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Mass customization in operations management:


oxymoron or reality?
R.S. Selladurai∗
School of Business and Economics, Indiana University Northwest, 3400 Broadway, Gary, IN 46408, USA
Received 15 October 2002; accepted 25 November 2003

Abstract
Mass customization in production and operations management, a process of integrating mass production/standardization
principles with customization, seems to be gaining momentum in the United States as well as all over the world. Major
companies like Dell, Motorola, Hewlett-Packard, General Motors, Ford, Chrysler, Toyota, Proctor and Gamble, and others are
experimenting and also e8ectively implementing this process in their production and operations facilities. Mass production
and customization have traditionally been at the two opposite extremes of the production continuum. However, integrating
these together as mass customization seems to be the practice of the present with the strong likelihood that it would be a
continued trend of the future. This paper explores the concept of mass customization, focuses on methods to achieve mass
customization, explains why it is not an oxymoron but a reality, looks at the advantages and disadvantages, and discusses how
it may be e8ectively used in production and operations management.
? 2004 Elsevier Ltd. All rights reserved.

Keywords: Mass customization; Operations management

1. Introduction Hewlett-Packard, General Motors, Ford, Chrysler and others


are speciBcally using mass customization processes in their
Mass Customization refers to a process of production of production facilities. Moreover, some studies have showed
goods and services tailored to suit the needs of customers in the positive consequences of integrating mass customization
a mass market. Pine [1] and Gilmour and Pine [2] contended into the traditional mass production systems [4]. Therefore,
that mass customization was the process that displaced mass mass customization is undoubtedly a production operations
production as the primary method used in production facil- management issue and must be looked at from an operations
ities. Most of these studies on mass customization appear management perspective, and this paper does so by taking
to be developed from a strategic management perspective, this novel approach.
and very limited research in the operations management per-
spective of mass customization exists in the production op-
erations management literature [3]. 2. Mass customization: its evolution and uniqueness
However, this concept of mass customization is certainly
a production operations management issue, especially as it The traditional methods of production used by manufac-
pertains to the new, nontraditional process of integrating turing companies focused on mass production which used
mass production and customization into mass customiza- standardization principles. The traditional mass production
tion. Also, major manufacturers such as Dell, Motorola, company is bureaucratic, hierarchical, and highly standard-
ized. Workers operate under close supervision and perform
highly routine, standardized, and repetitive tasks. This type
∗ Tel.: +1-219-980-6646; fax: +1-219-980-6916. of a traditional production process leads to the manufacture
E-mail address: rsellad@iun.edu (R.S. Selladurai). of low-cost, standard goods and services. The time period

0305-0483/$ - see front matter ? 2004 Elsevier Ltd. All rights reserved.
doi:10.1016/j.omega.2003.11.007
296 R.S. Selladurai / Omega 32 (2004) 295 – 300

most typical of mass production was from the early 1900s Part
Process Product
when Henry Ford introduced the modern assembly line in (Component)
Standardization Standardization
Standardization
production of automobiles through the 1970s when mass
production was the most dominant production method for
all companies.
Mass production processes led to the continuous im- Mass
provement methods of production [5]. The continuous Customization

improvement company is more participative, empowered,


crossfunctional team-based and focusing on total quality Procurement Partial
management (TQM) principles. Workers are given more Standardization Standardization

participative and decision-making responsibilities and man-


agers perform the facilitative and coaching function of Fig. 1. Methods to Achieve Mass Customization.
motivating their employees toward continuous improve-
ment e8orts in the production facility. This type of a
production system results in the manufacture of low-cost,
high quality, standard goods and services. The time pe- 3. Methods to achieve mass customization
riod most typical of continuous improvement was in the
1980s when companies like Motorola began implementing Fig. 1 illustrates the dominant operational methods that
TQM and other continuous improvement programs in their facilitate the mass customization concept in practice. These
production operations management. include four standardization approaches—part standardiza-
The continuous improvement production methods led tion, process standardization, product standardization, and
to the unique concept of mass customization, a process procurement standardization [7]. When a company uses
in which all aspects within the organization from peo- common parts or components for various product items
ple, processes, organizational structures, and technology in a product line, it derives several beneBts—it lowers its
are geared to provide customers speciBcally what they costs due to the economies of scale, reduces inventories,
need and want [1]. An eHcient, well-integrated organi- and improves the forecasting of the component needs.
zational system of production facilitates this process of Robertson and Ulrich [8] distinguished between internal
mass customization. The result is low cost, high quality, and external commonality of parts. They contended that if
customized goods and services produced on a large scale the commonality is built into the internal components (for
to a mass market. The time period most typical of mass example, wires hidden under the hood in an automobile)
customization was in the mid-1990s through the present rather than the external components (such as the dash-
time when companies like Dell began e8ectively imple- board), this would be less obvious to customers. So, the
menting mass customization in their production operations potential risks of low product di8erentiation leading to a
facilities. cannibalization e8ect as a result of using standardization
The best example of e8ective mass customization in ac- parts are considerably reduced, if such standardization and
tion is the production facility at Dell Computers. When a commonality are internally based.
customer wants to buy a computer system, he/she can use a Also, mass customization is facilitated through the use
computer and the internet to go online and place the order of process standardization. When companies can delay the
for a computer system. The personal computer system is de- customization to as late in the process as possible, they
Bned in terms speciBcations such as memory size, processor can make use of the many beneBts of process standardiza-
speed, hard disk size, software, and other peripherals. Dell tion. Hewlett-Packard, for example, adds some of its cus-
provides a variety of these speciBcations for the customer to tomized components such as manuals and power supplies
choose from. The customer selects from the various options in their printers being shipped to the European markets at
for the di8erent aspects of the computer system according the distribution centers in Europe, thus delaying its cus-
to his/her choice. Then, Dell produces a computer system tomization to the last stages of the production and distribu-
as per the customer’s needs and delivers it to the customer tion chain [9]. When using product standardization, com-
within three to 5 days in most cases. Dell can manufacture panies may advertise a wide variety of products but stock
a built-to-order system of high quality and low cost and only a few of them (standardized items), may be using the
does this on a mass production scale to customers all over 80/20 rule. If customers demand certain un-stocked items,
the world. According to Dignan [6], Dell has developed a the Brm may produce them after receiving this order or
reputation as a lean and mean PC manufacturer with high use a process called downward substitution to meet this de-
eHciency in its production processes. By producing a mass mand. It may substitute a higher functionality/speed item
customized product at low cost (expense ratio of 9.9 percent for a lower functionality/speed item when the lower end
well below its competitors Compaq’s 19 percent and Gate- item is not available. Similarly, rental car companies substi-
way’s 27 percent), Dell continues to gain market share and tute the upgrade or higher-end car when the requested car is
proBts [6]. unavailable.
R.S. Selladurai / Omega 32 (2004) 295 – 300 297

Standard Product Manufacture of mass customization. As Brms progress through the vari-
Delayed
plus Customized Customized
Differentiation
ous stages, they become increasingly customized and less
Services Products standardized.
Further, Duray [4] categorized manufacturers as four
types of customizers based on the degree of customer in-
volvement and the degree of modularity in their production.
These include fabricators, involvers, modularizers, and
Effective assemblers, with fabricators at the higher end of customiza-
Modularize Continuous Mass
Components
Integration and
Customization tion, the assemblers at the lower end, and the involvers and
Response
modularizers in the middle.

Fig. 2. Sequence of Progression from Standardization toward Mass


Customization.
4. Mass customization is not an oxymoron—it is reality

Although mass customization appears to be an oxymoron


When using procurement standardization, Brms acquire made up of two contradictory terms—mass production and
the common equipment and components to carry out their customization—it is very much a reality today as several
operations. Thus, even though a wide variety of products companies in the United States and the world are using
may be manufactured, these items need similar production this concept in their daily production and operations man-
equipment and use a shared set of components, thereby agement. Dell Computers, Motorola, IBM, 3Com, Sun Mi-
enabling the Brm to beneBt the cost-savings from buy- crosystems, Proctor and Gamble, Toyota, General Motors,
ing standardized materials and equipment. The computer Ford, Chrysler, Hewlett-Packard, and others have e8ectively
PC industry uses this concept e8ectively in that it pro- used mass customization in their production. Over the years,
cures common equipment and components to produce its manufacturers have used mass production methods, which
systems. evolved into continuous improvement methods, and then
In addition to these four standardization approaches, Brms these changed into mass customization methods. Making a
may also adopt a Bfth one namely the partial standardiza- product speciBc to the needs of the customer is the essence
tion approach. In using the partial standardization approach, of successful business practices. Doing so on a mass produc-
Brms o8er customers a limited number of options to choose tion scale led to the mass customization concept. What was
from while keeping their products mostly standardized. Dell often viewed as impossible—a strategy of combining the two
Computers uses this approach e8ectively—when ordering opposite extremes of mass production and customization—
from Dell, a customer may select a standardized computer actually has become real and visible in practice. In fact,
system but along with this customizes his/her purchase by the widespread use of this unique concept of mass cus-
choosing from selective options for the various categories tomization in the production methods is considered a major
of the product. For example, when buying a laptop com- factor for the phenomenal success of companies that have
puter system, the customers can choose from several types implemented mass customization. Using mass customiza-
of processors ranging from 1.4 to 1:7 GHz M; several mem- tion in their operations appears to give the companies a
ory options ranging from 512 MB through 2 GB; or several strong competitive edge over their rivals who may not yet
video cards of 32 MB through 128 MB types and similar be adopting this strategy. As Duray [4] found in her study,
options for all the other speciBcations of the system. Dell Brms that used mass customization performed signiBcantly
o8ers these options at di8erent speciBc prices so that cus- higher in terms of Bnancial performance related to market
tomers may choose those options they want for their sys- share, return on investments, and proBt margins than their
tems and pay the prices according to the options selected. counterparts that did not use mass customization. Perhaps,
Partial standardization is increasingly becoming popular in this may help explain the tremendous overall and Bnan-
production and operations management across several in- cial success that Dell production plants have experienced
dustries especially the computer, printer, and automobile as a result of their increasing use of mass customization in
industries. production [6].
Also, Pine [1] discussed Bve ways that enable the progres- Also, some of the major factors that have contributed
sion of a company from mass production to mass customiza- to the strong growth and popularity of mass customization
tion. These include customizing the services around the stan- include the emergence of the internet and the phenomenal
dard products, producing customizable products, providing success of high-tech companies especially Dell Comput-
delayed di8erentiation, ensuring quick response to customer ers. The growth of the internet has given the manufac-
needs, and modularizing components. Pine contended that turers a platform for taking orders online from a mass
almost all companies follow this path of progression to- market audience for customized products such as cos-
ward mass customization. Fig. 2 suggests a typical progres- metics, shoes, bicycles, clothes, vitamins, computers and
sion of Brms from mass production/standardization toward computer related accessories, at very minimal costs. The
298 R.S. Selladurai / Omega 32 (2004) 295 – 300

internet allows companies to provide high customization 6. Disadvantages of mass customization


at low cost and has displaced to a large extent the tradi-
tional and more expensive method of highly skilled and Some disadvantages also were reported by companies
trained salespeople interacting with customers. The familiar that used mass customization Ahlstrom and Westbrook [3].
story of the tremendous success of high-tech companies These include in order of importance increased material cost,
especially Dell have caused many other companies to increased manufacturing cost, lower on-time deliveries, sup-
seriously consider mass customization strategies in their plier delivery performance, increase in order response time,
production systems so that they too may be e8ective and and reduction in product quality. Apparently most of these
successful. disadvantages were cost related. Although cost could be an
Mass customization is a reality because it is an attractive advantage of mass customization, it sometimes could be
strategy for both manufacturers and customers. Producers a disadvantage because of the premium cost that the pro-
are able to reduce their inventories and manufacturing over- duction system incurs for including the Mexibility of cus-
head costs, eliminate waste in their supply chains, and ob- tomization, and sacriBcing some degree of cost eHciency
tain more accurate information about demand. Customers, that usually is associated with standardization. Further, the
on the other hand, get reasonably priced, tailor-made prod- production process at most companies may not have fully
ucts according to their personal preferences of style, fea- evolved into a mass-customizing one, but continues to pro-
tures, colors, and functions. duce batches of standardized products.
Also, production costs have skyrocketed at some indus-
trial companies such as Toyota Motor Company [5]. Experts
5. Bene!ts of mass customization at Toyota contend that in addition to Japan’s recession and
the declining economy, some diHculties they experienced
Ahlstrom and Westbrook [3] surveyed several companies with mass customization implementation practices were also
that used mass customization and found many positive contributing factors for Toyota’s lower proBts and declin-
beneBts that companies reported they experienced. These ing competitive strength. Toyota executives discovered the
included (in the order of importance) increased customer hard way that mass customization is clearly di8erent from
satisfaction, increased market share, increased customer continuous improvement and was an unfamiliar way of do-
knowledge, reduced order response time, reduced manufac- ing business for them. They found out that both continu-
turing cost, and increased proBt. It appears that the beneBts ous improvement and mass customization need very di8er-
companies experienced with mass customization were re- ent organizational structures, values, management roles and
lated more to the customers and market impact than proBt systems, learning and training techniques, and customer re-
and cost factors. lations. Therefore, implementing mass customization was
Also, Dell Computers which is the world leader in the proving for them more costly and more diHcult than what
PC market seems to be beneBting tremendously as a re- they expected resulting in a weaker competitive position and
sult of implementing mass customization. Dignan [6] dis- declining proBts.
cussed some of the key measures of success for Dell espe-
cially in terms of eHciency. Current inventory levels at Dell
are four days; approximately 90 percent of Dell’s compo- 7. Organizational strategies for e(ective mass
nents are purchased online; each factory receives new com- customization
ponents every two hours; component inventory is measured
in hours rather than the traditional days; number of touches Although mass customization appears to have some dis-
or worker steps in the production process has been cut 50 advantages, the beneBts that a company enjoys from its use
percent; Dell’s expense ratio is the lowest in the industry seem to far outweigh the negatives. To implement mass
at around 9 percent; and its highly integrated distribution customization e8ectively companies need to consider some
and supplier networks give Dell a big competitive edge over speciBc organizational strategies (Fig. 3).
its competition. After the September 11, 2001 World Trade Modifying organizational structure. Firms need to mod-
Center crisis, air travel and border restrictions a8ected dis- ify and sometimes transform, if necessary, their organiza-
tribution networks for all American companies. However, tional structure to facilitate mass customization. As Fig. 2
Dell Computers was able to quickly identify where pro- points out, companies may need to change their structure to
duction would be a8ected and increased its production at Bt the progression from standardization toward mass cus-
its European and Asian plants. Dell also prioritized cus- tomization with each progressive stage indicating higher
tomer orders according to importance and was able to de- customization. Companies that are adaptable to the chang-
liver quickly and meet the needs of many companies that ing environment and tailored to speciBcally meet the cus-
had lost thousands of computers in the attack. In contrast tomer demands/expectations are more likely to be e8ective
another major computer manufacturer had diHculty ship- [10]. Dell for example has eliminated any intermediaries
ping out $300 million worth of orders due to supply network in its production chain and interacts directly with its cus-
problems. tomers especially via the internet. This eliminates the need
R.S. Selladurai / Omega 32 (2004) 295 – 300 299

Modifying Operationalizing often within few days of receiving the order. The whole
Type and Nature
Organizational Mass
of Product
process of mass customization from initial order receiv-
Structure Customization
ing to Bnal product delivery should be smoothly coordi-
nated and integrated with very little friction to be e8ectively
implemented.
Effective Mass Minimizing Cost Minimizing operations cost. Minimal cost of operations
Integration Customization of Operations
is another essential factor for mass customization imple-
mentation. Beyond initial investment to create the mass cus-
tomized operations factory, the whole production system
Modularity in
Automating Strong Customer must add as little as possible to the cost of production of
Product and
Process
Technology Relations the product or service. Dell, for example, has a very low
expense operating ratio of about nine percent which makes
it extremely cost-e8ective for the company and also con-
Fig. 3. Organizational Strategies for E8ective Mass Customization.
tributes to its proBtability. Finding other ways to lower the
cost of production and operations of the Brm will make it
easier to implement mass customization.
to use the expensive salespeople and/or wholesalers, retail- Modularity in product and process. Product and process
ers, and middlemen thus making the whole operations more modularity are critical determinants of mass customization
cost-e8ective. Also, improved relationship between produc- e8ectiveness. Modularity in products means the design and
tion and marketing within the Brm needs to be developed; production of the product are based on the appropriate com-
internal and external Mexibility should be enhanced; and the bination of di8erent components or subassemblies, called
integration of the entire information technology and support modules, and customers may be interested in various op-
system must be strengthened. tions for each module. The best illustration of modularity
Operationalizing mass customization. Companies need may be seen in Lego’s toys where various pieces or com-
to focus on adapting the operations function to mass cus- ponents may be “Bt together” in a variety of shapes and
tomization. Ahlstrom and Westbrook [3] found that the three forms and these may be changed several times to Bt the cus-
top methods used by companies to implement mass cus- tomized preferences. The personal computer manufacturer
tomization include material processing, increased range of o8ers the modularity feature in terms of memory size, pro-
stock, and assembly of core modules. The production factory cessor speed, video card, hard disk size, and peripherals, and
is considered the heart of the business; operations should customers may select from a variety of options for each of
work together with other functions in the Brm to provide these modules. Similarly, a modular process causes a prod-
products and services that anticipate and respond speciB- uct to go through a speciBc set of operations and enables
cally to customers’ needs. the storage of inventory in semi-Bnished form; and products
Type and nature of product. The nature of the product di8er from one another based on the types of operations that
also impacts the degree of mass customization. Some prod- were used in the production line.
ucts and markets may not be appropriate for such mass cus- Automating technology to enhance standardization.
tomization changes. Customers of commodity products like Mass customizers need to automate as many tasks as
oil, gas, wheat, corn, for example may not expect product possible to make use of the beneBts of automation and
di8erentiation. Also, some other products and markets es- standardization. Also, the links between modules must be
pecially in public utilities and government sectors have to automated and the activities of integrating people and tools
be standardized and customization is not an option—in fact to perform them must be integrated instantly. Communica-
rules and regulations may prohibit any form of variations tion networks, shared databases that provide simultaneous
from a standardized product. Electricity and water supplies, customer information, computer-integrated manufacturing,
for example, cannot be o8ered on a customized basis to cus- workMow software, and other group technology related re-
tomers for obvious reasons in that the high risks to human sources must all be integrated to ensure that the company
life and safety may be avoided. uses the right resources to serve and satisfy its customers’
E3ective and rapid integration. Quick integration and unique and speciBc needs/wants.
instantaneous production and delivery to customer are es- Strong customer relations. Mass customization needs
sential for e8ective mass customization [5]. Companies like continuous, close interactions between the Brm and its
Dell, Hewlett-Packard, Land’s End, and AT& T and many customers. By being in constant touch with its customers,
others use speciBc software and the internet to quickly record the Brm can Bnd out what its customers speciBcally need
customer needs and speciBcations; then they use their pro- and produce products and services to meet these needs and
duction and operations “factory” to change these into cus- deliver them quickly and eHciently. This is an important
tomized product designs and processes; and integrate all key factor for the mass customization success. Without
these to produce the Bnal product and service, which are strong customer relations, a Brm cannot e8ectively meet
then delivered to the customers as soon as possible and customers’ demands and implement the mass customization
300 R.S. Selladurai / Omega 32 (2004) 295 – 300

strategy. All of the Brm’s activities should be coordi- strong contribution it makes toward a Brm’s overall per-
nated to focus on and achieve close interactions with the formance and success, this unique production trend—mass
customers. customization—would certainly continue to dominate pro-
Also, overall when Brms that used mass customization duction and operations management in the future.
were evaluated in terms of Bnancial performance, they per-
formed signiBcantly higher in terms of market share, re-
turn on investments, and proBt margins than their counter- References
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