by Sudeepa Nair

Created on: March 11, 2009

Mass production of standardized goods provides the cost advantages of economies of scale. It keeps the production costs low, while allowing an increase in production. But the drawback is that the variety of products offered, is limited and if every player in the market indulges in mass production, the product becomes commoditized as there is little differentiation. The market for that product then sees a price war. In such a situation if a new player offers a degree of customization, competition shifts from the price to the product and the consumer becomes the winner. This is what mass customization does.

Mass customization is the mass production of customized goods with a goal to control production costs at the same time, cater to the consumers' individual needs. A good example is that of Dell, which, although, sources components globally and in bulk, offers product customization in the form of consumer defined configuration. Mass customization retains the cost advantages of the economies of scale, while simultaneously improving demand management, inventory management and consumer interaction. Thus, it not only became an innovative method of producing goods but also spawned innovative methods in supply chain management and retailing. Supply chain management, under mass customization, saw the adoption of (Just in Time) JIT procurement and inventory management. Mass customization also reduced inventory management costs as goods ceased to be mass produced and stored, waiting for consumer demand to drag them out from the warehouse. Production was more in sync with demand and hence procurement costs reduced.

Retailing put up a more consumer friendly face to improve consumer interaction. Mass customization changed the role of consumers to co-producers or prosumers'. Consumer interaction became very important for demand management, procurement as well as production. Retailers adopted different channels for consumer interaction including the World Wide Web. Internal information systems became robust both for producers as well as retailers. Mass customization brought forth the importance of seamless information flow in the supply chain. Technologies like RFID offer retailers a number of opportunities to capture customer tastes, instead of depending only on the Point of Sale (POS) data. For instance, a blog post at ZDnet.com by Roland Piquepaille, dated October 2007, talks about the German retailer, Metro, using RFID tags to provide customized ensemble suggestions to consumers in dressing rooms!

Above all, with mass customization, consumers came out winners, as products were made to satisfy their individual needs and wants. Competition among producers ensured availability of a variety of products at competitive prices. As mass customization gains ground, technology and innovation will definitely play a major role in delivering goods and services to the consumer, how, where and when she wants them.

References: Mass Customization by B Joseph Pine, Harvard Business Press

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