Over a century ago we saw the start of the victory march of mass production. Henri Ford uttered famous words about his cars that became the embodiment of this era and that unleashed a revolution that brought consumer goods within reach of Joe Public: “You can have it in any color, as long as it’s black.” Mass production: large series of uniform products, enabling production at low costs.
Now, more than a hundred years later, mass customization is becoming the new standard for many products. Mass production was driven by the desire to turn “have nots” in “haves”. Owning a car, vacuum cleaner, fridge or telephone came within reach of billions of people, even if this meant that you had the same model as your neighbors.
Mass customization is driven by the desire to be a unique person. Today, people want to express their individuality or uniqueness by explicitly choosing a particular model or version of a product, preferably customized to the level of the individual buying the product. The trend facilitating this behavior is mass customization. This way of designing, marketing, manufacturing and distributing a product is enabled by the use of flexible computer-aided manufacturing systems to produce custom output. Such systems combine the low unit costs of mass production processes with the flexibility of individual customization. It has two important characteristics:
- It effectively postpones the task of differentiating a product for a specific customer until the latest possible point in the supply network (Kamis, Koufaris and Stern 2008);
- It requires 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 (Kaplan & Haenlein 2006).
It goes without saying that this strategy has a profound impact on the entire supply chain: marketing, product design, product engineering, process engineering, procurement, etc. And also, on… cost engineering. How can you as a cost engineer ensure that you have the right costing information at your disposal at all times, when:
- frequent product and process innovations lead to shorter product lifecycles;
- shorter submission periods for cost estimates and binding quotation prices require you to limit the lead-time of tender processes, while at the same time, the exceeding number of RFQ’s enlarges volume of work in costing;
- the increased product variance requires estimations of a higher number of assembled parts and product variance in a shorter time;
- an expanding product portfolio, higher capital investments and R&D spending lead to stressed margins and profit?
Tools & methodologies
Organizations applying a mass customization strategy need an efficient cross-functional costing process resulting into reliable cost estimates and business cases. To quickly evaluate potential investments in new products and projects it would be very helpful if alternative scenarios can be compared by means of simulation. Reliable, up-to-date data as input for these calculations and simulations should be retrievable from a product and price repository. Such a repository would also be very helpful in securing the consistency of target cost / piece cost calculations for business case and ROI calculations. Advanced software is available to support cost engineers in their task to quickly provide cost estimates in a highly volatile environment.
Want to know more about successfully designing and implementing a cross-functional costing process, supported by the right tools?
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