Tuesday, October 18, 2005

notes from Mass customization, the new frontier in business competition by Pine, 1995

Here are some main ideas I took from the book

  • In the emerging system of mass customization, firms have thrown away the old paradigm of Mass Production by creating a variety and customization through flexibility and quick responsiveness. This is a new logic more suited to a world in which stability and control can no longer be maintained.

  • Creation of new flavors of similar products with short development cycles, e.g. cereals do not last much longer than the popular movies they tied to, and the idea is less demand for each individual product but increasingly stable demand for the company. The production system is driven by market and consumers and must produce a number of different, high quality products; production of affordable goods and services with enough variety and customization that nearly everyone finds exactly what they want. Instead of large & homogeneous markets, with low costs and consistent quality in mass production, mass customization offers heteregeneous niches and high quality goods and services.

  • In mass production low costs are achieved through economy of scale and in mass customization low costs are achieved primarily through economy of scope (a single process to produce a greater variety of products). Then this notion of EQQ, economic order quantity; for instance when customer desires are changing rapidly or demand is undertain, the cost savings of eliminating changeover time can be tremendous. Then as Stan Davis says "The general message is, the more a company can deliver customized goods on a mass basis, relative to their competition, the greater is their competitive advantage".
    However like mass production, mass customization generally produces in high volume, has low unit costs, and often (but not always) relies on high degrees of automation.

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