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Mass customization and its importance in a company

Description Table of Contents Topics Covered Preface Indices Preface Nowadays, the competitive situation of companies is characterized by a very strong orientation towards product individualization. Mass customization and its importance in a company have to struggle to gain new customers.

The individualization trend is mainly ascribed to social changes. The high growth of population was a key factor for the emergence of the mass production system, one century ago. But nowadays, especially in the industrial nations, the demographic development shows the population to be steadily decreasing. Simultaneously, wealth and the demand for luxury continuously increase. Psychologists know that in the postmodern era, the need for change and novelty is becoming as important as survival for human beings.

The human behavior is essentially determined by the individual principles and is rarely oriented on the behavior of the others self-determination. It is also well known that if more and more people possess the same object, then the possession of this object is no longer interesting and loses its attractiveness Piller, 1998.

All of these reasons have contributed to a need for individualization and the demand for products that exactly meet the individual expectations of customers.

Another important trend in the business world is the continuous decreasing of the product life cycles. Consequently, the timeframes for product amortization are considerably reduced. At the same time, the costs of research and development steadily increase because of higher technological complexity of products Nilles, 2002. In addition, the ability of fulfilling individual customer needs necessitates the capability of producing a large number of product variants, which induces high costs at both operations- and manufacturing-related tasks.

In effect, in contrast to the mass production system, in which the economies of scale can be fully utilized, the individualization of customer requirements usually involves a loss of efficiency. On the other hand, globalization and deregulation of markets as well as the rapid diffusion of e-commerce and e-business over the Internet has led to more intensive and aggressive competition. This has also forced companies to develop strategies in order to resist strong price pressures, especially from those companies that are producing in low-wage countries.

The challenge that manufacturing companies have to face is to provide individualized products and services while maintaining a high cost efficiency. To be successful, companies have to address both of these perspectives, which are necessary for gaining a competitive advantage. The manufacturing of products according to individual customer needs is referred to as product customization.

Whereas customization does not necessarily imply a focus on the cost perspective, in this book we will concentrate on both product customization and cost efficiency, namely mass customization, which is a new business paradigm that is very challenging for manufacturing companies.

Mass customization is a business strategy that aims at fulfilling individual customer needs with near mass production efficiency Pine, 1993. Whereas the literature includes many contributions that discuss the strategic benefits of mass customization, there are large deficits concerning its implementation in practice. Companies that want to pursue this strategy need a set of practical tools in order to make mass customization work efficiently. The main problem is about how to be able to produce a large number of customer-oriented product variants by simultaneously providing prices that do not considerably differ from those of mass products.

Providing customers with individualized products at affordable prices is the main goal of mass customization. However, customers generally accept paying premium prices compared to standard products because they honor the additional benefits of customized products. As a result, an optimal understanding of customer needs is a necessary requirement for the success of the strategy. In fact, the mass customization and its importance in a company on customers is not new and not only specific to mass customization.

However, during the pursuit of mass customization, customers have to be seen as partners in the value creation, which implies a deeper customer-supplier relationship. Customers are provided with a high number of product variants and are generally supposed to have the capability of making a rational decision. But this is not true because customers are not able to make optimal choices in extensive choice environments.

Thus, models for a better conception of customer needs and preferences are required because the customer is a key factor that considerably determines the success or failure of the strategy.

Due to the fact that it is necessary to satisfy the customer, the only chance to meet this challenge is to reduce the customizing costs during the product modeling process. The universal remedy for this is to design, implement, and use a supporting computer system. A computer system is, once implemented, the best way to cope with the problem, because it automates main parts of product designing and producing. This reduces complexity and human efforts, which in the end lead to lower costs.

Even if the additional investment for creating such systems is taken into account, the cost-cutting effect of mass-customization supporting systems will mass customization and its importance in a company this by far.

Furthermore, the advances realized in information technology are critical enablers, which mass customization and its importance in a company this strategy function efficiently. Information systems can be implemented to support diverse activities in the mass-customization value chain. They assist customers during the product specification phase in order to lead them in a fast-paced manner to the product variants corresponding to their individual requirements.

Modern information systems, which support open innovation, even enable customers to participate actively in the product design. In addition, mass customization information systems contribute to helping companies mitigate excessive product variety and increase cost efficiency on the shop floor and logistics through optimal product modeling, production planning, and scheduling.

Logistical issues like planning deliveries of raw materials as well as semi-finished goods become more important. Although the need for supporting information systems becomes obvious, suitable tools for addressing this relevant issue in the specific case of mass customization are missing. Therefore, the intention of this book is to bridge the gap between demand and supply in order to provide information and managerial tools that aim at coping with all of the depicted problems.

This book is divided into three sections. The first section Chapter I-IV deals with the ways of product configuration and modeling for mass customization as well as the existing benefits and challenges for mass customization, especially in engineer-to-order companies.

The second section Chapter V-IX starts with a presentation of frameworks in the course of mass customization. Afterwards, mass customization information systems are organized across the supply chain. More detailed, this book includes the following: A Review of Benefits and Challenges provides a systematic review of literature on how mass customization with configurable products and the use of configurators affect companies.

Configurable products are an important way to achieve mass customization. A configurable product is designed once, and this design is used repetitively in the sales-delivery process to produce specifications of product individuals meeting customer requirements.

Configurators are information systems that support the specification of product individuals and the creation and management of configuration knowledge, therefore being prime examples of information systems supporting mass customization. However, to the best of our knowledge, there is no systematic review of literature on how mass customization with con- figurable products and the use of configurators affects companies.

This chapter focuses on benefits that can be gained and challenges that companies may face.

Mass customization

A supplier can move to mass customization and configuration from mass production or from full customization. The chapter also reviews benefits and challenges from the customer perspective. Finally, the future research directions, open challenges, and problems are identified. Chapter II Product Modeling and Configuration Experiences attempts to present an alternative for product modeling based on applied research activities.

The model proposed is based on a concept supported by different views: With the aim of making the model learner-friendly, the chapter also presents an industrial case applied in the lift industry. The specific problems, the model used, the implementation carried out, and the results obtained are described in detail. The objective is to make a contribution based on the industrial practice to one of the basic enablers for product configuration.

The final aim is to speed up the supply-chain process in mass customization scenarios. The relevant main literature in the area is reviewed to identify the benefits.

Furthermore, the challenges of implementing product configuration in an engineer-to-order company are described. Finally, a number of suggestions for meeting these challenges are presented. In addition, a case description is introduced which supports that product configuration can benefit engineer-to-order companies even though there are a number of challenges to be met. It investigates the specific requirements of supply chain processes in terms of flexibility versus standardization, evaluating the feasibility of designing, customizing, assessing, and improving logistics processes within a framework provided by process reference models.

Mass customization and, in particular, a configuration approach for financial services will be discussed for their applicability for reducing complexity in a process environment.

Recommendation systems have been recently introduced to e-commerce sites in order to solve the information overload and mass confusion problem. This chapter applies knowledge discovery techniques to overcome the drawback of conventional recommendation systems approaches.

Mass customization

The framework of the associative classification-based recommendation system has been addressed in this chapter. The system analysis, design, and implementation issues in an Internet programming environment are also presented. Taking the advantage of accumulative knowledge from historical data, the ef- ficiency and effectiveness of B2C e-commerce applications are improved.

Chapter VI Knowledge-Based Recommender Technologies Supporting the Interactive Selling of Financial Services presents the knowledge-based recommender environment Koba4MS Knowledge-based Advisors for Marketing and Sales which allows a flexible mapping of product, marketing, and sales knowledge to the representation of a recommender knowledge-base.

In Koba4MS diagnosis, personalization and knowledge acquisition techniques are integrated to provide an infrastructure for the interactive selling of financial services. Those require deep knowledge about the product domain as well as about potential wishes and needs of customers. In this context, sales representatives can differ significantly in their expertise and level of sales knowledge. Therefore, financial service providers ask for tools supporting sales representatives in the dialog with the customer.

Chapter VII Developing Interoperability in Mass Customisation Information Systems proposes a standardbased framework to assist industrial organizations to develop interoperability in mass customization information systems. After identifying the major challenges for business and information systems in mass customization, the authors propose an innovative standard-based conceptual architecture for a combined model-driven and services-oriented platform.

Furthermore, a distributed, real-time, Java-based, mobile intelligent information system is presented.

Description

The model provides end-to-end visibility across the entire supply chain, allows for a collaborative and synchronized production system, and supports an event-based manufacturing environment. The system introduces four general purpose intelligent agents to support the entire mass-customization process. These results verify that the successful adoption of this system can reduce inventory and logistic costs, improve delivery performance, increase manufacturing facilities utilization, and provide a higher overall profitability.

Therefore, this chapter introduces different levels of customization and mass operations as well as three types of mass customization. It argues that in each mass customization type, information systems in upstream and downstream of the decoupling point can be varied.

Consequently, information flows in different types of mass customization have been examined.

Topics Covered

This analysis is an endeavor to organize mass customization information systems across the supply chain; it can also be a useful structure for future researches in this area as well.

Section III — Innovative Information Technology Approaches for Mass Customization Chapter X From Strategy Definition to Product Derivation Using a Scenario-Based Architecting Approach presents a set of scenario-based methods and techniques to support the development of system architectures that are more future-proof, and are also advantageous for mass customization.

These methods and techniques have originally been developed for highly-customized professional systems, in particular medical imaging equipment. The chapter introduces mass customization as a business strategy that aims at satisfying, in a timely and cost-effective manner, the various needs of different customers.

For that purpose, a system architecture is needed that supports two different kinds of variability: Variability in space provides a range of different products where each addresses the specific needs of an individual customer; and variability in time allows the products to evolve and thus meet new requirements. In defining such an architecture, two issues should be considered.

The other is whether the architecture can address these changes effectively.