The Federal Government’s Entrepreneurs’ Programme held a special learning event on 7-8 December in Melbourne, during which Professor Kjeld Nielson from the Department of Materials and Production at Aalborg University in Denmark gave a presentation entitled ‘Introduction to Mass Customisation’. Here, Mal Clark summarises the key points.
In this report, certain generic words such as product and others are used. However it should always be understood that, while manufacturing terminology may be used, the ideas described are equally applicable to service organisations. They may also cover specific elements of a business process, rather than simply the whole business.
Many people have the impression that mass customisation is about mass production, and through some magical process allows an unlimited number of variations to be offered to the customer. This is wrong. Mass customisation is about tailoring the offering to the customer, while retaining the lower costs per item that are offered by mass production. This allows SMEs to complete with larger enterprises.
Mass customisation is also highly data-driven. Consequently, it is relevant to the ongoing developments in the field of Industry 4.0.
From pull to push, and back again
Before industrialisation, everything was craft production, where the customer specified what was required and this was provided, but the cost was high. It was a ‘pull system’.
Then during the Industry 1.0, mass production started, costs were reduced, but the options for the customer were also reduced. This continued through Industry 2.0 and Industry 3.0, with ever-reducing costs per item, abeit accompanied by a requirement to produce higher volumes. This resulted in an ongoing decline in the potential for variations. The mass production phase was a “push system”, where the supplier pushed what they thought the customer wanted onto the customer.
We have probably all observed cases of businesses who have adopted automation because labour costs were perceived to be too high. This approach foregoes the key component of ‘customer pull’, instead jumping straight into the ‘supplier push’ way of thinking and this will offer the way forward. However, because they often do not have the volume to justify the capital investment of automation, these businesses are forced into the relentless pursuit of lower costs and higher volumes, following in the footsteps of numerous businesses since the early 20th Century.
With the advent of Industry 4.0, the question being asked is: can we achieve the ability to offer choice, while still retaining the low costs per item achieved in mass production? This would effectively amount to a return to a “pull system” from the craft production period. The answer is mass customisation.
Modularisation
The starting point for mass customisation is modularisation – breaking down the business process steps into modules that have common characteristics. When these modules are combined, multiple options for the customer arise. An example is Lego blocks. From just six items of one module comes over 915 million customer options.
Mass customisation is not mass production. The concepts can even be applied by businesses offering only a few items a year. The basis of mass customisation stands on three components, all of which must be developed, implemented and refined concurrently. The three platforms are: Solution Space Development; Robust Process Design; and Choice Navigation.
Solution Space Development
Solution Space Development involves developing a deep understanding of the space the business wants, needs, or can operate in; and its customers’ current needs, and more importantly their future needs (which they currently do not even know they need). There is a requirement for a great overlap of these two – business capability and customer needs. In summary, what space is the business in, what space is the customer in now, and what space will the customer be in sometime in the future? This can only come from data.
In considering the current and nascent needs of the customer, there is a requirement to develop an understanding of the benefit of choice. More choices do not necessarily leads to improved benefits. There is a limit to the value of providing more choice as the customer cannot differentiate available options. Obviously modularisation helps delay the increasing cost of variety.
Robust Process Design
Robust Process Design is all about flexibility, agility and changeability, to deliver variability coupled with standard work within the business process modules. These are all the hallmarks of employee engagement, and a culture of continuous improvement, or Lean Manufacturing. Successful employee engagement is data-driven with intimate knowledge of internal performance
Choice Navigation
Choice navigation entails helping customers feel they have all the choices they desire, but this is constrained within your product offering. It requires subtlety to ensure that, while choice is offered with unbridled flexibility, the business does not degenerate into a “one-off” configurator with the inherent costs associated with craft production.
There are several software vendors entering this space such as:
- Shape Diver. www.shapediver.com
- Sofon Guided Solutions. www.sofon.com/en
- 3D Source Product Configurator. www.3dsource.com
Choice navigation software options also exist for services.
Where things go wrong
There have been multiple high-profile firms whose attempts to implement mass customisation have gone wrong. Here are two prominent examples:
- Individualised Levi Jeans. In this example, the failure was due to choice navigation being too broad, with every size being offered in every style. There was no ability to modularise, and this was exacerbated by inefficient business processes – the jeans were still craft manufactured.
- In this case, customers were able to choose percentages of up to 80 individual muesli ingredients. The venture failed due to business processes requiring to go through every filling station no matter how many ingredients were selected, meaning volume was not scalable (i.e. modularised). Moreover, the reducing benefit of choice led to customer fatigue.
Why do it? And where to from here?
If completed successfully, mass customisation offers the ability to reduce costs by standardisation, while increasing revenue by offering customers what they want, even when they do not know they want it and they are prepared to pay more for the product.
In my opinion, when considering whether a business might consider mass customisation, the firm must have control of intangible assets, such as intellectual property (IP). Firms that are “build to print” or “service to order” have limited ability to embrace mass customisation. IP may be registered, such as design, trade secrets such as recipes, or knowhow such as service provision.
The business needs to be willing to accept that it needs to review and analyse all of its products and services to consider how to modularise each component into reproducible elements that when combined create new offerings. The business also needs to be ready, if not fully capable, of being data-driven, from understanding customer needs, to having a full understanding of business processes and being able to implement an appropriate choice navigation process (generally software-driven).
Mass Customisation is a holistic business process – the business must be willing to jump past mass production straight to mass customisation.
Mal Clark is a Business Adviser with AMTIL under the Entrepreneurs’ Programme, a Federal Government flagship initiative focused on raising the competitiveness and productivity of eligible companies at an individual level. AMTIL is a partner organisation in the Entrepreneurs’ Programme. For more information about the Entrepreneurs’ Programme, please contact Greg Chalker, Corporate Services Manager at AMTIL, on 03 9800 3666 or email gchalker@amtil.com.au.