Does mass customization pay? An economic approach to evaluate customer integration

The paper provides an integrated view of value creation in mass customization-based production models. While flexible manufacturing technologies are often seen as the main enabler of mass customization, we argue that modern information technologies play a similar important role. Their significance is based on enabling a distinctive principle of mass customization efficiently: customer integration into the production processes. The customer is integrated into value creation during the course of configuration, product specification and co-design. Customer integration is often seen as a necessity and source of additional costs of customization. However, we argue in this paper that customer integration may also be an important asset to increase efficiency and could pave the way for a new set of cost-saving potentials. We coin the term 'economies of integration' to sum up these saving potentials. Economies of integration arise from three sources: (1) from postponing some activities until an order is placed, (2) from more precise information about market demands and (3) from the ability to increase loyalty by directly interacting with each customer. By examining and structuring the economic principles of mass customization the paper will give insights into the benefits, but also the constraints of a mass customization strategy.