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educing the costs of production and logistics. Therefore, mass customization inherently makes high-value-added products and services possible through premium profits derived from customized products. The chapter also introduces techniques of integrating product life cycle concerns in terms of how to connect customer needs proactively with the capabilities of a manufacturer or service provider during the product-development process. Major technical challenges of mass customization are also summarized.
1.1. Concept Implication
Mass customization is defined here as “producing goods and services to meet individual customer’s needs with near mass production efficiency” (Tseng and Jiao 1996). The concept of mass customization was anticipated by Toffler (1971) and the term was coined by Davis (1987). Pine (1993) documented its place in the continuum of industrial development and mapped out the management implications for firms that decide to adopt it. Mass customization is a new paradigm for industries to provide products and services that best serve customer needs while maintaining near-mass production efficiency. Figure 1 illustrates the economic implications of mass customization (Tseng and Jiao 1996). Traditionally, mass production demonstrates an advantage in high-volume production, where the actual volume can defray the costs of huge investments in equipment, tooling, engineering, and training. On the other hand, satisfying each individual customer’s needs can often be translated into higher value, in which, however, low production volume is unavoidable and thus may lend itself to becoming economically not viable. Accommodating companies to garner economy of scale through repetitions, mass customization is therefore capable of reducing costs and lead time. As a result, mass customization can achieve higher margins and thus be more advantageous. With the increasing flexibility built into modern manufacturing systems and programmability in computing and communication technologies, companies with low to medium production volumes can gain an edge over competitors by implementing mass customization.
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Mass Production Cost CurveEconomy of ScopeEconomy of ScalePrice that customers Mass Customization Cost Curve Low MediumHigh Production Volume$/Unit Mass Production Net Value-added Net Value-added Customization Massare willing to pay
Figure 1 Economic Implications of Mass Customization.
In reality, customers are often willing to pay premium price for their unique requirements being satisfied, thus giving companies bonus profits (Roberts and Meyer 1991). From an economic perspective, mass customization enables a better match between the producers’ capabilities and customer needs. This is accomplished through either developing the company’s portfolio, which includes products, services, equipment, and skills, in response to market demands, or leading customers to the total capability of the company so that customers are better served. The end results are conducive to improvement in resources utilization. Mass customization also has several significant ramifications in business. It can potentially develop customer loyalty, propel company growth, and increase market share by widening the product range (Pine 1993).
1.2. Technical Challenges
The essence of mass customization lies in the product and service providers’ ability to perceive and capture latent market niches and subsequently develop technical capabilities to meet the div