mass customization – The OM Blog by Heizer, Render, & Munson

Video Tip: Heinz’s Mass Customization of Sauces

For more than 125 years, Heinz bottles have touted “57 varieties,” a number completely made up by its founder with little to no real-life application. Now, Kraft Heinz wants to offer customers more than three times that number of condiment options through a new customizable sauce dispenser, created for food-service clients.

The machine, called the Heinz Remix, is the latest example of Kraft Heinz leaning into its away-from-home segment to grow sales. The company has expanded distribution in airports, launched a deluxe version of its mayonnaise for chefs and reformulated its Lunchables so they can be served in schools.

The company is still working through the specific business model for the Heinz Remix. It’s also looking at how the dispenser could be used for drive-thru orders. The machine requires more time and effort than throwing a handful of ketchup packets in a takeout bag, which will likely pose a challenge for speed-focused drive-thru lanes.

To make a customized sauce, consumers will use the touchscreen to select a base of either ketchup, ranch, 57 Sauce or BBQ sauce; add in “enhancers” that include jalapeno, smoky chipotle, buffalo and mango; and set one of three intensity levels. The mass customization dispenser can make more than 200 condiment condos. (Click here for a 3 minute video on the Remix).

The company created the Heinz Remix in just 6 months, with helping hands from Microsoft, device engineers and internet-of-things developers.

While the Heinz Remix is new, its design feels familiar, thanks to its resemblance to the Coca-Cola Freestyle machine, which was launched nearly 15 years ago. Today, Coke’s touchscreen drink dispensers can be found in more than 50,000 locations, including McDonald’s restaurants, AMC movie theaters and Target stores. Customers’ favorite custom orders from Freestyle machines have inspired the beverage giant to introduce new bottled drinks, such as Sprite Cherry and Coke with Cherry and Vanilla.

Classroom discussion questions:

What does mass customization mean?
Provide other examples of mass customization in service businesses. (Hint: see Chapter 7 in your Heizer/Render/Munson text).

OM in the News: The Challenges of Mass Customization in Manufacturing

Today’s consumers are not content with standard products but are looking for differentiated and personalized goods or services. Thanks to the new information technologies and innovative manufacturing processes, mass customization (see our discussion in Chapter 7) has become widely available. This combination of mass production and customization aims to provide unique products or services on a large scale and at a relatively low cost. It can improve profitability, just as it can help boost customer satisfaction and win brand loyalty.

One in five consumers are willing to pay a 20% premium for customization service, reports New Equipment Digest (Sept. 15, 2021). For instance, in the fashion industry, more people are now looking for personalized clothes, handbags, and shoes.

Although customers might be willing to pay more for a customized product, there might be neither time nor budget for full product inspection. Therefore, manufacturers must work with suppliers who can deliver high-quality materials on time to minimize production costs and shorten lead times.

The supply chain also needs to be adaptable, with every node able to communicate effectively to others so that they are all aware of any changes in demand. Supply chain visibility software can help manufacturers be aware of what’s happening across an extended supply chain so that they can react quickly when unexpected circumstances affect the delivery of goods.

Customer involvement in product configuration is inherent in the process, meaning that sales, marketing, distribution, and manufacturing all need to have great understandings of customer requirements. Customers who visit Dell’s website, for example, can directly talk to the staff about their personal requirements. After choosing suitable products, customers can order them with a simple click. From inventory and manufacturing to marketing and logistics, all the departments can process the transaction at the same time..

Since manufacturers are producing goods based on customers’ unique requirements, a highly flexible manufacturing process is important. Companies that are able to organize their modular product design properly tend to have a more agile manufacturing system. For instance, Boeing classifies a huge number of parts for its planes into 3 types: standardized, configured to a fixed set of options, or customized. This modular product design streamlines the process of ordering, engineering, and manufacturing, leading to a more cost-effective and time-saving customization process.

Classroom discussion questions:

What are the advantages and disadvantages of mass customization?
Provide examples of products/services (beside Dell and shoes) that you have ordered that have been mass customized.

OM in The News: We Don’t Need 3 Types of Red

In Chapter 7 we bring up the interesting topic of mass customization. Table 7.1 (on p. 284) illustrates the explosion of variety that has taken place in autos, movies, cereals, and thousands of other products as OM uses rapid, low-cost production to fulfill increasingly unique customer demands. What followed in recent decades is that retailers ramped up choices. They tried to capitalize on the shift toward personalization with a desire to please everyone and added variety to tempt people to buy items they didn’t need.

Now, with choices overwhelming shoppers and clogging supply chains, some brands are moving in the opposite direction, writes The Wall Street Journal (Nov. 22, 2020). They are trimming styles and colors in the hope that by eliminating the decision paralysis that grips customers when they are faced with too many options, they can boost sales and reduce markdowns. For example, Coach is cutting its handbag styles by half. Bed Bath & Beyond is reducing its can opener selection by 2/3. Kohl’s is culling its towel offerings by 20% and women’s dress styles by over 40%. In industry parlance, this is known as “buying narrow and deep” and follows Pareto’s 80-20 rule that 20% of a company’s products account for 80% of its sales.

Coach used to produce 1,000 handbag models each season, but now is only making 500. Instead of making two of the same bag, one with a leather strap and the other with a chain, it might make only the leather version. Coach is emphasizing its 3 best-selling colors and weeding out other shades. “We don’t need three types of red,” said the CEO.

A recent Columbia U. study found that people bought more jam when they were shown fewer choices. Only 3% of consumers who were shown 24 types of jams made a purchase. The purchase rate increased to nearly 30% when consumers were shown just 6 varieties. “We live in a world where we think more choice is better even though we recognize that it’s overwhelming,” said the study.

Classroom discussion questions:

What is mass customization and why is it an OM issue?
Give examples of how consumers can be overwhelmed with choices in a supermarket.

OM in the News: Why the Consumer Has Fewer Choices–Maybe for Good

Consumer-oriented companies spent the past decades trying to please just about everyone, as we discuss in Chapter 7’s treatment of mass customization. The pandemic made that impossible, and now some no longer plan to try. Sellers of potato chips, cars, meals and more have been narrowing offerings since the coronavirus snarled supply chains and coaxed consumers back to familiar brands, writes The Wall Street Journal (June 27-28, 2020).

Some IGA grocery stores now offer only 4 choices of toilet paper. “We may not need 40 different choices of toilet paper.” says IGA’s CEO. Georgia-Pacific switched all production of its Quilted Northern toilet paper to 328-sheet rolls; it had been also producing the brand in 164-sheet rolls. It plans to stick with the bigger rolls even after the pandemic, which let it speed production and make distribution more efficient. Retailers also had an easier time keeping Northern toilet paper in stock by having fewer varieties on shelves.

In grocery stores, the average number of SKUs was down 7% over the past month, with some categories, such as baby care, bakery and meat, down 30%. Frito-Lay, featured in Chapter 13’s Global Company Profile, stopped producing 1/5 of its products. Over the past 45 years, Lay’s has gone to 60 varieties of chips from 4. Since 1984, Campbell Soup has quadrupled the types of soup it sells to about 400.

Those efforts helped consumer-goods makers claim more shelf space as supermarkets expanded into big-box stores. In 2018, the average U.S. food retailer stocked 33,000 different items, compared with 9,000 SKUs in 1975, But now food makers have cut back on options, streamlined supply chains and concentrated production on the most-demanded goods.

Darden Restaurants said it was going to largely keep slimmed-down menus it started during the pandemic, which have helped reduce prep work and costs. And while last year, auto makers offered more than 605,000 vehicle configurations (even before taking different colors into account), showrooms today offer choices more limited because of supply-chain bottlenecks and lower volumes.

Classroom discussion questions:
1. What are the advantages of stocking fewer SKUs?

2. Why is this a supply chain issue (see Ch. 11)?

OM in the News: Tech + Fast Fashion = Mass Customization

A computer screen showing a 3-D body scan with body measurements in custom software

Style trends are moving faster than ever in an age when a shopper can spot an outfit on Instagram and buy it with just a few clicks, writes The Wall Street Journal (April 10, 2018). That immediacy is prompting the fashion industry to experiment with a business model called “click, buy and make.”

Today, Hong Kong clothing maker Bespokify’s customers, anywhere in the world, can order professional women’s clothing. Customers input their measurements, generating a digital pattern for clothes manufactured in China, and receive their orders within 2 weeks of purchase.

“Consumers are now shopping 24 hours a day and are being trained to expect new styles all the time,” says an industry analyst. Big retailers also are looking into the click-buy-and-make model. A year ago, Amazon won a patent with which it could take a customer’s order, print a pattern on fabric and send it to be cut by a robot before being assembled by another robot.

Hong Kong’s Li & Fung Ltd., one of the largest supply chain managers in the global garment industry, thinks new technologies could ultimately mean that more companies would be able to place small orders and avoid being stuck with extra inventory. “Just look at the average size of orders—it’s been going down for years,” its CEO said. “It went from hundreds of thousands to tens of thousands. And it will keep going down until it approaches a unit of 1.”

Software and robotics have been in use in fashion for some years. Companies like Proper Cloth use technology to predict a customer’s ideal shirt measurements without having to measure them in person.

Classroom discussion questions:

What is keeping this technology from wider use?
Name some other industries moving toward mass customization.

OM in the News: German Robots to Make Adidas Running Shoes in 2016

A German factory operated largely by robots is making its debut this year as the sportswear company seeks to cut labor costs and speed up delivery to fashion conscious consumers. Adidas had shifted most of its production from Europe to Asia and now relies on more than 1 million workers in contract factories, particularly in China and Vietnam. But Adidas now wants to bring production back closer to its major markets to meet demands for faster delivery of new styles and to counter rising wages in Asia and higher shipping costs, reports Reuters.com (Dec.19, 2015).

The new “Speedfactory,” near its Bavarian headquarters, will produce a running shoe that combines a machine knitted upper and springy “Boost” sole made from a bubble filled polyurethane foam. “An automated, decentralized and flexible manufacturing process… opens doors for us to be much closer to the market and to where our consumer is,” said the CEO.

Adidas currently makes about 600 million pairs of shoes and items of clothing and accessories a year, with a target of 900 million by 2020. The new factory will still use humans for parts of the assembly process. Around 10 people will be on the ground for testing purposes during the pilot phase, but Adidas is working towards full automation.

Almost 75% of Adidas sales currently come from products newer than 1-year-old and that figure is rising. “Our consumers become more challenging and demanding,” the CEO said. “Customization to markets and individuals will become the norm.” The ultimate objective would be to get replicas of red shoes worn by rapper-turned-designer Kanye West at a concert into the store the following morning. Adidas is also seeking to find ways to remove machine tools from the manufacturing process as they can take weeks to prepare. It has already used 3-D printing to create futuristic looking soles made from webs of crisscrossed fibers.

Classroom discussion questions:

Why the move to Europe?
Discuss the implications of mass customization at Adidas.

OM in the News: The Customized Bicycle Industry

The vast majority of bikes sold in the US are made in Asia and a handful of companies dominate the market, writes The Atlantic (April 3, 2014). Custom-made bikes are a very small slice of the industry. “But right now is the Golden Age in custom frame building,” says one industry expert. “There have never been more builders producing, and the quality has never been higher.” Though thriving, the 100 or so builders in the hand-built bicycle scene make up about 3.3% of the overall U.S. bike industry, valued at $6.1 billion and is sourced almost completely overseas. Almost 99% of bicycles sold in the U.S.are assembled in Asia—93% in China and 6% in Taiwan.

Additionally, just four companies—Dorel, Accell, Trek Bicycle, and Specialized Bicycle—own about half of the 140 bicycle brands available in this country. Technology, though, is very accessible to a one-person or two-person shop or frame builder. A lot of the innovation and creativity comes from the thinking that smaller companies can produce. Technology has made the production side more important by lowering the cost of reaching customers. The internet opens up selling opportunities–and more competition. So production and design capabilities are critical.

Unlike production bicycles that come off the rack in standard shapes and sizes, custom bikes are designed specifically for their owners’ bodies, riding styles, and aesthetic preferences. In determining the angles, rigidity, and flex of the frames they construct, hand builders take into account dozens of measurements and factors—everything from customers’ inseams, arm length and hip flexibility to whether they prefer a stiff ride for efficiency or a softer ride for comfort. The customer also has a say in the bike’s finish, color scheme and design. Ranging in price from $3,000 to more than $15,000, the primary market for custom bikes is affluent people in their 40s or 50s—more men than women—who are steeped in the cycling lifestyle and already own one bike, if not 10.

Classroom discussion questions:

1. Which of the production processes described in Chapter 7 applies here?

2. Why is the industry surviving–and succeeding?

OM in the News: Mass Customization vs. Simplicity

In 1980, the typical credit card contract was about 400 words long. Today, many are 20,000 words. In a typical day, we encounter dozens of moments when we are delayed, frustrated or confused by complexity, writes The Wall Street Journal (March 30-31, 2013). Our lives are filled with gadgets we can’t use (GPS devices, fancy blenders), instructions we can’t follow (labels on medicine bottles, directions for assembling toys) and forms we can’t decipher (tax returns, gym membership contracts, wireless phone bills).

Every facet of our lives, even entertainment and recreation, is complicated by an ever-widening array of choices delivered at a frantic pace. Consider:

• More than 800,000 apps in the Apple App Store

• 240-plus selections on the Cheesecake Factory menu, not including lunch or brunch specials

• 135 mascaras, 437 lotions and 1,992 fragrances at Sephora.com

. 45 Medicare Part D prescription plans to choose from

The supermarket chain Trader Joe’s, reports the Journal, tries to simplify rational choice. The company’s long-standing goal is to reduce the grocery-shopping experience to a few manageable decisions. It believes that giving people everything overwhelms customers, clutters stores and undermines the shopping experience. And, says Trader Joe’s, it is inefficient for handling inventory. So the 350 store chain offers many fewer products than other supermarkets (about 4,000 items instead of 40,000). But it sells $1,750 in merchandise per sq. ft., more than double the sales generated per sq. ft. by Whole Foods.

This WSJ article makes for a nice discussion when you are covering mass customizations benefits and downsides in Chapter 7. (Table 7.1 lists 10 other items for which choices have exploded in the past few decades.)

Discussion questions:

1. Why has mass customization become a part of our culture?

2. What are the issues operations managers face in making mass customization successful?

OM in the News: Mass Customization, Starbucks, and the Millennials

Blame it on Starbucks. Our students in the millennial group (18-39 years old) seem to be looking for ways to customize everything they buy, according to the Chicago Tribune (Feb.26,2011). And it’s not just picking apps for their phones, IDs for their Nike shoes, or music for their iPods.

Now Kraft, the food giant, with its first new brand since the DiGiorno pizzas of 1995, has just introduced MiO, a $3.99 squeeze bottle of flavoring. Consumers can customize their water with flavors like pomegranate or strawberry. Not only will Kraft begin a TV marketing blitz in 3 weeks, but it will give away 100,000 samples through its Facebook page.

Northwestern prof. Alex Chernev points out that consumers derive “additional utility” in doing something themselves. He calls it the “Ikea effect” because buyers got to assemble their own furniture. In the old days, manufacturers made products to meet consumer tastes, he adds. Now they outsource the customization to consumers themselves.

Experts trace the mass customization rage to Starbucks’ success, which pioneered modifiers like “no-whip”, “double-shot”, and “nonfat” to the masses in the 1990’s, removing the stigma of complex orders. (My local Starbucks already knows I only get a “grande decaf iced-mocha with 2 pumps and a dollop of whipped cream”)!

So when you teach mass customization in Chapter 7, consider the quote from a 23-year-old student at Roosevelt U. in Chicago: “Our generation has this sense of entitlement. It’s not only ‘the customer is always right’ but ‘I’m always right’ “.

Discussion questions:

1. What other mass customizations are taking place among products?

2. Why is this an important issue to retailers and manufacturers?

OM in the News: Chrysler’s Gamble with Mass Customization

The year was 1973. Jay and I were both teaching at Boston U.’s brand new European MBA program, just outside of Pisa, Italy. The most popular car on the Italian road was the “Cinquecento”, a midget of a vehicle that could easily fit in the back of a Chrysler minivan. The Cinquecento had all the power of about 3 Vespa motorscooters, my vehicle of choice in college. When I left Italy I never thought I would see one again.

So yesterday’s Wall Street Journal article (Nov.22,2010) announcing that Chrysler was bringing the Cinquecento to the US–and planning to sell 50,000 of them in 2011–was a bit of news. The car will be called the Fiat 500 and be manufactured at a retooled Chrysler plant in Mexico. Five feet shorter than a Chevy Impala, the 500 will retail for $15,500. But the reason you may want to bring this topic to your class is Chrysler’s risky strategy of mass customization (Chapter 7). Where the Japanese mastered the global auto market by limiting production options (a typical Honda might have 2 transmission options, 6 paint choices, 2 interiors, etc.), the Fiat 500 will provide a dizzying array of features to choose from.

With 3 versions of body style, 14 exterior colors, 14 seat colors, 6 wheel styles, and so on, there will be about 1 million combinations of the new car. Chrysler hopes the chance to customize the 500 will draw a wide range of customers who may want a “one of a kind”. In the past, US auto makers learned the risks of mass customization: too many choices leave dealers with lots full of cars, but not the exact one a customer may want (and 80% of US customers want to drive their car off the lot the day they buy).

Further, suppliers are being asked to keep more parts on hand so they can more quickly build a seat or interior combination , then ship it to the plant within a few hours.

Discussion questions:

1. How interested are students in a unique, customized car that will take 30 days to deliver?

2. Why is Chrysler taking this approach?

3. What are the competing products and how do they fare?

OM in the News: Mass Customization at BMW

BMW at its Spartanburg S.C. plant along with 170 suppliers wants to build a custom X5 sport utility vehicle for you. The Spartanburg plant thinks they can do it for you as they already export 70% of the vehicles it makes to more than 130 countries; each with its own specifications. And they do it with 18 owner’s manual languages. The number of custom options includes 500 side-mirrow combinations, 1300 front-bumper combinations, 2,500 possible wiring harnesses, 5,000 seat and 9,000 center-console combinations.

BMW wants 4 to 6 weeks to make the custom ordered SUV, but orders are locked in with a lead time of only 5 days. Dealer software is closely tied to BMW’s manufacturing and supply chain, with workers getting the word on what car they are building via overhead screens. The frequent changes required by variations in custom orders complicates every thing from entering the order, to procurement, to moving parts to the line, and balancing the assembly line. Customization is not cheap. But BMW is betting that mass customization for a premium priced car will pay off.

Discussion questions:

Why don’t more auto purchasers request custom-made cars (the car they really want)?

How do we balance an assembly line with many different products coming down the assembly line (the article says the standard time is 106 seconds)?