Made-to-Order Businesses In the past, customers had two choices for purchasing products: (1) purchase a mass-produced product like a pair of jeans or a candy bar or (2) commission a custom-made item that was perfect but cost a small fortune. Mass customization is a new trend in the retail business.
Mass customization hits that sweet spot between harnessing the cost efficiencies of mass production and offering so many options that customers feel the product has been designed just for them. Today, many companies are using strategic information systems to implement mass customization business strategies.
Lands' End Lands' End built a decision support system that could pinpoint a person's body size by taking just a few measurements and running a series of algorithms. The process begins when the customer answers questions on Lands' End's Web site about everything from waist size to inseam. Lands' End saves the data in its customer relationship management system, which is used for reorders, promotions, and marketing campaigns. The order is then sent to San Francisco where supply chain management software determines which one of five contracted manufacturers should receive the order.
The chosen manufacturer then cuts and sews the material and ships the finished garment directly to the customer. Over 40 percent of Lands' End shoppers prefer a customized garment to the standard-sized equivalent, even though each customized garment costs at least $20 more and takes four weeks to deliver. Customized clothes account for a growing percentage of Lands' End's $511 million online business. Reorder rates for Lands' End custom-clothing buyers are 34 percent higher than for buyers of its standard-sized clothing.
Nike The original business model for Nike iD concentrated on connecting with consumers and creating customer loyalty. Nike iD's Web site allows customers to build their own running shoes. The process begins when customers choose from one of seven different styles and orders from numerous color combinations. Dark-pink bottoms, red mesh, bright yellowing lining, purple laces, blue swoosh, and a eucalyptus green accent. Customers can even place eight-character personalized messages on the side.
The cost averages about $30 more than buying the regular shoes in a store. Once Nike receives the custom order, its supply chain management system sends it to one of 15 plants depending on production availability. Customers receive their shoes within four weeks. The program experienced triple-digit growth in just two years. Stamps.com Stamps.com made an agreement with the U.S. Postal Service to sell customized stamps. Customers could put pictures of their choice on an actual U.S. postage stamp. Pictures ranged from dogs to fiancées.
The response was phenomenal: Within seven weeks Stamps.com processed and sold more than 2 million PhotoStamps at $1 for a first-class stamp. Thinking about mass customization as a goal changes the way businesses think about their customers. Using supply chain management and customer relationship management to implement mass customization can have a direct impact on a business's bottom line.
Questions
1. What role does supply chain management and customer relationship management play in a mass customization business strategy?
2. How can Lands' End use its CRM system to improve its business?
3. How can Nike use a CRM system to improve its customer relations?
4. Why is Nike's supply chain management system critical to its Nike iD order fulfillment process?
5. Choose one of the examples above and explain how an ERP system could help facilitate the mass customization effort.
6. Choose one of the examples above and explain how the company is attempting to gain a competitive advantage with mass customization.
7. Identify one other business that could benefit from the use of mass customization.
Explain why this business would need customer relationship management and supply chain management systems to implement a mass customization business strategy.