast-growing sector of one of the world's oldest and largest industries: printing. The ongoing shift from so-called "offset" printing to digital or "on demand" helps companies to produce books at low prices even at low quantities aiding mass customization.
  3. Manufacturing Location: In this article titled "Zara has a Made-to-Order Plan for Success," (subscription required) the tight linkage between production and retailing, with close geographical proximity of production facilities to the retail store is explained. This could be a trend for manufacturing in high cost areas like the US and Western Europe. Locate configuration or light manufacturing facilities close to the market for mass customization.
What do you think?
Karthik Mani

1 comment:

  1. hi there

    i saw you article and actually have a more general question about scm.

    " what are the scm attributes/characteristics of from e.g. Levi's?"

    I hope you can help me further

    Best regards,