[Financial Times] Mass customisation: Make every one different By Peter Marsh Published: May 21 2002 11:43 | Last Updated: May 21 2002 11:43
At a factory in Wichita, Kansas, run by the Cessna aircraft company, a gleaming new Citation Excel executive jet rolls off the production line roughly every three days. While they may look almost identical, virtually every aircraft, which sell for an average of about Dollars 10m and are assembled from about 30,000 parts, is different depending on the requirements of the customer. The production line at Cessna - which is part of the Textron industrial conglomerate - is a good example of the trend in much of industry towards mass customisation. This term was introduced in the early 1990s to describe how manufacturers can satisfy customer demand for product variants by introducing them into traditional factories. But they don't sacrifice manufacturing efficiencies, the absence of which can push up costs and make the company uncompetitive. According to a seminal paper* in the Harvard Business Review in 1993, mass customisation requires a dynamic and flexible organisation. The authors say "the combination of how and when they (different production units) make a product or provide a service is constantly changing in response to what each customer wants and needs". Since this paper was written, more manufacturers have realised they need to introduce variation into production as a way of keeping customers happy - but without returning to employing craftsmen to fashion items in single batches and at astronomic cost. Cessna has introduced principles of lean manufacturing to speed up production and worker efficiency, while at the same time allowing for a large degree of product variation. Last year Cessna made 81 Excel aircraft, one of the company's best-selling models. This is a five-fold improvement on 1998, since when the number of direct assembly workers has risen two-and-a-half times. In other words, worker productivity over this period has doubled. Behind the improvement has been a number of changes to the processes on the assembly line involving extra worker training and a re-classification of the 1,000 or so individual assembly jobs that it takes to fit the parts together on an individual aircraft. The result is that production variation is catered for by substituting different parts and sub-assembly routines within a mass-production environment. According to Garry Hay, Cessna's chief executive, the company's ability to provide a high level of customisation without overly pushing up costs is a key factor behind the company's good profits record and its likely increase in sales from Dollars 2.8bn last year to Dollars 3.1bn this year. This is in spite of a cooling of the world economic climate. Also keen on mass customisation is FAG Kugelfischer, a German manufacturer with sales last year of Euros 2.2bn and which is Europe's second biggest maker of rolling bearings (devices essential to virtually all kinds of rotary motion) after SKF of Sweden. Uwe Loos, FAG's chief executive, suggests that how well the company can move in the direction of customised bearings that suit individual tastes will be a key determinant of future earnings growth. Mr Loos says: "In the bearings industry globally, 70 per cent of the sales come from standard bearings and just 30 per cent from special or customised bearings. "At FAG, the ratio is closer to the other way round - 30 per cent standard and 70 per cent specials - and I want to move the ratio even further, to about 20:80, in the next few years." A reason for this goal is that, frequently, the profit margins on special, custom-made bearings are higher than for conventional standard bearings - a factor of their higher price. While the bearings churned out in their hundreds of thousands for car wheels might sell for tens of dollars, a high-tech bearing for a jet engine might cost Dollars 15,000. The interest in mass customisation can be seen in FAG's main German ball-bearings plant in Schweinfurt, near Wurzburg. Here 270 people work using a high level of automated plant to turn out some 13,000 bearings a day, weighing 25 tonnes. While the casual observer might imagine the bearings were nearly all the same, in fact each day's output can be divided into 50-60 types. The main components for each bearing - the inner and outer rings, balls and cage to hold the balls in place - are shipped in the correct quantities and dimensions to separate units or cells charged with manufacturing individual product types. As much of the detailed assembly (such as inserting balls inside a pair of inner and outer rings) is left to machinery, it is important to make the machines easy to re-programme to increase their flexibility. That, in turn, allows smaller production runs and a greater degree of product variance without unacceptable increases in costs. Jens Krohn, FAG manager in charge of the ball-bearings plant, says: "Increasingly we are trying to reduce the set-up times for the assembly machines, so we can change production more easily in tune with the demands of the market. "The goal is to reduce set-up times by 10 per cent a year. In some cases, we can alter machinery (to make different kinds of products) in about 15 minutes when a few years ago it might have taken two to three hours." This kind of change allows it to be more cost effective to make products in relatively small batches, while it used to be uneconomic to do so. * Making Mass Customisation Work by Joseph Pine, Bart Victor and Andrew Boynton, Harvard Business Review, September-October 1993.
