How a textile manufacturer balances cost cutting with mass customization in its domestic facility.
The burgeoning trend of sending manufacturing to cheaper offshore locales often conflicts with increasing demands for speed and customization. Companies with a niche in producing both mass-customized and standard model products may encounter a problem — while they need a domestic facility to respond to custom orders quickly, the lower costs of manufacturing abroad create an incentive to use an offshore facility for standard units —and such a division may generate diseconomies of scale. In particular, having a domestic facility solely devoted to filling custom orders may raise expenses and force producers to keep custom prices higher than desired. Do firms have an option to profitably retain domestic production? Must flexibility and speed be sacrificed for cost savings? Our research asserts that both goals are possible: A domestic facility focused on filling custom orders can employ a technique called “spackling” — filling in gaps in the custom order schedule with noncustomized orders that might otherwise be manufactured overseas — thus keeping a domestic facility viable, while maintaining custom manufacturing responsiveness.I