Creating the customer-responsive supply chain: a reconciliation of concepts

Build-to-Order Supply Chain Management

Edited by Angappa Gunasekaran

1 Introduction

In market conditions of increasing levels of product variety and customisation, the ability to respond to customer orders in a timely fashion can provide a critical competitive advantage. Across industry sectors, such as fashion ([19] Christopher, 2000; [115] Storey et al. , 2005), personal computers ([64] Kapuscinski et al. , 2004), consumer electronics ([18] Catalan and Kotzab, 2003), construction ([3] Arbulu et al. , 2003), and automobiles ([59] Holweg and Pil, 2004), companies are contemplating strategies to increase their responsiveness to customer needs by offering high product variety with short lead-times. More recently, the discussion of mass customised products ([69] Lampel and Mintzberg, 1996; [37] Gilmore and Pine, 1997) has shifted the discussion beyond the simple provision of product variety towards individually customised products. While these customer-driven or build-to-order (BTO) strategies have been implemented in the personal computer sector, with Dell being the most prominent example ([64] Kapuscinski et al. , 2004), complex manufacturing operations, such as automotive, have been slower in adopting these strategies ([49] Hertz et al. , 2001; [59] Holweg and Pil, 2004).

The increasing importance of BTO supply chains results from two developments: first, the number of product variants has been increasing across most industries, such as consumer electronics ([18] Catalan and Kotzab, 2003), fashion and sportswear ([31] Fisher et al. , 1994), and automobiles ([59] Holweg and Pil, 2004). Second, time has become a factor in competitiveness as customers are increasingly reluctant to accept long lead-times for products and services ([12] Bower and Hout, 1988; [112] Stalk, 1988). The former development creates severe operational problems for traditional make-to-forecast or "push" strategies, as firms require large amounts of finished goods inventories to ensure customers find the specifications they are looking for. In the case of the Mercedes E-Class, which is available in more than three septillion (3 × 10²⁴ ) variations ([95] Pil and Holweg, 2004) for example, a make-to-forecast strategy becomes virtually impossible. While BTO strategies can help overcome the first hurdle, existing auto supply chains are not sufficiently responsive to deal with the second development; impatient customers, who would like their vehicles delivered within 2-3 weeks, rather than the current six weeks ([57] Holweg et al. , 2005a).