Mass customization is identified as the process of delivering customized goods and services to the market with the intention of satisfying a specific customer’s needs. This is a modern business concept that is also known as made-to-order or built-to-order. It is a technique used by marketing and manufacturing departments of many mass production organizations that combines personalization and flexibility of custom-made products with low unit costs involved with mass production.
Mass customization provides the benefit of integration, flexibility, and personalization that best meet the needs of individual customers. This adds a higher benefit in the market while providing the benefit of low production costs of the mass production.
In simple terms, mass customization allows the customers of a certain product to design certain made-to-order features of a product while keeping the cost of the product closer to the usual mass production cost. This feature of flexibility allows the customers to mix and match the available options of the product specifications and eventually realize a semi-custom-made product as a final product.
This is a concept that can be applied to many business fields. However, the most common application can be seen in the retail industry. The software development industry and financial industry are two main business sectors that use the concept of mass customization. Software developers allow the end-users of the software to add or make changes to specific functions of the core product based on their specified needs. Increasing the functionality of the product, increasing the user-friendliness, or making the software more relatable to the business industry are a few main intentions of customized functions.
Apart from that, in the financial sector, the provided services are subjected to many customization options through the growth of independent, fee-only advisory firms. It is expected to attract more customers to the product by providing a unique value at a lower cost is the expectation of mass customization of financial products.
Manufacturing companies generally use readily available information, effective and efficient processes to implement and maintain the process of customization. However, there are both advantages and disadvantages that can be identified in the mass customization process.
Advantages of Mass Customization
– Customer Satisfaction
This concept allows manufacturing products that are one of a kind, with unique features. It helps to increase customer satisfaction and creates an opportunity to attract more customers to the product. This can lead the product to achieve competitive advantages in the target market.
– Better Profits
Through customization, the companies are allowed to charge a premium for their products. While maintaining the cost of the customized products slightly higher, the nominal increase of the cost is covered with the pricing strategy of the product. This allows the business to make better profits than mass production.
– Streamlined Production
Even though mass customization creates concerns related to the impact it can create on the production line, it typically does not create a disruptive impact on the production. In many scenarios, the production process is not affected until near completion or the customized components are created ad ready for assembly. This is the point where mass customization and pure customization vary the most in the production process.
– Increase customer loyalty
Due to the perceived value derived from mass customization, the business has a higher chance to retain the customers with the product for a long period of time. The ability for the customers to enjoy the product with customized benefits will create a returning customer base and this can provide a competitive edge to the product in the operating market.
– Improved inventory management
The process of customization helps businesses to reduce their inventory management costs. By using a just-in-time stock management strategy, the business can minimize the overhead costs by reducing the storage and inventory management requirements.
Disadvantages of Mass Customization
– Challenges in handling product returns
When there is a product return due to some reason, the business may have suffered losses due to customization. Depending on the customization, there is a possibility that the business might not be able to resell the product to another customer.
– Cost involved with individual manufacturing
Since there is a semi-customization involved with every product, there is a certain cost involved with manufacturing each product separately. This can be considered as an unnecessary cost compared to mass production. When implementing mass customization methods, it is important for the business to check whether the premium price has the ability to outweigh the additional overhead costs involved with customization.
– Requirements of additional stock
Compared to mass production, mass customization may require additional stocks of inventory due to various add-ons to the product. This may involve additional ordering and holding costs.
– Impact on the production time and supply chain management process
Production time can vary for each individual product based on the customization type. Apart from that, it can create a significant influence on the supply chain management process of the business as well. Unless the business takes a strategic approach to minimize these disruptions to the production process and ensure a streamlined production, it can make a huge adverse impact on the entire production process.
– Requirement of vastly adaptable manufacturing tools
Implementation of customization in a production line can often be highly expensive and prolonged. it is difficult for businesses to implement such systems without a big capital and knowledge.