“Have it Your Way”

"Mass customization" may sound like an oxymoron, but it’s actually an emerging business model — one that’s getting a lot more attention.

In a nutshell, mass customization takes place when companies offer individually tailored products or services on a large scale. For example:

• Dell Computer Corp. allows customers to configure their own computer on the Web, specifying everything from microprocessor speed right down to the mouse.
• At selected Levi Strauss stores, consumers can build a pair of jeans from scratch, selecting from different patterns, fabrics, leg widths and fly styles.
• At Reflect.com, a Proctor & Gamble venture, women can formulate their own cosmetics, fragrance, skin-care and hair-care products.

Though still in its early stages, mass customization will be as important to the 21st century as mass production was to the 20th century, experts predict.

Why all the fuss? For one thing, mass customization can help manufacturers lower production costs. Because mass customization is a demand chain rather than a supply chain, companies have no inventory of finished goods and no wasted resources. More choices translate into more value for buyers, enabling companies to win new customers and keep current ones.

Mass customization also promotes closer ties. "There are no middlemen in terms of salespeople or retailers between our consumers and us," says Dave Ward, founder of Customatix.com, a Santa Cruz, Calif., footwear manufacturer. "Mass customization allows us to be involved in a very personal dialogue with our consumers, where they tell us exactly what they want — as opposed to building products we think they want."

What it is, what it isn’t

As with any emerging business model, definitions get a bit blurry. Mass customization differs from traditional craftsmanship in three ways:

1. Speed. Custom orders typically involve long waiting periods; however, mass customizers rely on flexible operating processes to guarantee quick delivery. (Mass customization is also faster than build-to-order, which typically involves complex products like automobiles; it’s a special type of build-to-order.)
2. Volume. Although a mass customizer may be filling small orders — often lot sizes of one — total production is on a large scale. That’s why your local barber isn’t practicing mass customization; he may provide you with a unique service, but he can only cut so many heads of hair. Mass customization involves not just personalization, but also mass volume — production or delivery must be scalable.
3. Price. Custom products have always been available, but at a premium. In contrast, mass customization is affordable. Products may cost slightly more than mass-produced ones, but they don’t fall into the luxury realm.

Mass customization should not be confused with "variety," which implies that production has been conducted in advance of orders. In some cases, mass customization may require subtracting (instead of adding) features that buyers don’t want to pay for.

The great enabler

The idea of mass customization has been around for some time. Yet technology is the reason why mass customization is blossoming now. Our computerized world allows custom production and mass production to come together. Anything that can be digitized can be customized, say experts.

In particular, the Internet provides some critical infrastructure. "The Web allows you to bundle orders together and download them to a manufacturing facility for production," says Ward of Customatix. "It’s also the perfect tool to talk to consumers on an individual basis and to let them design their own products."

Case in point: Timbuk2, a San Francisco bag manufacturer, had been offering customization to consumers through brick-and-mortar stores, but retail distributors didn’t really push the program. So in October 2000, Timbuk2 launched a Web site that enabled consumers to design bags online.

That proved to be a real boon in early 2001, when the economy dipped and sales from Timbuk2’s other two units (retail sales and corporate gifts) dropped substantially. Without its e-commerce component, the company’s bottom line probably would have been down 50% for the first half of 2001, says Jordan Reiss, Timbuk2’s vice president. Yet B-to-C customization offset those losses.

Going direct to customers also helps Timbuk2 constantly innovate. For example, after getting dozens of e-mails from laptop-computer owners complaining that no sleeve fit Apple’s Titanium G4, Timbuk2 created a new sleeve that has been a bestseller. "Before, getting feedback was tough," says Reiss. "When you distribute in retail stores, there’s always a barrier between you and the consumer — even if you have a good relationship with the retailer."

Three challenges

Mass customization should not be pursued lightly. Duke University’s Paul Zipkin identifies three key components, each of which can present different obstacles, depending on the particular product:

1. Elicitation: finding out what the buyer wants or needs. The Internet may enable companies to conduct a one-on-one dialogue with customers, but determining their preferences isn’t as easy as it sounds. Companies with complex levels of personalization often require a configurator (expensive software that illustrates what the end product will look like).

   And some essential information simply can’t be gleaned online. Take Dean Sparkman, founder of Meridian Golf in Golden Valley, Minn., who spent three years and $1 million to develop a computer-driven measurement system that enables him to manufacture customized golf clubs.

   Meridian’s fitting process takes about 90 minutes and requires customers to visit one of its retail locations, where customers swing a club on a special platform. Meridian’s computer system, embedded in the floor, measures 14 dimensions such as speed, loading, path, plane and face angle at impact.

2. Flexible processes: translating information into a physical product. To make product quickly in small batches, manufacturers typically must adopt "flow-production" techniques. "Much of the difference [from mass production] depends on the beginning stages — how you process orders, how you stock materials," says Ward. It’s critical to have a reliable network of suppliers and partners who can work on short lead times. Customatix uses a stand-alone manufacturing facility in China, owned by one of its investors, to turn around product in two days.

3. Logistical aspects: getting product to the right customer. When Ward launched Customatix, he thought the greatest problems would be operational ones. "Yet our real challenge was on the marketing side," says Ward. "We underestimated the challenge of building a brand on the Internet."

   People want to touch and feel the product, explains Ward: "If you’re already a major brand, you have a certain following. Yet consumers don’t know who Customatix is or the quality of our product, so it’s not easy to get them to hit that buy button."

   To broaden distribution, Customatix launched two other business units last year: a corporate-logo segment and a licensing unit for college and sports logos. "Setting up multiple distribution channels is the key to maximizing revenues in the short term until the brand becomes strong enough to drive significant volume for the Internet-based custom business," says Ward.

   Although the consumer won’t alter the licensed product, Ward deems it mass customization from an operational standpoint: "The manufacturing and logistics infrastructure that we use for custom products will enable us to handle the hundreds of different school and team logos, graphics and trademarks in an efficient manner — which is why no one has been successful until now in licensed footwear products."

Owning your customers

Despite challenges, mass customization can help small companies stand out of the crowd. "You can’t use traditional methods of growing your business," says Sparkman of Meridian Golf.

One size doesn’t fit all, stresses Sparkman: "We don’t say that Callaway doesn’t make good golf clubs, but they make them for one mythical person. We make golf clubs in 1,100 different combinations."

Catering to individuals instead of masses has paid off, and Meridian Golf boasts a 99.5% customer satisfaction rate. What’s more, revenues are on a roll: Meridian Golf generated $1 million in sales last year, and Sparkman expects the company to hit $2 million this year.

"Our customers are our disciples," he adds. "When you have a one-to-one relationship with them, not only do they come back — they’ll send you more business."

Writer: TJ Becker