Platt Perspective on Business and Technology

Commoditizing the standardized, commoditizing the individually customized 4: acknowledging the consumer demand for choice 2

Posted in strategy and planning by Timothy Platt on May 15, 2013

This is my fourth installment in a series on the changing nature of production and commoditization (see Business Strategy and Operations – 2, postings 364 and loosely following for Parts 1-3.)

Up to here, I have been discussing the development of the first automobiles, and how Henry Ford reinvented the car for the general public, and certainly for its emerging middle class. And in Part 3 I began a discussion of how the public began to demand variety and choice in the cars they bought, and for both practical reasons and for variety that would reflect their individuality. I also at least noted how economy of scale made assembly lines more cost-effective for production of product variety that would support consumer choice.

I refer here, back to Part 1 and Part 2 of this series where I wrote of the importance of standardization in making assembly lines work at all, and how end product variety serves as a stressor to assembly line cost-effectiveness per se.

So in a fundamental sense, I left Part 3 with a contradiction in needs and a fundamental challenge to the assembly line production system per se.

• Yes, it is true that a company such as Ford’s could maintain much of the efficiency of single process and single product-type work flow in its assembly lines by scheduling single type runs for producing different specific product builds.
• And with production scale they could essentially recapture all of the potential of a single process and work flow system by running separate and parallel production lines, one for example producing a coupe model car and another a Model TT truck design.
• And for real efficiency, every part and process going into assembling one of these vehicles that could be, would be standardized and fit equally well into any other Ford vehicle produced – and across vehicle lines and from year to year too.
• But the middle class and their expanding consumer base that came to want and need cars and trucks wanted more and more variety, and new models and designs.
• And the increasing competition of other businesses that also built for this growing and demanding market offered more and more variety and choice too.
• Annual new model releases became a basic fact of life for the mass production automotive industry and the pressures became intense to offer wider and wider variety in any given year too. And something had to give – either the basic price point that a car would have to go for would have to go up, or the profit margin per vehicle assembled and sold would have to go down, or consumer demand for variety would have to be thwarted.
• But competitive pressures made it difficult to simply increase the price of a car or truck, and it made it difficult to simply ignore consumer demands too. This, among other things meant a rethinking of the assembly line per se and its cost centers and how it could become more streamlined and effective.

And with this, I cut away from the early days of the mass produced automobile to much closer to today.

• Employee salaries and benefits are expensive, and I have to add that pension systems can with time become even more so as the major auto manufacturers in the United States all found out the hard way.
• Skilled employees and the human eye and touch are needed and will remain so for a significant time to come, but automation of more and more rote production processes, from spot welding to painting and more, have transformed the assembly line completely – and some assembly line systems are already fully automated except for quality control and managerial oversight.
• But for purposes of this discussion, I would focus on a none-of-the-above for rethinking the assembly line: rethinking what product variety and even personalization mean.
• And in that regard I note that the one, and in many respect only place where variety of product really has to show a distinctive difference is where you see it.

Let’s say, to take that out of the abstract that you are building cars with three different types of seating for the driver and front passenger: a standard model bench seat and two different bucket seat styles, and with each available in three cover materials, and each of them in five colors that would be coordinated with paint color selected. Just considering seating, this means 45 different combinations and 45 different model differences that would have to be supported in an assembly line system. But let’s also say that everything that goes into those seats and both for design and materials, that can be standardized across all of them are standardized.

• So they all connect to the chassis of the car at the same basic assembly points, and with the exact same bolts and brackets too. And the seat padding is the same for materials used – just the seat covers differ.
• So you set up your assembly lines to be supplied for parts and materials using lean just in time strategies and operational approaches for managing what you need to have in inventory, and for getting that where it is needed when it is.
• And you automate as noted above wherever possible.
• And you leverage this with smart information technology for tracking and preparing for demand for each and every product variation that you would produce, and as close to real time as possible so you can produce and ship as quickly as possible, and with the right balance of product output produced, and shipped to the right dealerships at the right time.

Now expand out the range of options that can be modified and even customized across the entire vehicle and allow for the customer to buy any of a huge range of options and choices, depending on how much they would be willing to pay to get that extra special feature or build. And this brings me to the Scion: a Toyota Motor Corporation brand manufactured primarily for their North American market, which for purposes of this posting and series, I would hold up as being as much a benchmark at that first Model T.

• The basic idea behind the Scion is not that you buy one of a select set of basic, preconfigured models with for example one paint color going with one seat cover color – it is that you be able to buy a car that you can see as personalized to you, as the range of options and combinations of them available to choose from, expands past the “standard options” range to a personalization range for the variety that can be selected from.
• So going back to the first true assembly lines and the first mass produced Model T’s and with this in mind as an evolutionary descendant of that, with the modern assembly line as exemplified by the Scion, assembly line meets what amounts to artisanal for variety and even individualization of products possible – but with assembly line efficiencies and costs.
• And I see the Scion and its production in this as just a first step in what is going to become much more the basic and standard assembly line and mass production approach – mass production of the individualized and personalized, and for what I expect to be a progressively wider range of products and product types.

I am going to turn in my next series installment to consider 3-dimentional printers and single copy-friendly printing kiosks for on-demand book publication while you wait. Meanwhile, you can find this and related postings at Business Strategy and Operations and its Part 2 continuation page.

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