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Int. J. Production Economics 114 (2008) 7183


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Mass customised distribution


Robert Masona,, Chandra Lalwanib,1
a

Lean Enterprise Research Centre and Innovative Manufacturing Research Centre, Cardiff Business School, Aberconway Building, Colum
Drive, Cardiff, Wales CF10 3EU, UK
b
University of Hull Logistics Institute, Business School, Hull HU6 7RX, United Kingdom
Accepted 11 September 2007
Available online 29 February 2008

Abstract
This paper introduces, denes and explores a new term, mass customised distribution. Mass customised distribution is
all about the logistics support for the supply chain (irrespective of the nature of production). It identies the under-pinning
principles behind mass customisation, such as the use of economies of scope rather than scale and the importance of
modularisation and standardisation and then translates these constructs onto distribution related activities. A categorising
typology of the mass customised distribution concept is then provided based on time, space, information and process
constructs supported by discussion and examples. The trade off between the opportunities to reduce asset costs through
economies of scope versus the need for distributors to remain customer focussed in terms of offering better overall value is
then explored.
r 2008 Elsevier B.V. All rights reserved.
Keywords: Mass customisation; Distribution; Logistics; Supply-chain management

1. Introduction
The business environment is becoming increasingly competitive as supply-chain business customers expectations ratchet ever upwards and the
capability of competing companies to deliver consistent quality at low prices continues to develop
(Christopher, 2004). In response, many organisations have, over the last two decades, pursued an
alternative strategy to mass production dened as
mass customisation (Davis, 1987). This is a process
Corresponding author. Tel.: +44 29 2087 5511;
fax: +44 29 2087 9633.
E-mail addresses: masonrj@cf.ac.uk (R. Mason),
c.s.lalwani@hull.ac.uk (C. Lalwani).
1
Tel.: +44 1482463049; fax: +44 1482463484.

by which rms produce customised goods for a mass


market (MacCarthy et al., 2003) by applying
advances in information communication technology
(ICT) and exible work processes to permit them to
customise goods for individual customers at a
relatively low cost (Gilmore and Pine, 1997).
However, although mass customisation is a broad
generic term it has centred predominantly on the
customising of production: manufacturing goods in
an efcient manner tailored to the needs of
individuals or tightly dened segmentation groups
with common requirements for the product. This
paper argues that to complement this need for more
tailored yet cost efcient solutions, rms are also
considering the consumption experience and turning
the distribution activity into a more efcient
customer orientated process as well. Importantly,

0925-5273/$ - see front matter r 2008 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2007.09.013

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R. Mason, C. Lalwani / Int. J. Production Economics 114 (2008) 7183

this may be regardless of any product customisation


that may occur. But, this invariably cannot be
provided at a price premium; at every step in the
creation of value, competition is erce (Fuller
et al., 1993). To remain competitive, it ideally has to
be achieved at little or no extra cost and with no
negative impact on margin. This characterises the
problem that the mass customised distribution
(MCD) concept seeks to address. How can the
scale economies of distribution be retained or even
enhanced in the logistics model through economies
of scope, while effectiveness is improved by meeting
the customers needs better?
The papers purpose is therefore to develop a
more sophisticated understanding of a new term we
have labelled MCD. It will explain how MCD is
dened, how it differs from mass customisation and
how MCD strategies are being adopted in many
sectors to meet modern markets demand for
efcient yet more effective supply-chain distribution
solutions. Forms of MCD are categorised in a
typology based on time, space, information and
process constructs. Each is supported with examples
from numerous sectors before conclusions are
reached.
2. Denitions
As a foundation to the arguments developed in
this paper, a few key terms need to be clearly
dened. Firstly, it is important to distinguish
between two different types of customers the
supply-chain serves, end-consumers and business
customers. The end-consumer is the purchaser of
the product or service at the end of the chain of
supply and is arguably the most important determiners of who wins or loses in the competition to
supply. Business customers are the participant
companies positioned along the chain of supply
each of whom demand value from their supplying
organisations.
Secondly, it is important to distinguish between
production and distribution. From an economic
standpoint, value or usefulness of an item is derived
from its utility. Three of the most important forms
of utility are: form, time and place. Form utility is
the process of creating a good or service, or putting
it in a form for the customer to use. When Nestle
transforms raw materials into a chocolate bar, form
utility is created. Time utility is the value added by
having an item when it is required. This can be a
business customer who may require a delivery to

arrive just-in-time, or an end-consumer who needs


an item to be available at their chosen shopping
time. Finally, place utility means having the item or
service where it is needed. These denitions of utility
help us to distinguish between production and
distribution and the denitions for mass customisation and MCD. Form utility is generally part of the
production process, while time and place utility are
intricately linked to distribution activities (Lambert
et al., 1999). Ganeshan and Harrison (1995) provide
a useful denition of the supply chain which clearly
identies production and distribution focused activities and delineates between them: a supply chain is
a network of facilities and distribution options that
performs the functions of materials procurement,
transformation of these materials into intermediate
and nished products (we have termed collectively
as production), and product distribution to customers.
Finally, two types of size economies, economies
of scale and economies of scope, need to be
distinguished from one another. Economies of scale
refer to size economies gained by generating more
volume of a product in the same value stream
through a xed asset. Examples of this might be a
product promotion, which increases sales thus
allowing the xed costs per item to be reduced.
This is the principle that has under-pinned much of
the developments attributable to mass production
(for example focussed factories) and mass distribution (for example, bulk shipping). Economies of
scope are also a size economy, but are importantly
slightly different, as they are generated by routeing
greater volumes of compatible products through a
xed asset by merging parallel value streams.
3. Mass customisation
Creating variety in manufacturing processes
requires exibility in manufacturing processes,
the very antithesis of Mass Productiony
The production system must therefore be changed. (Pine, 1993, p. 46)
Davis (1987) rst coined the concept mass
customisation as a generic term to cover the whole
array of ideas and elements in a holding rm which
thought about the end-consumers needs and wants
backwards in determining supply design, rather
than thinking of production out to the customer, as
had traditionally been the case in mass production.
Concepts such as time-based competition, manufacture at the point of delivery, customer self-design and

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direct access, modularisation, zero inventories,


shrinking overheads, declining need for working
capital, enhanced logistics, info-mediation, and electronic value chains, he argued, were all elements of
the mass customisation family.
Following this broad inception of the term mass
customisation no single view of mass customisation
has emerged (MacCarthy et al., 2003). Most writers
implicitly have concluded that mass customisation is
predominantly about manufacturing: the costs of
production can be reduced by sharing core modularised forms across a range of products, while
greater product customisation can be attained by
permitting customer requirements to penetrate up
the chain of supply before differentiation of the
product is started. Thus, form utility is enhanced,
but yet at a more competitive price. Pine (1993)
dened mass customisation as, the cost-efcient
production of goods and or services tailored
towards an individual customers needs. Ross
(1996) described a spectrum of categories which
charted the degree of customisation ranging from
cosmetic to core customisation, although he
did include customisation by increasing the range of
stores in discussing the criteria to mention the
degree of customisation. Lampel and Mintzberg
(1996) asserted that the customisation of the
product could occur at various stages along the
value chain, such as design to order or assemble to
order. Alford et al. (2000) distinguished between
core, optional and form customisation in relation to
mass customised strategies in the automotive sector
and although they argued that form customisation
does occur at the distribution stage this was still
concerned with changing the form of the productan example of delayed production. Even in
Gilmore and Pines (1997) four approaches to
customisation, two of which did not mention
product customisation as a distinct focus, a
customised distribution solution was not evident.
Where customisation was categorised with no
product change this was either labelled as cosmetic (a customised package) or adaptive (a
product which can change, post purchase, its use
depending on the customers wishes, such as mood
lighting). Therefore, although when Pine (1993)
talked about customising the production system
this may have included a broader denition of
production to include distribution activities, the
vast majority of authors who have written in this
area have explored issues associated with the mass
customisation of the product rather than the

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distribution system. This gap sets the scene for the


focus of this paper; dening and exploring a concept
that can be seen as complementary to mass
customisationthis can be termed as MCD.
4. MCD
Fundamentally, the business climate encountered
by the distribution entities of the industrial system is
no different from those encountered by the producers. The imperatives of customer service and cost
efciency have prompted companies involved in
distribution activities to change their strategies and
logistics organisation (Groothedde et al., 2005). As
Christopher (2004) points out the whole business
environment is becoming increasingly competitive
as supply-chain business customers and end-consumers expectations ratchet ever upwards and the
capability of competing companies to deliver consistent quality at low prices continues to develop.
This manifests itself in the specic challenges that
distribution faces, such as the incessant need to
reduce the costs of distribution while coping with
more exacting logistics demands which may include:
delivering to increasingly fragmented points of
demand, delivering to tighter delivery windows,
becoming more reliable in terms of delivering on
time in full, distributing more frequently in smaller
quantities, providing distribution solutions over
extended distances, working on smaller planning
horizons, distributing a larger variety of products or
coping with uctuating demand for distribution
services in the short, medium or longer terms. Just
as mass customisation has provided solutions to
address the production challenges, MCD solutions
are being adopted by distributors to help tackle the
logistics challenges.
Indeed, MCD is all about the logistics support for
the supply chain (irrespective of the nature of
production) and aims to provide more efcient yet
more exible and customer focussed distribution
solutions. It is in contrast to the concept of mass
distributionthe shipping of bulk amounts of
product, usually at the behest of the supplier, with
a focus on vehicle ll rather than on customer pulled
distribution solutions. Examples could include, bulk
shipping by various modes of transport. MCD is a
generic term that covers a wide range of distribution
concepts building on the same principles espoused
as under-pinning mass customisation. It uses
economies of scope, rather than economies of scale
to contain costs while being highly focused in

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providing distribution solutions demanded by receiver led supply chains. Economies of scope in
distribution terms dictates that distribution activities are not solely focussed on one supply chain but
rather on many supply chains. This is invariably
enabled by modularisation and standardization,
which permits parallel supply to integrate across
value chains. The greater the economies of scope the
greater the potential cost savings, as we will now
examine.
5. Economies of scope not scale
In mass customisation, Pine (1993) argued:
Economies of scale are gained through the
components rather than the products; economies
of scope are gained by using the modular components over and over in different products; and
customisation is gained by the myriad of products
that can be congured. For instance, in car
manufacture, from a modularised chassis platform
a wide range of customised shapes of car can be
built sometimes across brands within the holding
company, such as Skoda, Seat and VW cars within
the VW Group. By identifying potentially modular
components across a product range and standardising those, considerable savings can be made, the size
of the savings largely being related to the number of
products the modularised components can be
applied to. This thinking leads to lowering costs
through the economies of scope and how they are
combined to make different products is the key to
customisation.
This same thinking can also be employed in
distribution activities such as warehousing, freight
transport and retailing. Traditionally, these functions have relied on economies of scale to be
efcient and have been incentivised accordingly.
Thus in freight transport a full pay-load is sought
from a supply-chain partner. While controlled by
the mass producing supplying partners this may be
what had been requiredlarge production batches
shipped in bulk to the next supply-chain customer.
However, in many supply chains today, including
some which are led by supply-chain customers and
the end-consumer, the requirement to tailor shipments to what is demanded and pulled rather than
what has been forecasted and pushed through the
supply chain becomes greater. Compared with
pushed supply, the characteristics of leaner (Womack and Jones, 1996) shipments of pulled products
are invariably smaller in volume and the pattern of

demand may be more variable and volatile, putting


greater strains on the transportation process. Lead
times may also be tighter than in traditionally
organised mass distribution. Thus, in many sectors
pressures are being placed on distribution functions
such as transport requiring them to be more process
orientated and able to deliver freight in the volume
demanded, at the time required but at no extra cost
than traditional freight movements (if anything at
continuously lower costs). In essence, the challenge
for MCD is:
Instead of the supply chain being designed to
support the optimal production and distribution
of Mass Production through Mass Distribution,
its orientation is reversed and must be set up to
optimally serve the niche segments of demand
required in customised marketsy the aim is to
facilitate product supply so that the customer can
order it and access it in a wide variety of
situations, while efciencies are maintained.
(The authors)
Modularisation in distribution and the standardisation of these module components allows parallel
supply chains to be combined together so that
economies of scope can be better realised. Examples
of modularisation include trays, pallets, containers,
exible vehicles capable of hauling a variety of
distribution loads, multi-user warehouses, consolidation and distribution centres. Examples of standardisation include compatible ICT platforms
including scalable protocols, commonly recognised
product coding, standard operating codes for incoterms or safety, standard dimensions for pallets and
containers.
Beyond this Morash and Clinton (1997) note
that, the standardisation of transportation and
logistics processes, practices and policies is an
important integrative capability. This supports
the reliability and predictability of supply-chain
ows allowing integration horizontally and vertically to be achieved more effectively without an
excessive number of steps in risk precautions, to
buffer against uncertainties, having to be built in, in
terms of time, labour costs, inventory, or equipment. Indeed, collaborative initiatives supporting
this enhanced integration are taking an increasingly
important role in optimising freight transport
(Mason et al., 2007). Collaboration in logistics both
vertically with supply-chain partners and horizontally with other logistics providers, even sometimes
competitors, is, in our view, becoming more in

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vogue. It is recognised by many that if value chains


are to be better integrated and assets more fully
utilised a new mind-set of more openness to
integrate and cooperate is demanded. Distribution,
once viewed as discrete to the rest of the supply
chain, needs to be understood and operated as an
integral cog in inter-linked value chains and supply
networks (Ritter et al., 2004). This competitive
setting for effective transport and logistics operations is increasingly being inuenced by developments in information communication technology
(ICT) which is creating a new operational landscape
for collaborative logistics systems to improve the
sustainable performance of transport by improving
efciency in terms of ll rates, empty running and
vehicle utilisation. The argument put forward is that
by partnering a competitive advantage can be
achieved both in economic performance and customer satisfaction and loyalty (Mentzer et al., 2000).
This is illustrated in the case studies given in the
following sections.
6. Forms of MCD
MCD can be dened as,
the deployment of economies of scope rather
than scale to deliver efciencies in distribution
activities, while also ensuring that the total
distribution solution is better tailored to the
customers requirements
Like mass customisation, MCD can occur in
many forms. The common principle behind each
idea is deploying economies of scope rather than
scale to deliver efciencies. Rather than just
addressing the optimisation of assets in a single
supply chain, the optimisation of assets across a
network can be aimed for (Nassimbeni, 2004).
Additionally, the total distribution solution must
be orientated back from the needs of the customer
and be more closely tailored to their requirements.
A typology for MCD can be drawn up based on
time, space, information and process constructs.
Each construct that represents different ideas within
the overall MCD family will be explored in turn
with short examples used to support each one.
6.1. Time-based MCD
Owning an asset carries an element of risk. If the
asset is idle for a period of time there is a potentially
a wasted opportunity where it may have been

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deployed for a nancial return but was not.


Distribution-based activities in general deploy many
expensive assets; warehouses, transport vehicles,
inter-modal interface assets such as ports and
airports and equipment such as cranes, to name
but a few. Coupled with this issue of expensive
capital assets is the fact that demands for the use of
that asset can be volatile and unpredictable if
focussed on one use, whether over the short,
medium or longer terms. This may be because of
unstable end demand due to seasonal uctuations,
nancial incentives and promotions, supply-chain
amplication effects, economic cycles or other
factors. Time-based economies of scope can be
created over a dened period to help mitigate
against the risk of asset ownership. In essence this
means sharing the use of a distribution-based asset
over time across different supply chains. This may
be over a very short time period (an hour, a day or
week) or longer period (by month or season or
longer). Clearly, the sharing of the asset over a time
period across two or more supply chains is more
desirable in terms of cost reduction than for the
asset lying idle when not in use in its primary
supply-chain setting.
For example, a tractor on an articulated lorry
(tractors are relatively expensive assets while trailers
are relatively inexpensive) may be coupled to a
range of trailers over a given time period. At Rhys
Davies, a regional logistics company in South
Wales, tractors are used on local jobs during the
day and then over-night trunking work during the
nights. This allows 24-h a day working for each
tractor rather than allowing them to be idle for
parts of the day. Similarly, Jigsaw, a UK-based
haulage consortium, exes its work among its
customers. In the fast moving consumer goods
sector Jigsaws customers have very exacting delivery standards: deliveries have to arrive within tightly
dened delivery windows and are required any time
day or night over 7 days of the week throughout the
year. Its customers in other sectors in General
Haulage markets such as for kitchen or bathroom
equipment have more relaxed delivery requirements:
anytime on a prescribed day, only during the
daytime and only on MondayFriday basis. As well
as weekends these customers are also closed down
periods at Easter, Christmas and holiday periods.
By combining distribution solutions across these
two different sectors expensive tractor assets are
utilised 24 h a day, 7 days a week and throughout
the year (Naim et al., 2006).

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6.2. Space-based MCD


As well as sharing the use of a distribution asset
over time a spatial element to sharing can also be
conceived where space is shared. This also invariably has some time element to it. For example, the
UK-based shopping company Argos, part of the
Home Group, for some years shared a warehouse
with Nestle UK in Bardon Leicestershire who used
it to store long-life ambient foods. Indeed the whole
concept of warehousing whether dedicated to one
user or set up as a multi-user space are both MCD
concepts in that the xed costs of the facility are
shared across a large number of parallel value
streams.
An extension of this is the in-bound consolidation
centre which has been developed in sectors such as
the grocery industry to more efciently manage
smaller more frequent transport ows from suppliers to the main warehouses or distribution centres.
The less than full truck load supplies (less than 18
pallets per load per day) from a regional group of
suppliers are routed to a convenient local location
and consolidated into full truck loads for the
onward trunking leg to the distribution centres.
For example, Tesco have used this strategy, taking
control of the consolidation network in tandem with
taking responsibility to manage in-bound transport
ows into their distribution centres saving millions
of pounds and from their distribution costs and
reducing the total distance products travel between
suppliers and stores by 2325% (Potter et al., 2007).
Modularised distribution components can greatly
aid the sharing of an asset space. For example, the
container allows a wide range of different products
to be safely stacked together in container ships the
largest ones of which can now hold many thousand
TEUs (20 foot container units). Similarly, commonly sized pallets can be used to merge distribution ows between different users and have led in
recent years (for example in the UK) to the
developments of pallet networks. Much work has
been done to push dimensions of these distribution
modules to common formats, not only within
industries but also across sectors by bodies such as
GS1 (www.gs1uk.org/home.asp). However, much
still needs to be achieved in this area. For example,
pallets for paper and chocolate are different than
the more standard Euro pallet sizes, which frustrates optimal sharing of warehouse racking space
in companies such as Nestle (general goods and
chocolate) and Spicers (general goods and paper).

Finally, another of the main barriers to the shared


use of distribution-based asset space is the attitude
of companies towards collaboration horizontally
with complementary even competing companies.
Many companies are reluctant to consider sharing
distribution assets due to fears of loss of control,
stock integrity or sensitivity of commercial issues.
There are however, examples where this has been
overcome. Waller and Geldard (2006) cite a
consolidation centre in Holland that serves two
independent manufacturers (Lever Faberge and
Kimberley Clark) with consolidated deliveries to
retailer distribution centres and two competing
British dairy companies (First Milk and Dairy
Farmers of Britain) who have established eet
pooling collecting 4.5 million l of milk from 7500
farms.
Benets of horizontally collaborating over distribution space as well as reducing costs by better
warehouse or eet utilisation can also include
service benets such as an ability to increase
delivery frequency which in turn can support lower
inventory and fewer out of stock occurrences. In
addition, as companies become smarter at understanding the wide range of situations and circumstances where demand for the same product might
occur, the need for smarter distribution solutions to
cater for this variety has become more accentuated.
From a shared warehouse space, more bespoke
deliveries can be made: for example, supplying a
wider range of neighbourhood stores, vending
machines or home delivery options.
6.3. Information-based MCD
Increasingly, a key element of any distribution
system is the information system, which supports it.
Here again elements of the information system or
data derived from it can be shared across parallel
supply chains for mutual benet. An example of this
kind of sharing is an open telematic system
developed by RoadTech, a UK-based technology
rm, which supports the haulage industry. The
visibility of the transport operation has been greatly
enhanced in recent years by the introduction of
telematics. However, what had frustrated the
customers of transport was the necessity to access
a number of telematic sites to gain an accurate
picture of their eet at anyone time as each haulier
had develped its own telematic system. RoadTechs
new open telematic Internet-based system meets
haulage tracking needs and was created for three

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leading grocery manufacturers who collaboratively


united to commission the system. Although hosted
as a common platform able to monitor up to half a
million jobs at a time every 5 min the visibility of the
data it provides can also be customised to the needs
of each user. As well as supporting on time delivery
through enhanced visibility it also has the potential
to encourage better eet asset utilisation matching
spare vehicles with loads across the collaborative
network. For instance, a haulier can identify which
vehicles are due to run empty or can nd a vehicle.
The more companies that join the network the
greater the potential in load consolidation and
empty running reduction.
Another example of economies of scope derived
from sharing information is the collaboration of
two competing brewers (Scottish Courage and
Carlsberg Tetley) who using common barrels
identied with RFID tags have set up consolidated
outbound deliveries (Waller and Geldard, 2006).
6.4. Process-based MCD
Finally, process considerations include the appropriate location of distribution decoupling points,
where transport loads are recongured from mass
movement to customised movement and vice versa.
De-coupling the supply chain has become a key
concept synonymous with mass customisation.
Lampel and Mintzberg (1996) claimed in their
continuum of strategies that this point marked
the process where the goods were customised to the
order of the customer. This ts in with the concept
of the adoption of a mass customisation strategy
that leads to the customisation of the product.
Strategies such as design to order, or assemble to
order, among others, can be selected depending on
how far the customer request penetrates up the
value chain.
However, the decoupling point can also be the
point where customisation of the distribution rather
than of the product occurs. The customising can be
just in distribution not production terms. The decoupling point in this instance marks the point
where bulk ows of pushed goods are replaced by
ows pulled to a specic customised location with
no customisation of the product necessarily occurring.
The activities of Rotterdams Distri-Port a warehousing complex which has developed as a natural
de-coupling point at the interface of transport
modes can be used to distinguish between mass

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customising activities (those that affect the product)


and MCD activities (where the product itself is
unaltered but where a value-adding process still
takes place) (Table 1).
The decoupling point in MCD can be explored
further. The ideal strategic location for the decoupling point has been shown to be inuenced by a
range of factors (Olhager, 2003), but one of the key
determinants of the position of the de-coupling
point is understood by exploring the fundamental
concept of the P:D ratio, introduced by Shingo
(1981). P and D both refer to lengths of time,
where P is the production and distribution lead
Table 1
Value-adding activities undertaken at Rotterdams Distri-Port
split into mass customised and mass customised distribution
activities

Value adding
activities at
Rotterdams
Distri-Port

Mass customisation
activity

Mass customised
distribution activity

Assembling

Stufng

Product assembly
Stufng is the lling
e.g. the putting
up of a container
together of computers (applicable to mass
customised
distribution when
product in parallel
supply chains are
merged)
Packaging
Stripping
For example putting Stripping is the
shoes in boxes
emptying of a
container (applicable
to mass customised
distribution when
product in parallel
supply chains are demerged into multiple
shipments)
Labelling
Groupage
For example, adding Groupage is the
instructions for use in combining of multiple
shipments into one
the language of the
country the product is shipment
bound for or putting
price tags onto
clothing
Testing
Degroupage
Degroupage is the
Products are tested
based on the quality splitting up of a
requirements of the
shipment into multiple
customer. An example shipments
is the testing of
monitors

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time and D means the time the customer is


prepared to wait for their desired product. The ratio
P divided by D, where it equals to one, would
indicate the furthest point upstream from the
customer where the de-coupling point could be
located. Clearly, both the P lead time (the time it
takes to order, produce and distribute a product),
determined by the supply-chain enterprise, and the
acceptable delivery lead-time, determined by the
customer, are independent variables. However,
both, to some extent, can be manipulated. The
production lead time can be inuenced by the speed
of order processing, the degree of assembly required
which can be compressed by deploying a mass
customising strategy through modularisation and
de-coupling the total production process, and/or
leaning up the production and distribution process.
Similarly, the acceptable delivery lead-time can be
inuenced by for example providing electronic
shopping mediums so that the goods can be selected
and paid for away from the shop preventing the
possibility of the customer requiring immediate
receipt of the goods, thus in effect manipulating
customer demands.
Products are made to order (MTO) where they
can be produced and distributed faster than the
customer allows for delivery, or made to stock
(MTS) where production and distribution would
take longer than the customer is prepared to wait.
There is obviously also a middle ground, as we have
discussed, where the production process, or the
distribution process, is broken and a de-coupling
point is introduced. Thus a spectrum of various
alternate MTO strategies through to a MTS
strategy where the customer selects the product
from a supermarket can be envisaged similar to the
continuum of strategies of Lampel and Mintzberg (1996) discussed above.
An important issue to consider is to examine how
the decoupling point can be conceived differently
depending on who is perceived as the customer. If
the customer is the end-consumer the D time is
clearly determined differently than if the customer is
a business customer. As we will see in the worked
example below this can mean that a supply chain
has more than one decoupling point.
To conceive the decoupling point as always being
the point where goods can be customised in terms of
product customisation or distribution customisation
is not correct. In fact, the decoupling point as
dened as the order penetration point (Olhager,
2003; Hoekstra and Romme, 1992) need not be the

point where goods are customised. This thinking is


akin to the idea of conceiving the point as the
information decoupling point (Mason-Jones and
Towill, 1999). It is solely the point where push is
replaced by pull regardless of whether customisation has taken place or not. So the information
decoupling or traditional decoupling point falls
clearly within the MCD family and does not
necessarily have to be conceived as the point of
product customisation akin to mass customisation
thinking. Although the customising of goods (mass
customisation) can occur at this point it can also
occur at a point or points further downstream of
this point. Indeed, differentiation activities, whether
they are product customisation activities (mass
customisation) or distribution-based customisation
(MCD) can also occur at a number of points
downstream of the information or principal decoupling point.
In conclusion, in a process sense, MCD is the
postponing of the point or points of the customising
of distribution while mass customisation is the
postponing of the point or points of product
customisation. This thinking widens the scope of
strategic options available to the supply-chain
enterprise(s) in assessing their options.
A separate type of decoupling can also be
considered where the process of supply is itself
decoupled into two or more separate yet essentially
parallel chains of supply. This decoupling of types
of demand for the same product can be termed as
base and surge decoupling. Gattorna and Walters
(1996) noted that in many instances overall demand
cannot be accurately forecasted especially where
there are long times involved and/or because of a
sizable inuence of random forces (i.e. predictable
patterns of season or trend are not sufciently
explanatory). They suggested splitting the forecast
for a product into demand, which can be safely
predicted, base and demand where forecasting is
more problematic, surge. Christopher and Towill
(2001) developed the idea but again provided
production-based examplesZara, Benetton and
National Bicycle. This strategy can also be used in a
purely distribution activity as illustrated by
Groothedde et al. (2005). They illustrated that even
in the fast Moving consumer goods industry the
predictable base element can be planned well in
advance and consequently more sustainable transport modes such as barge, or rail can be deployed,
with economies of scope achieved from ensuring
ows from parallel value streams are attracted to ll

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the available space of the transport asset. The


remaining more unpredictable surge requirements
of the same product can then be distributed in a
more responsive format, such as by road on a
shorter lead time when exact orders can be
determined.
7. Discussion
As Fuller et al. (1993) highlighted, at every step
in the creation of value, competition is erce.
Clearly, the customer wants value to be maximised,
but this may not just be derived from lower costs. If
Johansson et al.s (1993) customer value criteria
are assumed it can be seen that value is built up of a
number of facetsquality, service, cost and cycle
time. Ballou (1999) maintains that from a logistics
point of view, customer service is the outcome of all
logistics activities or supply-chain processes. So in
simple terms, if Johansson et al.s (1993) quality,
service and cycle time criteria are merged as one
categoryhow can effectiveness be improved
through service differentiationa two dimensional
value equation can be used to position successful
MCD activities: value service differentiation enhancements versus costs improvements (Table 2).
Being more efcient and more effective should
improve value for the customer, but there can be a
classic conict between cost and service (a reoccur-

ring fundamental issue in logistics). In MCD, cost


can be dened as the level of cost reduction achieved
through the deployment of an asset sharing strategy
and achieving economies of scope, while service
differentiation refers to enhancements in performance in other areas than cost reduction; for
instance from improved exibility, higher quality
levels, enhanced adoption of technology leading to
tighter lead times and/or more reliable, predictable
and sustainable distribution performance.
Using these two criteria, a summary table can be
proposed to help categorise MCD solutions against
other types of distribution structure (Table 2).
MCD occurs where there is an element of asset
sweating through a multi-user approach and exploitation of economies of scope to reduce costs, yet
an ability to hone in and sustainably achieve value
focussed distribution that may be demanded in
dimensions other than just cost reduction. By
contrast where economies of scope are focussed
upon, but service levels are seen as not as critical
this can be described as a competitive distribution
solution. Over sweating the assets although leading
to enhanced efciencies can result in poorer service
which can compromise a strategy that relies on just
in time delivery and reliability of logistics performance; where service levels are high but little
attempt to explore and take up opportunities to
deeply assets across parallel value streams this is

Table 2
The four sourcing options for buyers and providers of logistics services

High
Competitive
Distribution
Solution

Level of Cost
Reduction
Achieved
Through
Economies of
Scope

79

Undeveloped
Distribution
Solution

Mass
Customised
Distribution
Solutions

Premium
Distribution
Solution

Low
Low

High
Level of Dedicated Service the Logistics
Provider Gives to its Customer

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R. Mason, C. Lalwani / Int. J. Production Economics 114 (2008) 7183

Table 3
The four sourcing options for buyers and providers of logistics services

High

- Pallet Networks
- 4PLs ideal
- Logistics Partnerships e.g.
Jigsaw
- Factory Gate e.g.Tesco
- End to End Supply Chain
Service e.g. door to door
container shi pping)

- Container Shipping
(port port)
- General Haulage

Level of Cost
Reduction
Achieved
Through
Economies of
Scope

- Construction Logistics
- Bulk Shipping

- Dedicated 3PL Contract

Low
Low

Level of Dedicated Service the Logistics


Provider Gives to its Customer

termed as premium distribution solutions. Finally,


where a distribution service has neither developed
the economies of scope nor is achieving high service
levels this is termed as an undeveloped distribution
solution. Table 3 provides selected examples in each
of the four categories.
MCD challenges the thinking that just optimising
the assets in a single supply chain is enough. As
Nassimbeni (2004) proposes the optimisation of
assets used in a supply chain across the network
should be the goal. MCD strategies are helping
support companies overall competitive strategies
allowing them to reduce costs in the distribution
activities as well as support service differentiation,
supporting more bespoke delivery requirements to
be effectively achieved. This is important because
logistics has become central to many companies
strategies because all products are not just thingswith-features but are things-with-features-bundled
with services (Fuller et al., 1993).
This challenge between the trade off of cost and
service is key to understanding how value from
distribution-based activities can be better optimised.
The solution needs to be contingent to the supplychain strategy (Fisher, 1997). In essence what is
required is exible logistics where the distribution
solution can be exed dependent on the needs of the
marketplace and the supply-chain strategy. By
deploying MCD, logistics entities can support more
fully the improved ow of pipelines and tight
inventory stock holding that are the hallmarks of

High

advanced supply-chain management practice. Integrated transport, load sharing, multi-user warehousing, eet pooling, shared equipment use, open
information systems and so on all should be
considered by distribution entities wishing to reduce
costs through sharing asset utilisation. To better
realise this, a new mind-set towards horizontal and
vertical collaboration may need to be taken.
One of the groups of logistics companies which
have sought to exploit this are the service integrators such as the parcel carriers, pallet network
operators and so on (Mason et al., 2007). By
merging together product ows across parallel
supply-chains economies of scope can be achieved,
while customised distribution solutions are provided. These integrators are growing in importance
and seeing in many cases considerable growth
records. For example, the pallet networks in the
UK have grown rapidly since their inception in the
early 1990s. Ten networks currently operate with a
nightly throughput of around 5000 pallets (DfT,
2005). They create and exploit a single point of
control for the whole operation with a modular
pallet system, which allows a high level of customisation and service while efciencies are managed
through economies of scope. Haulage companies
who join a network mutually benet from collaborating in the consortium but have no need to
integrate their business with other hauliers other
than through the pallet network coordinator. Pallets
are picked up from local suppliers, consolidated for

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a region, shipped to a central distribution hub,


before being re-allocated to their end destination
where the reverse process of trunking, de-consolidation and nal delivery is followed. Their success is
partly attributed to being able to efciently handle
the small but frequent loads required for lean
production (Semple, 2003), thus supporting reduced
inventory levels especially at customers.
Finally, there is currently a debate in the logistics
industry whether third party providers are well
placed to manage the full exploitation of assets
associated with transport and distribution either.
Transport is an asset intensive industry in that it
frequently involves highly intensive capital outlays
which to be optimally exploited need to be shared
across many customers. This is especially so in
international transport movements where shipping
or airline owners control assets which only specialists would be able to operate. Even in domestic
haulage the cost of a freight vehicle, and the
importance of ensuring that it is fully exploited,
dictates again that this usually has to be provided by
a specialist provider such as a 3PL. Many retailers,
manufacturers and even logistics companies do not
want to tie up capital in such assets especially if
transport is not seen as a core area of expertise. This
has given rise to the fourth party logistics provider
or 4 PL. In not owning assets themselves, their
purpose is to ensure a more optimal use of the
supply-chain network ensuring activities such as
transport are procured at a rate for a specic job
rather than paying for a dedicated vehicle whether it
is deployed or not. A successful deployment of this

81

was achieved by Tesco in moving to their factory


gate pricing initiative (Potter et al., 2007). A similar
move is currently being made with Corus who have
awarded a contract to TDG to begin a 4 PL
initiative for UK steel movements from autumn
2006 (Motor Transport, 2006). Consequently, we
are witnessing a range of initiatives invariably
supported by advances in ICT, which are enabling
more sophisticated ownership frameworks and
organisational structures and MCD solutions.

8. Mass customisation and MCD


A case for a separate form of mass customisation
we have termed as MCD has been presented.
Previously, most authors when researching mass
customisation have explored issues associated with
the mass customisation of the product rather than
the distribution system. Rather than be categorised
as mass customisation, as it has in this paper, this
can perhaps be termed as a form of mass
customisation and more accurately and precisely
now labelled as mass customised production. Along
side, this can be positioned MCD. Both mass
customised production and MCD can exist alone
or can complement one another. The overall
umbrella category of mass customisation can now
be envisaged to cover both ideas, as each aims to
address broadly similar challenges: how can a more
demanding marketplace be served better with more
bespoke solutions, while the economies of the mass
market are retained (see Fig. 1). In summary, how

Mass Customisation

Mass
Customised
Production

Mass
Customised
Distribution

Mass Customised Distribution can co-exist with Mass Customised


Production, but can also be adopted independently. Together Mass
Customised production and Mass Customised Distribution can be
envisaged as strategic options within the Mass Customisation family
Fig. 1. Mass customisation incorporating mass customised production and/or mass customised distribution.

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82

can supply effectiveness be enhanced without


compromising on efciency?
9. Conclusions
The concept of mass customisationproducing
customised goods for a mass market(MacCarthy
et al., 2003) has been discussed and debated for
almost 20 years. The term was rst coined by Davis
(1987) and was popularised by Pine in his book
Mass Customisation in 1993. Mass customisation
was centred primarily on the product and the
systems of production and less on the structure
and process of distribution. This paper focused on
this shortfall and identied and explored a new
related concept to mass customisation we termed
MCD. The requirement for and underlying principles of both mass customisation and MCD are
intrinsically generic. However, it has been argued
that a more sophisticated understanding of MCD
and how it can be further exploited by rms to
support enhanced value delivery needs to be
developed. A categorising typology of the MCD
concept has been provided based on time, space,
information and process constructs supported by
discussion and examples from various industry
sectors. It has been argued that an overall umbrella
category of mass customisation can now be
envisaged to cover both the ideas of mass customisation of the intrinsic product and the mass
customisation of the products distribution to the
customer.
Organisations such as ECR Europe echo many of
the key issues raised in this paper. In their transport
optimisation publication (ECR UK, 2004), they
highlight four main areas where transport efciencies can be extended: backhaulingmaking better
use of empty or lightly lled return legs, consolidationthe use of special centres discussed in this
paper to support the drip feeding of slower products
into the regional distribution centres of the retailers,
data sharingof sales, stock holding and efcient
unit loadingutilising transport space more efciently. All these issues can be tackled by accommodating a MCD strategy, which is increasingly
being embraced by leading distribution related
companies.
Finally, a number of inter-connected questions
are worth posing:

Are there lessons that may have been learnt in


mass customisation in terms of modularisation





and applying economies of scope that may help


support more efcient and effective MCD solutions in the future?
If distribution has been reoriented back from the
customer, to what degree is collaboration (Simatupang and Sridharan, 2002) required with
supplying organisations to overcome unconscious and dysfunctional behaviour by the downstream players who may have a myopic view of
the impact their decisions have on supplying
partners?
Is horizontal collaboration required to realise the
economies of scope?
Does production have to respond to MCD?
Is a MCD approach always superior? If not in
what circumstances should it be deployed?

These are all matters that will underpin our future


research into this eld. MCD offers great opportunities. If some customer segments can be served
better while not costing any more on the bottom
line, market share improvements may be delivered.
The logic may be to combine mass customisation
with MCD strategiesThe logic suggests that
customers in being considered as a group to serve
should be broken down into more and more
appropriate segmented groups through which the
tailored supply chain and production strategies and
consequent operations should be orientated to meet
each groups specic requirements. However, in
many cases where this is appropriate change of this
magnitude could take some time to be accomplished
and will not be easy. It took over one hundred years
for mass production and supporting distribution
systems to evolve and the infrastructural investment
and supporting thinking will take decades to
dismantle and be replaced by mass customisation
and MCD. Although much change in this direction
has occurred it will be some time before gains from
exploiting the ideas contained in this paper will
diminish.

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