Slide1: PENNSTATE Timothy W. Simpson
Associate Professor
Mechanical & Nuclear Engineering and
Industrial & Manufacturing Engineering
The Pennsylvania State University
University Park, PA 16802
phone: (814) 863-7136
email:
[email protected]
http://www.mne.psu.edu/simpson/courses/me579 ME 579 - Designing Product Families - IE 579
TR 9:45 - 11:00 a.m. © T. W. SIMPSON
Customization and Product Platforms: Customization and Product Platforms An effective product platform enables a variety of derivative products to be developed quickly and cheaply
How can we allow consumers to customize a platform to satisfy their individual needs?
Web-Based Platform Customization: Web-Based Platform Customization
Spread of Products into American Households: Spread of Products into American Households Source: Cox, W. M., and Alm, R., 1996, “The Economy at Light Speed: Technology and Growth in the Information Age and Beyond,” 1996 Annual Report, Dallas Federal Reserve, http://www.dallasfed.org/htm/pubs/annual/arpt96.html.
The Internet as an Enabler for Customization: The Internet as an Enabler for Customization The Internet enables remote accessibility while delivering rich information content at the same time
When information is embedded in physical modes of delivery, there is a tradeoff between reach and richness:
Reach is the number of people who can access and exchange the information
Richness characterizes the information itself in terms of bandwidth, customization, and interactivity
bandwidth is the actual amount of information that can be sent or received
customization refers to the extent to which the information can be individually tailored
interactivity refers to the extent that people can interact with the information
Slide6: http://www.landsend.com/
E-Loyalty: Source: Reichheld, F.F., and Schefter, P., 2000, “E-Loyalty: Your Secret Weapon on the Web,” Harvard Business Review, July-August, pp. 105-113. E-Loyalty The value of loyalty is often greater on the Internet than in the physical world
“word of mouse spreads even faster than word of mouth”
Web technologies, when used correctly, reinforce the inherent loyalty found in most on-line customers
In apparel e-tailing, new customers cost 20%-40% more for pure-play Internet companies than for traditional retailers with physical and on-line stores
On-line customers are looking for “a Web site I know and trust”, a long-term relationship, and convenience
Having lowest cost and broadest selection not as important
The Internet as an Enabler for Customization: The Internet as an Enabler for Customization This tradeoff between reach and richness, shaped the way that companies communicated, collaborated, and interacted with customers, suppliers, and distributors.
The Internet enables economic activities that are characterized by “instant information flows, the delayering of value chains, the emergence of new intermediaries, and the shifting of economic rules and market dynamics” (Shaw, 1999)
Many assert that the “computer-mediated market will accelerate the process of customization through its technologies”
Intel recently opened DevelopOnline.com, a company that will support mass customization of electronic products on-line
Slide9: http://www.DevelopOnline.com/
Online Product Customization: Online Product Customization Despite all of the optimism, Shaw (1999) states that “how to capitalize on the full potential of electronic commerce is still an open question”
“One of the critical aspects influencing the success of electronic commerce will be the effectiveness of the interface interacting with the consumers” (Shaw, 1999)
Since Internet commerce is still rapidly evolving, it is unclear what factors will influence people to buy products over the web Source: Shaw, M. J., 1999, "Electronic Commerce: State of the Art," Handbook on Electronic Commerce (Shaw, M., Blanning, R., et al., eds.), Springer, New York, pp. 3-24.
Building the Perfect E-tailer: Building the Perfect E-tailer Design an easy-to-use web site
Craft cheaper customer-acquisition programs
Average of 110% of revenues spent on marketing in 1999
Build expertise in merchandising
Choosing the right products to sell is a fine art
Leverage the real world
Need a combination of clicks, bricks, and slicks (catalogs)
Create new revenue streams
Be willing to customize services and advertising
Build a bullet-proof order fulfillment system
Create a killer data-analysis system
Hire a dedicated customer-service force Source: Berman, D.K., and Green, H., “Cover Story: E-tailing,” Business Week, Oct. 23, 2000, pp. 32-33.
In-Class Activity: In-Class Activity Each group will be assigned some of the following sites:
Examine your company’s on-line product offering and customization process to answer the following:
How easy is it to find the customization page?
What is the extent of the product variety being offered?
What is the point of customer involvement (Duray’s 4 stages)?
What type of customization is being (Pine’s 4 types)?
How is the customization being achieved (Pine’s 5 steps)?
Results of Customer Involvement: Results of Customer Involvement Customer
Involvement Product
Variety Information
Technology Production
Planning Fabrication Assembly Delivery Unique fit Combinatorial Combinatorial Tailored-
to-order Assembled-
to-order Made-
to-stock
or JIT Order
processing Order
processing,
scheduling Point-of-sale
Inventory Adapted from:
Duray, R., and Milligan, G. W., 1999, “Improving Customer Satisfaction through Mass Customization,” Quality Progress, Vol. 32, No. 8, pp. 60-66.
Four Types of Mass Customization: Four Types of Mass Customization Transparent Collaborative Adaptive Cosmetic Representation No Change Change No Change Change Product Adapted from:
Gilmore, J. H, and Pine, J. B., II, 1997, “The Four Faces of Mass Customization,” Harvard Business Review, Jan-Feb., pp. 91-101.
Pine’s Five Steps to Mass Customization: Pine’s Five Steps to Mass Customization Degree of Market Turbulence Degree of Organizational Turbulence Customize Services Embed Customizability Create Point-of-Delivery Customization Provide Quick
Response Modularize 1 2 3 4 5 Sources:
Pine, B. J., II, 1993, "Mass Customizing Products and Services," Planning Review, Vol. 22, No. 4, pp. 6(8).
Pine, B. J., II, 1993, Mass Customization: The New Frontier in Business Competition, Harvard Business School Press, Boston, MA.
Web Sites for In-Class Activity: Web Sites for In-Class Activity 1) Computers:
Dell - http://www.dell.com/
Gateway - http://www.gateway.com/
Apple - http://store.apple.com/
3) Automobiles:
Ford - http://www.forddirect.com/
BMW - http://www.bmw.com/
Jaguar - http://www.jaguar.com/us/
5) Jewelry:
Mondera - http://www.mondera.com/
DeBeers - http://www.adiamondisforever.com/ 2) Clothing:
Lands’ End - http://www.landsend.com/
Shirtcreations - http://www.shirtcreations.com/
Americanfit- http://www.americanfit.com/
4) Bicycles:
Cambria Bicycles - http://www.cambriabike.com/
Cannondale - http://www.cannondale.com/
Internet-based Product Platform Customization: Internet-based Product Platform Customization Comparisons of Internet-based MC strategies within and between industries can be useful in establishing general trends and guidelines for effective Internet-based product platform customization
The Internet will accelerate the process of product customization through its capability to:
reach a broader customer base
enhance consumer interaction
improve customer satisfaction
Therefore, companies should develop product platforms and product platforms to be consistent with their desired Internet-based product offering to enable customization
Slide20: http://www.dell.com/
Slide21: http://www.gateway.com/
http://www.cannondale.com/custbike/c2.html: http://www.cannondale.com/custbike/c2.html
Slide23: http://www.shirtcreations.com/
Slide24: http://www.landsend.com/
Niches within SUV Market Segment: Luxury Cars Small Cars Wagons Midsize Cars Sports Cars Vans &
Minivans Trucks Convertibles Niches within SUV Market Segment
Customized Products within SUV Niche Market: Customized Products within SUV Niche Market Luxury Cars Small Cars Wagons Midsize Cars Sports Cars Vans &
Minivans Trucks Convertibles Lincoln
Navigator Ford Excursion Mercury Mountaineer Ford Expedition
Slide27: http://www.gm.com/
“Cruising for Cars Online”: “Cruising for Cars Online” “65% of car buyers will turn to Internet for pre-buying information this year (up from 25% in 1999).” - J.D. Power & Assoc.
“In nearly half of new-vehicle sales, shoppers consulted the Internet during the buying process.” - Gartner Group
“New- and used-car sales initiated over the Internet will rise to 20% of all U.S. sales by 2002.” - Gomez Advisors
Volkswagen recently offered 4000 limited editions of its New Beetle in Vapor and Reflex Yellow that could only be purchased online through their web site (but deals had to be completed through a Volkswagen dealer) Source: Burnham, R., Road & Track Road Test Annual 2001, pp. 6-7.
Slide29: http://www.FordDirect.com/
Slide30: http://www.FordDirect.com/ Over 30 states prevent automobile manufacturers from selling directly to customers FordDirect
is available
in 9 states
(CA,DE,GA,
MA,NV,NJ,
TN,TX,WA)
Slide31: http://www.smart.com/
Slide32: http://www.smart.com/
Slide33: http://www.smart.com/
Slide34: http://www.smart.com/