Customization: Impact on Product and Process Performance

Abstract

Manufacturing capability has often been viewed to be a major obstacle in achieving higher levels of customization. Companies follow various strategies ranging from equipment selection to order process management to cope with the challenges of increased customization. We examined how the customization process affects product performance and conformance in the context of a design-to-order (DTO) manufacturer of industrial components. Our competing risk hazard function model incorporates two thresholds, which we define asmismatch and manufacturing thresholds. Product performance was adversely affected when the degree of customization exceeded themismatch threshold. Likewise, product conformance eroded when the degree of customization exceeded themanufacturing threshold. Relative sizes of the two thresholds have management implications for the subsequent investments to improve customization capabilities. Our research developed a rigorous framework to address two key questions relevant to the implementation of product customization: (1) what degrees of customization to offer, and (2) how to customize the product design process.