Customized products require a customized supply chain. We explain the benefits to mass customization and share some tips to ease up the process.
Custom printed M&M's empowered customers and sold $10 million worth of candy. Image courtesy PopSugar
The global supply chain has been built around the concept of identical parts being shipped across the world to create equally identical products. But as products grow more complex, manufacturers and suppliers must look to innovate in order to adapt to changing environments. One growing development? Mass customization.
Customization is becoming increasingly necessary.As more and more companies offer the same goods, they must set their brand apart from existing competition. According to Frank Piller, the co-director of the MIT Smart Customization Group, “Mass customization allows companies to profit from the heterogeneity of the market.” To achieve success in the global market, businesses should shift their attention to customer insights for long-term profitability.
How do companies benefit from customization?
Let’s take a look at some recent examples.
For years, BMW had a reputation for manufacturing cars that combined sleek style with exceptional performance. Since the 1990s, the company has also gained recognition for its customization program, which allows buyers to design their own car from a set of available options and then have it delivered in as little as 12 days of ordering.
- Nike, whose NIKEiD initiative let consumers customize their running shoes and then have them made and shipped direct, was one of the first movers in the wave of customization that has since gained popularity among many athletic apparel manfuacturers.
- The food and beverage industry has significantly benefitted from customization. Chipotle’s “build-your-own” food model increased sales by 22 percent. M&Ms saw a successful campaign to customize the printed letters on their candy, which quickly garnered over $10 million in profits.
But the demand for diversity and innovation with products presents a supply chain challenge.
Not all industries easily lend themselves to mass customization. Here are some of the common supply chain issues companies face when adding customizable products:
- Data isn’t leveraged correctly. Offering customizable products means there’s a bigger risk of waste if companies don’t accurately predict how much of specific styles to produce. That’s where technology comes into play—make sure you understand your customers’ needs and use existing data to get a better feel for what they will choose. There’s no point in setting up your supply chain to be customized if your customers have no interest in doing so.
- Suppliers aren’t prepared. Some suppliers won’t be ready to handle the flexibility and specificity that customization demands, or aren’t prepared to offer the visibility necessary to develop custom parts. Increasing communication efforts with your suppliers will ensure a smoother transition.
- Inventory gets messy. Not every area of the country will have the same buying patterns—consumers in different areas want different things. It sounds simple, but it gets companies into trouble when they don’t diversify their warehouses. Customizable products demand a clear understanding of purchasing patterns, so companies can store different inventory in localized warehouses. It’s similar to the concept of e-commerce storage, wherein customers often choose customized products and want them quickly.
With the rise of e-commerce, customization will get more common.
Online shopping allows consumers to take control of their shopping experience, including how they can customize products. The auto industry allows customers to “build” their ideal car online before locating a similar model near them. M&M’s conducts all of its customization online. E-commerce will make mass customization a widespread asset that companies can capitalize on if they prepare.
Utilize technology to facilitate the transition.
Companies should use data to understand their products, pricing, and target market. Stay vigilant about keeping track of your suppliers and the products they provide, and customize the way you distribute your products, too.
In a 2015 survey conducted by Deloitte, 36 percent of consumers said they were interested in purchasing customized goods. As e-commerce makes customization easier, that percentage will likely grow. Product customization allows businesses to cater to new target markets and diversify their product offerings.
But without the right level of visibility and data leverage, the benefits don’t outweigh the costs. If you’re considering a move to customization, don’t let your supply chain hold you back. Instead, use data and transparency to bring it up to speed.
Editor's Note: This post was originally published in September 2015 and has been updated for accuracy and comprehensiveness.