Mass Customisation - Pros & Cons

• Mass customization

  The use of computer-aided manufacturing (CAM) to produce individually tailored output to customers on a large scale
• Example of mass customization

  • Macbook
• Customization

  • Individually tailored to customers in terms of RAM, capacity, outer shell
• Various adaptations of mass customization exist
• Pros of mass customization

  1. Increased operational flexibility

  2. Eliminate intermediaries

  3. Less waste

  4. More stimulating work environment
• Increased operational flexibility

  Better meets customer needs, higher sales, higher revenues, potential for repeat business, potential for brand loyalty, potential for inelastic product demand, added value
• Eliminate intermediaries

  Increases profit margins
• Less waste

  Output is produced to customer preferences, reducing chances of waste
• More stimulating work environment

  May lead to lower absenteeism and reduced labor turnover
• Cons of mass customization

  Requires computer-aided manufacturing (CAM), CAD costs, labor training, financial considerations, potential need for external sources of finance (debt or equity)
• Do you have the finances available to do this or you're going to have to get sources of finance
• How to get sources of finance

  1. Debt

  2. Equity
• Getting sources of finance

  Impact in the short term: High capital expenditure, increased operational flexibility, reduced intermediaries' profit margins, less waste
• High capital expenditure

  Offset by increased operational flexibility, reduced intermediaries' profit margins, and less waste in the long term
• Mass customization

  Less scope for economies of scale, potential for more waste, slower response speed, higher capacity utilization issues
• Mass customization suggests a wider range of products, leading to the need for more raw materials or components
• Wider range of products may result in less negotiating power with suppliers and higher prices
• Higher prices from suppliers increase average cost per unit, impacting economies of scale
• Mass customization may lead to more waste if quality control and quality assurance are poor
• Individually tailored output in mass customization may result in customer dissatisfaction and product rejection
• Slower response speed in mass customization compared to mass production
• Lower capacity utilization with multi-product production lines in mass customization may lead to inefficiency and increased average cost per unit