Postponement & Mass Customisation

This paper describes the manufacturing strategy to support lean and agile concepts. It also outlines the influences on product and service design brought about by leanness and agility. The characteristics of Postponement and Mass Customization are defined. These methods also impinge on product design. Two companion articles on "Agile Manufacturing" and "Lean Manufacturing" accompany this article.

Links to other Best Practices and Training at bottom of page

Manufacturing Strategy

Product variety is increasing, which has a profound effect on manufacturing strategy and the supply chain in terms of the number of SKU's needed to service demand. However the way that variety grows is significant. The following chart illustrates the relationship between the number of raw materials and finished products with each type denoted by a letter and a typical conversion process.

Where the conversion process follows the shape of the letter. For example motor vehicle manufacturers have many raw materials fewer sub assemblies which can then be configured in a wide variety of permutations represented by the letter X as follows:

Manufacturing strategy tends to resolve itself into a number of standard strategies:

Engineer to order

The product and design tend to be highly complex with long manufacturing lead times, for one off or small production runs.

Make to order (print)

The customer designs the item and provides the design to a supplier to make.

Assemble (pack) to order

Standard items or sub assemblies are stocked and configured into discrete assemblies/packing configurations to customer specified options.

Make for stock

Standard (commodity) items are stocked awaiting orders.

Continuous production

Limited and becoming rarer as varieties increase, but the item is a continuous supply chain. Examples include water, gas and electricity, and some chemicals.

Manufacturing strategy is greatly influenced by product strategy. In the case of "T" products, raw materials can be held in bulk and packed to order if sufficiently flexible packing facilities with sufficient capacity to accommodate demand fluctuation is available. "A" items generally require dedicated assembly facilities with good raw material stock control to avoid shortages. "V" items require flexible processes. "X" items are generally assembled to order from buffered sub assembly stocks.

One method of gaining some agility is to use the concept of postponement. Often this technique can be used to pluck the low-hanging fruit of agility. We used letter notation to define product strategy in the context of the implications on manufacturing strategy. However the shape of the letter is also significant as follows:

Let us take as an example the letter "T" type products from a manufacturing point of view.

1. In the left hand figure the products are made from a few common raw materials and at a single point in the process can be converted into a number of end products.
2. In the second figure a single raw material goes through early processes which increases the variety of different semi-finished varieties which then follow a common set of processes up to a later series of process which then further increases variety.
3. In the third figure a single process about two-thirds through WIP commits the semi-finished items to one of two (or more) types or families.
4. In the fourth figure process stages are longer.
5. In the fifth figure there are only a few short processes.
6. In the sixth figure the mix is higher.

Firstly you need to identify the degree of commonality (inter-changeability) which exists between your products at all stages of the process from raw materials to finished and the points in the process where they become more specialised (points of mutation). This mutation may occur at a specific process or may be represented by a change in level in the Bills of Materials. We teach a method called "Commonality Trees" to perform this analysis.

We can now exploit product architecture in one or more of the following ways:

1. Processing costs money. As a result significant value can be added at certain stages. It makes sense therefore to try to postpone the point of mutation to avoid holding costly items, or at least hold stock prior to this stage rather than after.
2. Lead-time is shorter the nearer the product is to completion. Therefore from a customer service viewpoint it is advantageous to have finished stock readily available, or in a postponement world to hold stock where there is a good trade off between additional varieties needed to be stocked vs. the lead-time to finish.
3. Flexibility to convert a semi-finished item or raw material into any end product is retained up to the process where the process commits it to becoming a particular end product, or belonging to a smaller sub set of end products (the point of mutation). If stock is held after this stage inevitably more varieties are needed which increases overall stock levels and the risk of obsolescence.

These arguments define the scope for and benefits of "postponement", and the bedrock of lean and agile supply chain design.

• Argument 1: The earlier parts are stocked in the process the more likely they are to satisfy a larger range of changing requirements.
• Argument 2: The earlier parts are stocked in the process, less value has been added to the stockholding.
• Argument 3: The later parts are stocked, the shorter the lead-time.
• Argument 4: If stock is held after the point of mutation more will be needed (some of each type).
• Argument 5: If processing can technically be re-sequenced to delay mutation more flexibility can be retained.

If the point of mutation can be delayed by the design of the product or process that is always beneficial. Examples of this would be:

• Variable features should be added last (just before shipping);
• Variable features should be minimised to external features only;
• Variable features should be minimised to trivial part replacement / re-assembly;
• Variable features should not be part of sub-assemblies;
• Variable features should be separate to other parts / packaging;
• Customer customisable products (possibly by supplying a separate conversion kit).

This could be up to the point of sale or beyond using mass customisation techniques.

Mass Customisation

One method of significantly contributing to agility is the recent concept of "Mass Customisation", which in a manufacturing context aims to achieve an individual customer product from standard components. I.e. turning "A" and "X" type products into inverted "X" (fewer parts, but high product variety) or "V" type products.

This is almost the opposite of the Henry Ford Concept of "Mass Production", where high volume and low variety are the major themes. In this case Mass Customisation implies high volume production but of high variety products. There are three major types that influence manufacturing strategy:

Configured (Pre sales)

The product is configured directly in conjunction with the customer the result of which is directly fed into the manufacturing planning process. Examples of this include sales of mobile phones, which have millions of permutations and options. Commuter jets are made on this basis, as are many machine tools, motor vehicles, clothing, and many PC computer suppliers with Internet ordering systems. This may include a degree of design such as flat pack furniture suppliers who will sit with a client and configure their bedroom or kitchen using standard cupboards and worktops and then pick them from stock. CAD design tools, or configuration tools can specify allowable design permutations and sales features. Knowledge based systems using this concept have been used to configure valid "X" type products, into permitted and complete permutations of parts and sub assemblies. An example is that if the 1600cc engine is fitted to the vehicle it also has a label on the boot (trunk) corresponding to that.

Configured (Post sales)

The customer can configure the product when they have received it. Examples include vacuum cleaners with interchangeable cleaning heads, and software. In this case the product is standard, with customisable features, but may include optional extras, bought at the time of purchasing the original equipment or later, as an enhancement.

Postponed

A standard product that can be packaged differently or has short lead-time customisable features such as printed logos as with tee shirts and swimming hats, "own-branding", price detail changes on food packaging.

The Basic Mass Customization Premise

1. Standardisation leads to part count reduction, reductions in overheads, reduction in lead-times and can introduce the possibility of leaner working, due to increased volumes of standard parts. Traditional accounting systems underestimate this effect.
2. Lack of standardization leads to a massive product range product and component proliferation and longer lead-times. (Also see Best Practice of the Week 027: Killing Old and Unprofitable Products).
3. Products do not have to be over-engineered to suit the worst case. Each case can be accommodated separately.

Implied in these techniques are:

• Agility
• Re-engineering your product range to make your products "agile'.
• Knowledge bases of individual customer's needs including "soft" needs.
• Knowledge bases, rule based and interactive CAD systems of allowable permutations and sales features such as different pricing rules.
• The ability to use these tools to tailor your product and processes to provide personally customised products routinely.

There is therefore a significant level of further change required to achieve mass customisation in addition to agility. Also knowledge based information systems, which are today in their infancy, are needed.

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The following further best practice articles were also mentioned in this paper:

The following public training courses and in-house workshops cover Postponement & Mass Customisation from different perspectives:

To discuss your consulting or training needs with one of our independent consultants or trainers please Contact Us.

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© SM Thacker & Associates November 2000 Version 2: November 2008