Mass Customization, We Hardly Knew You

Managing Automation (Chiappinelli) - For years, Dell’s supply chain prowess drew the ire and esteem of manufacturers worldwide, as the made-to-order leader ably delivered customized computers and accessories to eager and loyal customers, muscling its way to an enviable market share in the process.

Let’s observe a moment of silence for this supply chain pièce de résistance. Last month, Dell announced that, well, it just wasn’t working out anymore. The operations and supply chain needed to feed the formerly high-flying business model had grown too complex and too pricey. In what amounts to a eulogy for a once-coveted business model, Dell’s director of investor relations, Robert Williams, wrote:

In the past, we utilized a single, direct configure-to-order model and we gave our customers a cascade of options to choose from when configuring a product specifically for their needs. This was, and still is, a great model for custom configuration where our customers value and will pay for this service, but it has become too complex and costly for significant portions of consumer and some portions of our commercial businesses.

Dell’s new strategy is called Client Reinvention. Under its directives, the company is keeping a wary eye on its cost of goods sold (COGS), a tough-love metric that often erodes the notion that every customer is a valuable one. Williams went on to explain:

Cost savings will come from further reduction in product complexity, larger bulk orders to contract manufacturers, strategic component buys, and use of lower-cost shipping lanes. For example, one year ago, Dell had never shipped a finished good to a customer via ocean freight. We have now started to move a small percentage of our product to a low-touch, fixed configuration, ocean ship model and you will see more orders going over the water going forward.

A Dell computer on the ocean? Say it ain’t so!

Dell should survive the transition and find its footing in what will be a much more out-of-the-box world. But there are now flowers on the grave of a business and supply chain model that just a few short years ago looked like a bellwether of change for manufacturers.

So the question becomes, can mass customization survive in a world where transportation is no longer cheap? And how might the next aspiring Dell configure its supply chain for high product variability and short delivery times? Can it rely on thousands of final assembly locations (its own and its partners’) to customize orders for short deliveries? I suspect the COGS equation will snap that pipe dream as well.
What do you think: Is mass customization dead?