SUPPLY CHAIN MANAGEMENT AND MASS CUSTOMIZATION

Шекеринка Ивановска

Доктор экономических наук, доцент, Международный Славянский университет, Г. Р. Державин, Свети-Николе, Р.Македония

МЕНЕДЖМЕНТ (УПРАВЛЕНИЕ) ЦЕПОЧКАМИ ПОСТАВОК  И МАССОВОЕ РЕГУЛИРОВАНИЕ

Аннотация

Эта статья посвящена  управлению цепью поставок (УЦП). Глобализация, технология и рост  конкурентоспособной в  бизнес-среды стимулировали появление значительного изменения под названием управление цепью поставок. Это  дисциплина  21-го века. Это искусство материальных компонентов, сырья и поставляемость  готовой продукции до клиентов с эффективностью и эффективность в  расходах. Цепочка поставок более чем физическое движение товаров из одной страны в другую. Она включает в себя информацию, движение денег, а также творчество и развитие интеллектуального капитала.

Массовое регулирование это маркетинг и производство техники, которая  комбинирует гибкость и персональность „сделанные для потребителей - клиентов„ с более низкими затратами  суммированы через массовое производство. Массовое регулирование это выдача  клиентам-потребителям единую  готовую  продукцию когда, где и как они хотят.

Наиболее важным является цена, которую они способны и в состоянии платить. Массовое регулирование это не массовое производство.

Импликация  методов и подходов  к массовой кастомизации создает  льготы для компаний: более высокую прибыль, низкие затраты, эксплуатация  рынка, растущая база данных меньше инвентаризации.

Ключевые слова: закупки, цепочка поставок, управлению цепью поставок, массовое регулирование, рынок, потребители.

Shekerinka Ivanovska

Doctor of Economics Sciences, associate professor, International Slavic University, “G.R.Derzavin”, Sent Nikole, Republic of Macedonia

SUPPLY CHAIN MANAGEMENT AND MASS CUSTOMIZATION

Abstract

This article is dedicated to the Supply Chain Management (SCM). Globalization, technology and an increasingly competitive business environment have encouraged huge changes in what is known as Supply Chain Management (SCM). It is a discipline of the 21^st century. It is the art of material components, raw materials and finished products delivered to customers accompanied with effectiveness and efficiency of the cost. Supply chain is more than the physical movement of goods from one country to another. It includes information, money movement, and a creation and development of intellectual capital (knowledge).

Mass customization is a marketing and manufacturing technique that combines the flexibility and personalization of "custom-made" with the low unit costs associated with mass production. Mass customization is giving consumers a unique end product when, where and how they want it. Most importantly it is a price they are willing and able to pay. Mass customization is not mass production.

Therefore, implication of methods and approach at mass customization creates benefits for the companies: higher profits, lower costs, market exploitation, increased customer base and without any inventory included.

Keywords: supply, supply chain, supply chain management, mass customization, market, customer.

1. Globalization’s impact on Supply Chain Management

The first decade of the 21^st century may be described by future business historian as the beginning of the Supply Chain Management. Friedman refers to as “third stage of globalization”.  Fundamentals of SCM are established in 2005, when the Council of Logistics Management ended up renaming itself at the Council of Supply Chain Management. The chairman of the Council of Logistics, Rick Blasgen, said:[1] Logistic is part of the supply chain process as the Earth is part of the universe”.

SCM became one of the fastest growing research areas of interest to both academics and professionals. Demand driven by globalization and the introduction of electronic commerce made SCM more interdisciplinary, to adopt, to solve and to identify the problems for many companies. The area of SCM has been considered as a competitive strategy for suppliers’ and customers’ integration. The main objective is improving the responsiveness and flexibility of manufacturing and to service the organizations at the same time. Prevailing trend of globalization demands effective supply chain policy and it can reduce average holding inventory level as well as expected cost. On the other hand, the advantages which are much more important are: reduction of inventory investment in the chain, general reduction in costs, improved customer service with higher customer satisfaction, building competitive advantage and learning from past experience and amassing knowledge from it.

Globalization, as the consumer end of the supply chain, introduces multiple managerial complexities. One familiar product that is among the first to come to mind is coffee that traverse the globe before it comes to us. There are known many issues of “customization’ and “standardization” of products as they are introduced into new markets with different customer preference. Global firms such as Coca Cola and Mercedes Benz provide interesting examples of supply chain globalization and differing stages of the chain in which their respective products are adapted to the local taste.[2]

Dr. Bernard J., professor emeritus at The Ohio State University, described SCM’s evolution as a passage through three stages of integrated logistics: from Physical distribution, through the inclusion of Procurement and Operations, to the end–to-end view encompassing Vendors and Customers.[3]

SCM integrates supply and demand management within and across companies. To give a better explanation of SCM, managers have to answer and be faced with more questions:

• How many products are they going to sell,
• Where and when are they going to sell them,
• How much production do they need to plan in their factory,
• Which raw and packaging materials do they need to involve in their production plan?

As a summary, SCM should give an answer of two questions:  first, when and where products are desired, how many are wanted, in what kind of combination, and second, when and where the products are made, how many are produced, in what kind of combination.

All of these aggregated a need to develop an action, where demand and supply need to meet sourcing, production and delivery. Supply chain in a simple format consists of three players: 1) the company producer, 2) the supplier, and 3) customer (supermarket, or distributors, wholesalers or retailers).  Also, there is the customer’s customer or the end customer at the end of the extended supply chain.

Evolution of SCM is from combination of Manufacturing management and Logistic management. Logistic management is growing up from transformation of Sales and distribution management and Material management. The next Figure no. 1 is illustration of evolution of SCM.

 

Figure 1 - Evolution of Supply Chain Management

Today, it is important to place production near its markets and clients for better prospects. Production must be close, not only in the figurative sense, to listen to what customer is saying today and to be certain what he will want in the future. Proximity in the physical sense is important too, to be able to deliver to the customer as quickly as possible and to track closely his changing needs.[4]

There are two parts of SCM, effective planning and effective executing. Effective planning should be done in two distinct classes of forecasting methods:

• Qualitative forecasting - based on intuition and experience.
• Quantitative method or statistical forecasting – based on time series of historical date.

The Effective-an important level of implementation-performance, includes replanning of the materials which are supposed to come out as a final product, the factors which have an influence over them and the frames where they are supposed to be performed

Effective executing of SCM execution starts with schedule and settings dates. The Effective-an important level of implementation-performance, includes replanning of the materials which are supposed to come out as a final product, the factors which have an influence over them and the frames where they are supposed to be performed  Sometimes the SCM suboptimal features are based on the planning and the changes that are necessary.

Top of Form

It is also importa It is also important that it includes coordination and collaboration with channel partners. Design, maintenance, and operation of supply chain processes, including those that make up extended product features so as to satisfy the end-user needs.

Traffic managers became physical distribution managers of the goods, who then turned into logistics managers, and today they are morphed into supply chain managers. Supply Chain Management disciplines have produced more of the new concepts, methods, and tools; if applied wisely, they will improve the results.

Consumers today play more demanding and requiring role. Today, the ability to enter the market and to be the leader of changes is directed towards the ability to be a good supplier and to add as much value as it is possible to the client-consumer. Therefore the chain of supplies presents a product presented in the right time, with an appropriate cost and conditions including a quality transferred to the right consumer. It logically arises that the organization must take CSM into consideration as a part of the company’s strategy.

Supply chain is overcoming the bridge between demand and customers. It means turning the requirements at the point of purchase and delivery of supply as demand point. Therefore, CSM should be viewed as a process of strategic management of procurement and storage of materials, partial and finished products throughout the organization and its marketing channels as a way for current and future profitability by maximizing the cost and cost-effective realization of orders. This procure chain differ greatly from organization to organization and from industry to industry.

2. Mass customization and Supply Chain Management

Mass customization has many explanations, but each of them is that in marketing, manufacturing, call centers and management, it is the use of flexible computer-aided manufacturing systems to produce custom output.[5] Those systems combine the low unit costs of mass production processes with the flexibility of individual customization. Mass customization is a marketing and manufacturing technique that combines the flexibility and personalization of "custom-made" with the low unit costs associated with mass production. Mass customization is a business strategy that aims to fulfill individual customer needs at a cost level. That enables to target a relatively large part of the market of a similar standard product. Production of personalized or custom-adjusted goods or services to meet consumers' diverse and changing needs nearly to the mass production prices. Mass customization is not mass production.

All executives today recognize the need to provide outstanding service to customers. Focusing on the customer, however, is both an imperative and a potential curse. In their desire to become customer driven, many companies have resorted to invent new programs and procedures to meet every customer’s request. But as customers and their needs grow increasingly diverse, such an approach has become a surefire way to add unnecessary cost and complexity to operations. Managers have discovered that mass customization if not properly operated, too, can produce unnecessary cost and complexity.

Mass customization is based on several significant aspects:

• Mass customization is based onproduct-based strategy,
• No morebrands -consumerbecomesits ownbrandby creatingtheirownpersonalbrand,
• Consumersrequireadjustment,
• Modulatingmeansmasscustomization,
• Masscustomizationsellscustomizedproductsorservices.

We have identified four distinct approaches to customization: collaborative, adaptive, cosmetic, and transparent. When designing or redesigning a product, process, or business unit, managers should examine each of the approaches for possible insights into how best to serve their customers. In some cases, a single approach will dominate the design. More often, managers will discover that they need a mix of some or all of the four approaches to serve their own particular set of customers.

Collaborative customizers conduct a dialogue with individual customers to help them articulate their needs, to identify the precise offering that fulfills those needs, and to make customized products for them.

Adaptive customizers offer one standard, but customizable, product that is designed so that users can alter it themselves.

Cosmetic customizers present a standard product differently to different customers. That’s mean the product is displayed differently, its attributes and benefits are advertised in different ways.

The transparent approach to customization is appropriate when customers’ specific needs are predictable or can easily be deduced, and especially when customers do not want to state their needs repeatedly. Transparent customizers observe customers’ behavior without direct interaction and then inconspicuously customize their offerings within a standard package.

Also, the following components can change the form of an offering for individual customers: packaging (bar codes, labels, instructions), marketing materials (sales brochures, flyers, video and audiotapes), placement (where, when, how and to whom the product is delivered), terms and conditions (purchase price, payment and discount terms, promotions, warranties and guaranties, after sale service procedures), product names (brand name, co-branding, club memberships, privileges for frequent customers).

Example one[6], consider the case of the adaptive customizers by lightening system made by “Lutron Electronics Company” of Coopersburg, Pennsylvania.  Lutron’s customers can use its systems to maximize productivity at the office or to create appropriate moods at home without having to experiment with multiple switches each time they desire a new effect. Lutron’s graph eye system connects different lights in a room and allows the user to program different effects (so as to say, lively parties, romantic moments, or quiet evenings for reading). The customer instead of repeatedly adjusting separate light switches until the right combination is found, now he can quickly achieve the desired effect merely by pressing in the programmed settings.

Example two, cosmetic customization. Planters Company, a unit of Nabisco, Virginia, chose this customization in order to satisfy the increasingly diverse merchandising demands by the retail customers. Planters could be produced only by long batches of small, medium, and large cans. Customers had to choose from a few standard packages to find the one that most closely met their requirements. Today, the company can quickly switch between different sizes, labels, and shipping containers, responding to each retailer’s desires on an order-by-order basis.

To determine which types of customization are appropriate for a given business should focus on identification of critical customer necessities and flaws in their business, thus it should carefully identify what is supposed to be adjusted with the ability to create the best and unique value for the customer with the lowest cost   including the right time for this process.

But, mass customization has some disadvantages as well: taking information from customers is not easy; logistics and distribution of real product of real consumers in real time and with adjustable real price is very difficult; manufacturing process must be flexible as well as the increase of material and manufacturing costs.

Finally, the key is to apply some of the means of customization that are proven to be necessary to create customer-unique value. The four approaches of customization provide a framework for companies to design customized products and support the business processes. They demonstrate the need to mix the direct interaction of collaborative customization, with a knowledge gained from customer recognition in the cosmetic customization and precise observation of the transparent customization. All of these types of customizations should be applied through the economic aspect of the expenses.

[1] David Jacoby, Guide to Supply Chain Management, //Business & Economics, 2014, p.5.

[2] Chi-Kin Chan, Heung Win J. Lee, Successful Strategies in Supply Chain Management, //UK, Idea group Publishing, London, 2005, p.123.

[3] Kenneth B. Ackerman, Art Van Bodegraven, Fundamentals of Supply Chain Management: an essential Guide for 21st Century Managers,// US, Washington, 2007, p.6.

[4] Bill Belt, Five Basic Principles for Supply Chain Management, // Business & Economics, CRC Press, 2009, p.30.

[5] www.businessdictionary.com/goods

[6] B. Joseph Pine II, free webinar, Beyond  Mass Customization,// Harvard Business review , analytic services, 2011, p.15.

References

1. David Jacobi, Guide to Supply Chain Management, // Business & Economics, 2014, p.211.
2. Bill Belt, Five Basic Principles of Production and Supply Chain Management, // Business & Economics, CRC Press, 2009, p.180.
3. Colin Scott, Henriette Lundgren, Paul Thompson, Guide to Supply Chain Management, // Springer, U. Kingdom, 2011, p. 195.
4. Flavio S. Fogliatto, Giovani J.C. da Silviera, Mass Customization: Engineering and Managing Global Operations, // Springer, 2011, p.374.
5. James B. Ayers, Supply Chain Project Management, // B&E, CRC Press, 2009, p.390.
6. James B. Ayers, Handbook of Supply Chain Management, // Business & Economics, CRC Press, 2006, p. 611.
7. Kenneth B. Ackerman, Art Van Bodegraven, Fundamentals of Supply Chain Management: an essential Guide for 21st Century Managers, // US, Washington, 2007, p. 225.
8. Lawrence V. Snyder, Zuo-Jun Max Shen, Fundamentals of Supply Chain Management, // Institute of industrial Engineers, Hoboken, New Jersey, 2011, p. 350.
9. Lawrence D. Fredendall, Ed Hill, Basics of Supply Chain Management, // CRC Press, Business & Economics, 2000, p. 239.
10. Joseph Pine II, free webinar, Beyond Mass Customization, // Harvard Business Review, analytic services, 2011. p.25.