MIT Sloan Management Review

Operations Management and Research

The Customization-Responsiveness Squeeze

By David M. McCutcheon, Amitabh S. Raturi and Jack R. Meredith

January 15, 1994

FIRMS IN MANY INDUSTRIES ARE BEING SQUEEZED BY CUSTOMER DEMANDS FOR BOTH GREATER PRODUCT VARIETY AND REDUCED delivery lead times. This is difficult for firms to achieve because quick delivery is usually based on standardization, whereas product variety requires the organization to be flexible and innovative. A common response to these demands is to start production of expensive, specialized products prior to receiving specific orders for them. Such a risky approach often can be avoided, the authors argue. They present a framework for determining the extent of your company’s “customization-responsiveness squeeze” and choosing appropriate tactics to mitigate it.

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The machine tool business is an exemplar of beleaguered U.S. high-technology industries. In the early 1980s, most machine tool companies responded to the recession by slashing output. This left the door open for foreign machine tool builders to establish a strong presence in the U.S. market by bringing in cheaper, standardized products, most of which were built to stock offshore.

As the recession abated, most domestic firms had difficulty regaining significant market share in standard machine segments and concentrated on selling high-end and customized models. Customers had become used to the quick delivery available with the industry’s basic machines and, responding to their own need for faster deliveries, pressured machine tool builders for more rapid response. Most machine tool builders found themselves forced to produce a wide variety of machines in relatively small volumes, offer some degree of customization, and deliver with unprecedented rapidity.

Typically, build times are ten to fifteen weeks longer than desired delivery lead times. Therefore, a firm must have a machine well into the production process before it can be offered to customers with a competitive lead time. Because many of the expensive components cannot be used in other machines or even for alternative models of the same machine type, a firm is heavily committed to its forecast. Inevitably, the forecast is not completely accurate, and firms have had to develop tactics... To read the complete article, login or sign-up using the form below.

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