Customized Through to Consumer

There is a new market trend toward customized products, no matter how big or small a product may be. Toyota, for example, has a new saying: "We'll never build the same car twice." Shopping for a vehicle online now offers the consumer the ability to customize to the smallest detail without impacting the delivery date.

"It's the scalability of one," observes Nypro's Jones. "Our buyers want very individual products from us nowlot sizes of onebut they insist on not bearing either additional cost or duration." In some cases, we as consumers will also expect a degree of personalization of many major purchase items. For commodity or nondifferentiating products, we may not expect customization of the product, but rather of the process to procure it coupled with the ability to buy it 24/7 and receive it the next day or sooner.

A supplier could not "scale lot sizes of one" without the automation enabled by end-to-end connectivity. In the past, custom and small quantity orders would require special management attention that was an exception to a standard shipping process.Flags, paper notes, or special handling instructions would be affixed to boxes or parts, and supervisors would have to periodically shepard the "custom order" through the process. Receiving status of such an order at the other end would be an exercise in human networking.

Today, order customization can no longer be treated as an exceptional condition. It must be built in to the process. The product or part carries its instructions electronically (perhaps RFID tag referencing the build-to-order database record). The system processes these instructions on a per-part basis (e.g., paint this one blue) while real-time databases are updated seamlessly. Successful manufacturing companies can use Inescapable Data technologies to adapt to such a scheme.

Build-to-Order Manufacturing

We have seen the need for specialty or custom manufactured goods for decades. "We're continuing to see a trend of moving away from a make-to-stock strategy in manufacturing and fulfillment to a make-to-order or configure-to-order strategy," says Mike Dominy, a senior analyst with the Yankee Group.^[7] Black Model-Ts no longer retain customers in a world where buyers value form and fit along with competitive price. Vans, Inc. is an example of a company that marries customer's desires for custom shoes with manufacturing operations thousands of miles away in China.

Through the Vans.com Web site, customers can click on every piece of material that goes into a particular shoe, specifying the color and potentially other attributes. Between 5 and 10 materials (or sections) are commonly used in building a shoe and, using the Vans.com order process, each one can be customized.

There were many challenges for Vans to overcome to get all of its business systems tied together and produce "one-off" custom orders that didn't incur unreasonable delays or costs. Web services integrate Van's Web site with its MRP system as well as a unique purchase order that is then transmitted to China. Innovative supply-chain software from J.D. Edwards was key as was compute machinery from IBM that provides "capacity on demand," allowing Vans to easily handle unanticipated demand peaks.

Many operational changes were driven by this need for customized product. Instead of batching together monthly purchase orders (which is normal in the shoe industry), purchase orders are now created and transmitted nearly continuously and for individual shoes. Distribution centers that normally hold and queue batches of one-style product now had to be equipped with specialized automated handling machinery to zip the custom orders through. Vans used UPS's WorldShip system, which handles all the shipping data, and the China factory is able to print domestic shipping labels for each individual box and affix the labels at the moment of manufacture. Transoceanic shipments are first aggregated into larger containerized groupings to clear customs faster. When they arrive in California, the containers are broken down into groupings for individual destinations and cross-docked^[8] back onto UPS trucks for delivery directly to the customer.

^[7] http://www.webservicespipeline.com/trends/46800394.

^[8] Cross-docking is a technique where packages come in on one loading dock and are immediately routed to an outbound dock and a different truck for delivery without any holding or queuing time.

Higher customization can be more easily achieved by deferring the final assembly step to the last possible moment. Some shipping companies now understand this and, in an effort to do more customized order fulfillment, have taken on the some final kitting, assembly, and integration tasks. This is a trend that is expected to continue (reminiscent of Jones' Pac-Man eating up value-chain dots imagery).

There is not just a single step or single change to enable customized manufacturing. Rather, the end-to-end process has to be rethought and refactored to allow for the process and electronic infrastructure changes. Data exchange technology and networks and business services are all available now that can come together to essentially stretch a wrapper across the global design, manufacturing, supply, and distribution chainsmany of which are completely separate companies (if not competitors some of the time). Once in place, the new tightly coupled integration allows for customization to be a nondisruptive event.

An interesting outcome of value-chain integrationfor manufacturers, suppliers, and shippersis that all become more impervious to economic downturns. As Motorola, for example, outsources more and more of its production and engineering to tightly coupled partner firms such as Nypro, Motorola becomes physically smaller. This allows Motorola to become more nimble, more able to respond faster to market changes, and more tolerant of market down cycles (primarily from having to invest in much less capital and labor-related resources). At the same time, a manufacturer such as Nypro achieves more resiliency as well because it has scaled to meet diverse needs of a broader customer basea rebalancing, of sorts, in the manufacturing world.