Cost minimization with mass customization approach and sample application

Unpredictable demand, heterogenous customer requests, short product life cycles, increase in the demand for customized quality products and services, and technological and innovative discoveries enabling all these have raised the bar in the competition. Since 1980's, mass customization production system has gained momentum in fulfilling the requests and needs of the customers, who are the focus of the competition, through an adequate and effective defining process. Mass customization is producing and offering products that fulfil customer needs and requests at mass production costs. It projects customer involvement at different points of product value chain and enables the customization of products of different levels. Owing to the developments in advanced production technology and progress in information communication technologies, customer requests and needs have become capable of steering an enterprise's production activities. It is clear that while customized products and services cause an increase in the demand for an enterprise's product range, variety complicates the activities in "design-production-assembly-distribution" value chain and increases the costs. On the other hand, from customers' point of view, receiving accurate cost information regarding different product configurations that fulfil different needs and requests holds a big influence on customer decisions. The success of mass customization depends on the balance between the amount a customer intends to wait and pay for innovative and customized products and the enterprise's capability to produce the requested product within reasonable time and at reasonable cost. In this context, in kitchen production industry where design-production-assembly and distribution stages are completely determined according to the specifications of the product that will be offered to the customer, mass customized products provide cost advantage. Aim of this study is to set forth the cost advantage by comparing the costs of Enterprise B which produces personalized kitchens and Enterprise A which conducts modular kitchen production with mass customization method. With this aim, cost data of two enterprises is analyzed and it is observed that the enterprise using the mass customization production system gains cost advantage by using economies of scale and scope.