Mass Customization: Tailoring To The Individual

NIke, Dell, and Swatch

The system of mass customization benefited manufacturers by offering services and achieving greater customer satisfaction and brand loyalty. In addition, customization brought greater advance information on market trends and reduces inventory. Usually, many companies cannot handle the mass customization system because of the way how their supply chains are designed and optimized for producing predetermined amounts of stock.  Because of this, some manufacturers believe that the profit margins are too low for those who adopt the mass customization system, and thus the system is not economically feasible since it depends on the type of the product.

To increase sales, most manufacturers integrate the most common appealing features into their products to move units.  Conversely, the ideology of mass customization is that every aspect of a product will be tailored to a customer specifically.  For example, Swatch, the world’s largest watchmaker company, produces standardized internal mechanism components en masse, but also offers a wide variety options such as colors, straps, faces, and so on. The idea of a personally tailored product has been adopted by prominent vehicle manufacturers, computer manufacturers, and many more.

Dell, as another example, has demonstrated the idea of mass customization and utilizes it to allow their customers a very personal PC experience. Dell allows customers to assemble their own desktops and laptops online by customizing components such as, hard disk, graphics cards, processor, memory (RAM), and other options before assembly and delivery.  Amazingly, Dell manages to offer a fair amount of variety with their components, but achieves the lowest cost of production in the entire industry, leveraging the benefits of e-commerce and mass customization in selling directly to customers.

Both Swatch and Dell offer personalized experiences, but these two manufactures do not offer an unlimited number of choices.  Instead, companies learn what sort of spectrum that customers would be comfortable purchasing in and adjust the limits accordingly so that customers will end up happy with both their product and service.

Nike, as the most popular sports equipment manufacturer in the world, pioneered many ideas in the industry of mass customization. In spite of this large number of products tailored to golf, basketball, tennis, and soccer enthusiasts, operations managers at Nike have improved product quality while reducing overall costs. Nike allows customers to customize many of their products. For instance, customers can print their own names and numbers on shoes as well as customize their shoe strings to different color. Consequently, these practices boosted sales of Nike products to phenomenal levels, smartly marrying the links between sales, production, design, supply chain, and logistics.

The greatest downfall of mass customization is wait time.  Considering that each product must be tailored to a specific customer, often being done by hand, it will take longer to be in a purchaser’s possession.  That is where uniformly mass produced products are advantageous, as they do not have to meet a specific criteria.  In addition, most custom products cannot be returned to a manufacturer, since the item was created specifically for an individual and the likelihood that that product would meet another person’s needs exactly is slim.


Should more businesses adopt the idea of tailoring a product to an individual’s needs?





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“Inventory Is Evil”

Apple, Inc. is one of the largest, most innovative companies in the world, selling not only electronic gadgets for users of all skill levels, but also how it manages inventory and forecast for its demand. The company has devised new inventory management strategies that have become a benchmark in the electronic industry and examples to many other companies worldwide.

These newly implemented benchmarks not only minimized inventory costs, but simultaneously helped Apple smoothly sail through high profile product launches without giving scope to competitors or allow them to catch up with competitively similar products. The case not only covers inventory management techniques at Apple, but also provide basis for calculating the internal fund requirements of the company based on projected sales.

In the electronics business, companies desire to minimize inventory storage as much as possible to avoid the risk that it won’t move to consumer hands. However, when a company underestimates the anticipated demand of a product and produces fewer units than expected, this results in a shortage of inventory, leading to a loss in both customers and market share. Therefore, a fundamental practice for a manufacturer is to keep as little inventory on hand as possible. As Apple’s agenda is perceived, they try to keep the right balance of inventory in all of their stores to satisfy customers demand.

Marketing products quickly saves the company storage costs and avoids the devaluation of products due to the continuous improvement of technology both internally and by new innovations from competitors. The best way to keep the inventory at minimized level is to invest and focus on supply chain and marketing continuously. To increase production, it is wise to hire contractors for manufacturing equipment instead of owning one. By doing so, the company will focus on promoting the inventory management in order to sell that specific line of products speedily at the fixed price.

Tim Cook, the manager of Apple, believed inventory loses somewhere between 1-2% of its value each week under standard conditions, the same way milk goes bad soon after the carton is opened. Operating under this philosophy, he put Apple in front of other competitors, such as Dell, by improving the way of moving inventory, where he claimed that “inventory is evil”.

There are a few ratios that show how quickly companies can liquidate inventory. For instance, the “days of inventory” ratio measures a company’s performance and provides a better idea to investors of how long a company takes to turn its inventory into sales, with shorter periods being better. Likewise, “inventory turnover,” shows that a low turnover can mean poor sales and thus products will be sits in a warehouse losing their value; on the other hand, high turnover means strong sales and relatively empty warehouses.


What sort of inventory management practices can other companies learn from Apple, Inc.?




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