Customization: Impact on Product and Process Performance

Abstract

Manufacturing capability has often been viewed to be a major obstacle in achieving higher levels of customization. Companies follow various strategies ranging from equipment selection to order management to cope with the challenges of customization. We examine how the customization process affects product performance and conformance in the context of a design-to-order manufacturer of industrial components. Our competing risk hazard function model incorporates two thresholds, which we refer to as mismatch and manufacturing thresholds. Product performance was adversely affected when the degree of customization exceeded the mismatch threshold. Likewise, product conformance eroded when the degree of customization exceeded the manufacturing threshold. Relative sizes of the two thresholds have implications for the investments by firms to improve their customization capabilities. Our research presents a rigorous framework to address two key questions relevant to the implementation of product customization:(1) what degrees of customization to offer, (2) how to customize the design process.

Making Sense of Supply Disruption Risk Research: A Conceptual Framework Grounded in Enactment Theory

“…Buyers' dependence on suppliers increases as suppliers' investments in specialized plants, equipment and personnel effectively reduce the number of available sources of supply (Hallen, Johanson and Seyed-Mohamed 1991). Equivocality stems from product customization as (i) the resulting thin markets permit suppliers' opportunistic behavior and limit information flows (Hedge, Kekre, Rajiv and Tadikamalla 2005) and (ii) the deviation from standard product designs necessitates proprietary interfaces, increasing the complexity of coordination between buyer and supplier (Novak and Eppinger 2001). The dynamism of product technology -the rate of technological change for a particular product technology in an industry (Dröge, Claycomb and Germain 2003) -also impacts the level of equivocality inherent in the supply environment (Weick 2001).…”

Buyer perceptions of supply disruption risk: A behavioral view and empirical assessment

“…We define item customization as the extent to which purchased items are modified according to the specifications of a specific buyer (Hegde et al, 2005;Perdue and Summers, 1991). Customer-specific product adaptations necessitate specialized investments in plants, manufacturing equipment and processes, and/or worker skills (Hallen et al, 1991).…”

“…Impor tantly, these transaction-specific investments also raise buyers' switching costs (Hallen et al, 1991;Stump et al, 2002). Increased switching costs associated with the purchase of customized items reduce buyers' abilities to deter suppliers' opportunistic behavior and the production of non-standardized products introduces new processes which may be problematic (Hegde et al, 2005). Both of these increase the likelihood of supply disruption.…”

Supplier flexibility and postponement implementation: An empirical analysis

“…To manage uncertainties, the product design team can defer less stable stages of product design, and delay them until receiving more accurate information about the possible required changes in them. (Hegde et al, 2005).…”