PLM, Mass Customization and Ugly BOM Vertical Integration

A car can be any color as long as it is black. This famous Henry Ford quote speaks about how manufacturing handled customization in the past. That was the era of mass production. The idea of limited customization options combined with high level of standardization and high volumes of batch production allowed to decrease cost and improve productivity. The concept of mass production is applied to different products in process and discrete industries – food, chemicals, fasteners, home appliances and automobiles.

However, mass production is getting less popular these days. What comes next you ask? The next trend in manufacturing is going to be “mass customization”. This is the idea of total “custom output”. Manufacturing is looking how to create a possibility to produce goods in smaller batches to meet customer specific requirements. Wikipedia article provides a good summary of mass customization concept together with explaining economical value.

The concept of mass customization is attributed to Stan Davis in Future Perfect[2] and was defined by Tseng & Jiao (2001, p. 685) as “producing goods and services to meet individual customer’s needs with near mass production efficiency”. Kaplan & Haenlein (2006) concurred, calling it “a strategy that creates value by some form of company-customer interaction at the fabrication and assembly stage of the operations level to create customized products with production cost and monetary price similar to those of mass-produced products”. Similarly, McCarthy (2004, p. 348) highlight that mass customization involves balancing operational drivers by defining it as “the capability to manufacture a relatively high volume of product options for a relatively large market (or collection of niche markets) that demands customization, without tradeoffs in cost, delivery and quality”.

However, to turn manufacturing from Ford-T production mode to mass-customizable requires lots of changes in the way companies design and build products. My attention caught by McKinsey article – How technology can drive the next wave of mass customization. Read the article and draw your opinion. Author speaks about mass customization trends in manufacturing and how it potentially impact enterprise software and IT. Look on the following picture – the list of “new customizable products” looks very impressive.

New technologies in manufacturing are going to make mass production possible – social and crowdsourcing, customer facing product configurators, 3D scanning, dynamic pricing and many others. Clearly, I can see lots of opportunities in new tech development for software and hardware companies. It also requires structural changes in product development and process organization. 

You can ask me how is it related to PLM? I’ve been posting about PLM role in mass customization before.  PLM becomes one of the most critical drivers in the way development and manufacturing will be organized. Now, I’d like to be more specific. In my view, it is heavily comes down to the way product information and bill of materials related processes will be managed. The ability to have customer facing configurator, with dynamic pricing, optimizing company manufacturing facilities requires significant vertical integration. Today these processes heavily disconnected and implemented in silos. This is not how things should work in 21st century. To connect custom bill of material with specific engineering option and make product delivery lead time short is an interesting process, communication, collaboration and planning challenge. I found the following passage from McKinsey article connected to that –

True scale in mass customization can only be achieved with an integrated approach where technologies complement one another across a company’s various functions to add customization value for the consumer, bring down transaction costs and lead times, and control the cost of customized production

What is my conclusion? Mass customization ends up with ugly bill of materials (BOM) integration challenge. By enabling BOM vertical integration, future PLM systems will make mass customization processes possible, shorten time from the moment customer hits company e-commerce web site and until the moment, product will be shipped. Just my thoughts…

Best, Oleg