Mass Customization in Process Industries

From Mass Production to Mass Customization

Prof. Dr.-Ing. habil. Hans-Jrg Bullinger, Dr.-Ing. Wolfgang Schweizer
Fraunhofer Gesellschaft, Munich, Germany

Abstract
Producing enterprises in Europe were in a situation, which marks itself by a strong growth
of competition and an individualizing of the customer's requests increasing at the same
time. In order to maintain the market, many enterprises with mass production find in front
of the difficult task of linking two strategic options: the simultaneous improvement of the
differentiation and of the cost structures.
In consequence controversy measures would be required. Solution attempts in the context
of conventional business models exhibited the following characteristics: a strong rise of
the information and communication intensity, an increase of the product type and number
of variants, a reduction of the manufacturing lot size, unstable, frequently changing production processes and an extensive storekeeping in several stock levels ("complexity
costs"). Enterprises, which introduce the mass production for the individual customer, try
to combine the advantages of mass production with those of individual manufacture. Intelligent competition strategies based upon concepts of the Digital Factory approach aim to
overcome the traditional duality of "cost leadership" or "differentiation strategy" and to
make both efficiency and effectiveness possible.
A network project aims to test ways and instruments to open Mass Customization as a
new paradigm for companies with batch production. That requires a new definition of the
relation to customers, trading firms, manufacturers of product configuration systems, machinery suppliers and therewith an almost complete reorganisation of processes and
structures. The combination of the advantages of a mass production (control of the processes) with individual customer relation (adopted products) promises a persistent position
advantage and tangible yield improvements for the businesses.

Keywords: Innovation, competition strategy, business model, immediate production, Mass

Customization, process industries, batch production

1 INTRODUCTION
Innovations are the central instrument of control for nations
as well as companies, enabling them to get ahead of the
international competition - and to stay on top. As innovations create a new lead, fresh employment and new
growth, this is just what we need to be able to further afford
our wealth. Nations as well as companies, however, find
themselves confronted with a growing obligation for innovation.
Producing enterprises in Europe are in a situation, which is
characterized by a strong intensification of the competition
with an individualizing of the customer's requests increasing at the same time. In order to maintain ground at the
market, many enterprises with mass production stand
before the difficult task to link two strategic options with one
another.
Classical-proves controversy measures would require the
simultaneous improvement of the differentiation and of the
cost structures. Solution attempts in the context of conventional business models exhibited the following characteristics:

a strong rise of the information and communication

intensity,
an increase in number of the product types and variants,
a reduction of the manufacturing lot or batch size,
unstable, frequently changing production processes
and
an over several stocks levels distributed, extensive
storekeeping.
The solution of the apparent contradiction is looked for in a
hybrid competition strategy, with the following characteristics: Mass production for the individual customer is the
production of goods and achievements for (relative) a large
sales market, which meet the different needs of each individual customer of these products, to costs, which correspond approximately to those of comparable standard
goods. Enterprises, those the mass production for the
individual customer introduce aim to combine the advantages of a mass production with those the individual manufacture.
1

2 INNOVATION AND INTELLIGENT PRODUCTION

Innovations in the sense of a process form research and
development up to the introduction on the market in particular in high-wage countries such as Germany have a
special meaning in the international competition. The present discussion shows that the competitive ability of an
enterprise depends not alone from successful measures to
the rationalization of the enterprise. Many enterprises supply themselves a "head on head running" with their competitors and have only marginally or briefly lead to competition. The result of such a cost cutting strategy is usually
only small profit margins, because the products and
achievements adapt themselves ever more and the costs
are rising.

One solution of the apparent contradiction is looked for in

the production concept called Mass Customization, a hybrid competition strategy, with the following characteristics:
Mass production for the individual customer is the production of goods and achievements for a relative large sales
market, which meets the different requirements of each
individual, to costs, which correspond approximately to
those of comparable standard goods. Enterprises, those
the mass production as a business model for the individual
customer introduce, aim to combine the advantages of a
mass production with those of the individual manufacture
(figure 1).

Handicraft

B
MassCustomization

Customer

Niche offerer

scope
on
Ec

Benefits

Product innovation

Costs

A
o
es
i
om

scale

Industry

(manufacture) Process innovation

Figure 1: Mass Customization as a business model.

The enterprises will have to shift their innovation emphasis on the demand side. The search for new market entrances becomes the central task of management [1].
An innovation-oriented strategy creates new products and
processes as well as new forms of the customer interaction (figure 2). A goal is, not to catch up the competition at
the same trace but to overhaul on innovative ways. We
are today in a dynamic surrounding field, that is shaped
from increasing innovation speed and increased innovation intensity.
Therefore it is often not possible to transfer the past success factors to the future. New technologies together with
different fields of knowledge, e.g. mechanics and electron-

ics or physics, biology and engineering sciences, demand

enterprises to extend their technology authority.
The dynamics of the surrounding field as well as new
forms of the customer interaction require fast-reacting and
flexible acting. In the field of vision that innovationoriented strategies do not only stand for new products,
also the production processes and firm's structures must
be analyzed and improved. Only from the holistic view the
enterprise can create an effectively and efficiently interlace. The management can activate new markets only if it
does not only develop creative ideas, but also time and
cost-oriented structures. A condition for it is a long-term,
strategic perspective.

Configuration
Configuration
Consultation
Consultation

Product specification
Order information
Service/ maintenance

Presentation
Presentation
Evaluation
Evaluation

Visualization
Visualization

Compilerfor
for
Compiler
production
plants
production plants

Customer

E-Commerce
E-Commerce

Commercialcompletion
completion
Commercial

Figure 2: Components of the configuration system in Mass Customization business model.

3 CHARACTERISTICS OF PROCESS INDUSTRIES

In comparison with the total industry calculated after volume of sales and employment, more than the half, with
regard to the investment intensity more than two-thirds of
the total volume belongs to the process industry. Batch
producers are the majority of these businesses.
The production type batch production is characterized in
particular by the following characteristics:
Batch producers are forced due to procedure and technical requirements to manufacture their products in the
form of batches in a replication able multi-level value
creation process. The manufacture process covers the
mass production on the basis of recipes (batch emergence) and the subsequent treatment following on it
such as a racking and packing. Thus both complex procedures and technical processes must be controlled.
The central authority of the batch producers lies thus in
the combination of recipe and processing know-how
(figure 3).
Batch producers are usually small and medium-sized
companies and supply usually a trunk of more heterogeneously, rather small users and customers. The raw

material suppliers are in contrast rather large companybound enterprises. This is a reversal of conditions in
the automotive industry.
The majority of the batch producers as small and medium-sized enterprises (SME) differ structurally from
large-scale enterprises. The characteristics are small
resources, limited research and development (R&D)
capacities, flat hierarchies, large action and deciding
range of the management, a great flexibility and pronounced customer orientation.
The projects direct themselves to batch producers, which
are concerned with increasing competition and strong
differentiation pressure. A large group of business is addressed, that as a relevant part of the process industry one
of the most important branches of the economy of the
producing business listened in Germany. In comparison
with the total industry calculated after volume of sales and
employment, more than the half, with regard to the investment intensity more than two-thirds of the total volume on
the process industry. Batch producers are the majority of
these businesses.

Laboratory

Workshop

Sales, service

manufacture

Trade desk

customer

commissionaire

Material
stock

Batch
stock

Recipe

Product
stock

Racking

packing

Distribution

dispatch

Figure 3: Three mayor steps in batch production

.
4

TYPES OF MASS CUSTOMIZATION AT BATCH

PRODUCTION
The aim of the project was to try and develop the three
different Mass Customization Concepts [2]
Self-Customization,
Point-of-Delivery-Customization, and
Hard-Customization
in recipe and processing step to methodically applicable
business models for batch production (figure 4).
Development of integrating value added chain and improvement by products, services (like customer service
and -training, maintenance support) and processes with

batch producer as an impulse emitter, suppliers of machinery and IT-firms as partners.

The three pilot projects open for the directly involved
batch producers new business fields through new mass
customization solutions:
Customer individual flowers funnels in the market
segment under 1 million units per order
Customer individual vitamins preparation with industrial production of individual batches in the foodsupplement and pharmaceutical area
Customer individual paraffin colouring opening new
markets in overseas (specially china) with production
location in Germany

Process engineering
equipment/plants

IT
Raw material
supplier

Laboratory/
batch

Type of Customization
(according to Piller)

Racking/
packing

Hard

Logistics

Sales
Trade

Point-of-Delivery

Customer
User

Self

Possible points of interference into the value chain for individual products
Figure 4: Value chain at batch production (reference model).

CUSTOMER INDIVIDUAL VITAMIN AND MINERAL

PREPARATIONS
The company SoVital Life & Nutri Science GmbH, resident in Karben, Germany, is a still recent enterprise,
which works in the market segment food auxiliary means
and offers preparations of vitamins and minerals.
The competitors either produce of standard products or
diversify customer's requests in a variant production.
With its product "MyMix" SoVital succeeded to them by
production of vitamin tablets for the individual customer.
In contrast to the commercial offers, in the preparation by
SoVital the personal nourishing behaviour and the individual life habits are considered. In addition the customer fills
a specific questionnaire by internet [3] or pharmacy consultation, after newest medical realizations provided out
and receives short time after the order a monthly dose of
its individual mixture of vitamins and minerals (figure 5).
SoVital follows not only an increasing desire for individual
treatment with its product, but aims with its product also in
one of the most promising growth market wellness and
health. Thus do market searches point out a potential of
27 million consumer of food auxiliary alone in Germany.

Its exhaustion offers a market of more than 1.000 million

. Also the turnover plus of 9% from the year 2000 on
2001 gives an idea of the future chances. To exhaust this
potential broadly however, it requires an appropriate production system.
So far a wage manufacturer on behalf of SoVital on the
basis of more than 100 prescriptions manufactures small
batches of at least 500 packing or 30.000 vitamin tablets.
This differentiation possibility is sufficient, in order to take
90% off of all individualizing requirements. A goal of SoVital is however the full-individualizing at a price, which
differs not substantially from that of the standard products.
The dissolution of the contradiction of a linkage of the
advantages of mass production and manufacturing for the
individual customer meant in the core nothing less than
the necessity, to adopt expensive and with difficulty controllable variant production to a completely new, flexible,
to develop a sufficient machine system.
The challenge to concept a machine was accepted by the
engineer's office Con.sen.s, Ulm, Germany.

Process engineering equipment/plants

Internet
Questionnaire

Individual
batch

Customer data
l
ua
d
i
v
di pe
In reci

Raw material
supplier

Manufacture

Pharmaceutical
industry

Racking/
Labeling

Logistics

s
er
om
st
u
c

Figure 5: Value chain in business model Sovital

6 CUSTOMER INDIVIDUAL FLOWERS SLEEVES

The company Wentus plastic GmbH, Hoexter/Germany
exists since 1996 and belongs to the Irish Clondalkin
group, Dublin. Founded in 1965, Wentus was progressively developed into a renowned specialist for flexible
packaging made from a polyolefin basis. Wentus places
itself with approximately 420 co-workers within the ranges
film extrusion, printing and confection. Mainstays of sales
are blank and printed on role commodity, biologically
degradable products and conical flower sleeves.
In the past years the production was still dominated in
standard device acres with large batches. Wentus is now
challenged by the desire of the customers for individual
product designs and small batches.

While the market of standard products stagnates or

shrinks, the demand on individual customer arranged
products rises. The world market covers at present approximately 4 billion flower sleeves, about which approximately 1 billion are still standard sleeves.
Therefore within the growing product range conical flower
sleeves for the individual customer" Wentus started to
develop a new business model at the beginning of the
year 2002.
While the average order number of items for flower
sleeves is so far with 250,000 pieces, Wentus strives now
on for economically to manufacture also small batches
with 50,000 pieces or less. This for a mass manufacturer
extremely ambitious project pushes to numerous barriers.
5

They begin with the development and user-fair organization of the configuration system (now named crewenta [4])
contains difficulties of the constant information flow and
the interaction of planning and production and cover problems of the personnel employment and a labour organization that can be made flexible (figure 6).
Batch size
1000

Material
Extrusion
Printing
Print. Setup
Manufacturing
Manu. Setup
Packing
Distribution

250
100
50
25
10

50

100 Unit costs

Figure 6: Unit costs as a function of batch size before the

introduction of the new business model.

Their preparation times are more than 10 times as long as

economically portable - and this with the machines to
manufacturing the flower sleeves, which belong to a new
generation.
The machine concepts come of traditional thinking, which
focuses throughput by numbers of produced items and
not flexibility and fast preparation.
On this basis a detailed cost analysis identified the printing and manufacturing departments as the most cost
intensive production steps of the value chain (figure 7).
Printing takes place at present in the flexography print
process. With the highly flexible digital printing in the development however only very small print rates are obtained at present of 25 m/min. Up-to-date such technologies are economic therefore with small batches. Besides
there are still technical difficulties with the printing ink
"white" with the digital printing on foil.
For the optimization in the manufacturing step modified
plants were made available. To shorten the setup and
preparation times technical improvements have been
developed, converted and applied.

As the largest obstacle however the machines for printing

and manufacturing of the flower sleeve foil are proved.

Sales

s
es ing s
c
t
o
Pr neer plan
i
/
t
g
en men
u ip
q
e

configuration system

Point-of-DeliveryCustomization

Manufacture/
printing

Extrusion

Foil stock
rolls

Figure 7: Value chain in business model Wentus

customer

Customized manufacturing

Variant manufacturing

Raw material
supplier

Logistics

7 CUSTOMER INDIVIDUAL PARAFFIN COLOURING

The company Kaiser Lacke GmbH with seat in Nrnberg,
Germany is since its establishment in the year 1932 in the
family estate and is led by the owners. Kaiser Lacke is
product system supplier for the refinement of decorative
surfaces and with approximately 50 co-workers in the
business fields of candle lacquers and glass lacquers.
Kaiser Lacke is one the outrider of individual production
and possesses already since 1995 a proportioning plant
for mixture of small batches for the individual customer in
the range of glass lacquers. The company is market
leader in the segment Christian tree balls. Since the year
2000 Kaiser offers a system which can be handled simply
for the production of individual candle colours. Here the
customer, trained by a so-called colour book with exact
mixture data, knows 15 basic colours according to desire
too approximately 2500 different colours combine. This
system finds so far when colouring candle surfaces application.
Since centre of the 80s the candles range grows gradually. While the glass range would wind high up required,
more than 8,000 recipes must be handled. The export
portion increased in the course of the time gradually and
amounts to today approximately 60% of the gross income.
The urgent setting of tasks, which is derived from it, is the
development of concepts, methods and proceedings for
the implementation of Mass Customization in enterprises
with batch production. In addition the company had set
itself Kaiser Lacke as pulse generator in its creation of
value network to the goal of developing and of converting
a new business model within the range of the paraffin dye
through. This develops on the principles and strategies of

Mass Customization and here particularly the self individualizing by the customer.
Kaiser Lacke has to develop a new product program for
the paraffin through coloration to adapt and constantly
interlace the already existing production plants as well as
to offer an Internet solution with configuration system [5].
This is to make a constant information flow of the customer over the ranges for selling, production and distribution possible. The configuration system including the
electronic colour book must support the customer sufficiently with the process of the colour blending. Furthermore it is necessary to offer an appropriate dosing system
to the customers.
At the basis of 8 basic colours the customer should be put
into the position to manufacture themselves more than
2000 colours. The step of the individual colour is shifted
thereby to the customer. This would entail a reduction of
the stock (fewer colours) and thus storage costs for the
customer. With this business model a direct supply under
economic aspects becomes possible. By the small volume
and weight of the highly concentrated colour pills new
markets in overseas are opened (figure 8).
A further very important effect is the fact that you can
produce 2211 colours by only using 10 basic colours. The
amplification of our colour variety by reducing the storage
of raw material is a huge advantage in regard to selling
and the business management.
Kaiser reproaches a camp in Southeast Asia especially
for the Chinese market. This became economically possible due to the few basic colours and that small volumes
and weight.

Individual
Candle Dye-Through Application

Configuration system

Process
engineering
equipment/plants

Self-Customization

customer
8 basic colors

Raw material
supplier

Manufacture

Logistics

Self-Customization

Figure 8: Value chain in business model Kaiser

8 RESULTS OF THE RESEARCH PROJECT

Three concrete business models based on mass customization in different industries were realized. Each model
comprises a new product generation, a new IT-solution
with a configuration system, new machines and plants and
a new organization structure.
Another mayor result of the project is a toolbox for the
batch industry to identify business models for the production of customized batches. The Toolbox contains:

A tool for enterprise-individual strategy work in

small and medium-sized enterprises [6,7]

I
II

III
P lant

An extension of the value stream mapping tool [8]

for batch production
A simulation game for training and supporting
business model development [9]
A curriculum for a specialized adviser "production
for the individual customer"
A roadmap for the development and introduction
of business models based on the Mass Customization concept in process industries (figure 9) [10]

Analysis of innovation potential

Growth potential of market
C ore c ompetenc es in tec hnology
Ideas

P ilot c us tomer
IT-S pecialis t

Des ign of bus ines s model

C os ts
B us ines s proc es s es
Organizational s truc ture
P ers onnel development

Mac hinery
s upplier

Material
s upplier

S ubprojects

Automatic preparation
Integration of proc es s s teps
S imple s c hedules

P roduc t des ign

L aboratory s tudies
Analytic / Doc umentation
Des ign for manufac turing

C onfiguration s ys tem
P ers onalization
Networking
E -C ommerc e-s olution

C us tomers

Market s tudy
As s ortment ques tions
Dis tribution s trategy

Figure 9: Master schedule to Mass Customization

9 CONCLUSION
Innovations are not more structured under employment of
a strategic innovation management as a coincident event,
but are result of a continuum process. Innovation processes are not only seen today as task delegated to a
certain person's group, but refer in all phases specialized
spreading participants within the enterprise and also beyond the enterprise borders. Creativity and customer
orientation are based on this broadly put on Co-operation.
As shown in figure 10 the development of an intelligent
competition strategy is a project of the whole company.
Innovations are the central instrument of control for nations as well as companies, enabling them to get ahead of
the international competition - and to stay on top. As innovations create a new lead, fresh employment and new
growth, this is just what we need to be able to further
afford our wealth. Nations as well as companies, however,
find themselves confronted with a growing obligation for
innovation.
Especially in a changing world it is necessary to retain and
strengthen the position in the world market through the
development of new products and services as well as
through the acquisition of new customer groups. In reality
this means that companies nowadays have to face growing global competitive pressure, an increasing complexity
and variety of technically excellent and individual products
8

or services. Due to increased customer orientation this

also involves a trend from serial products to masscustomized and service-intensive product packages. In
spite of time and cost pressure, companies are still forced
to exploit extensively the growth potentials of their valueadded chain. At the same time, they are confronted with
ever more complex framework conditions, e.g. extensive
legislations.
In particular within a knowledge-based society, accelerated cycles of change in technology, economy and society
and the dynamics of international partners and competition represent a challenge but also a fresh chance for a
"management of innovation".
In order to enable companies to take a leading position
within the international competitive field, innovation processes need to be accelerated and a networked and agile
economic organisation has to be built up. In this context,
an intelligent production also serves as a safety mechanism and should reduce the time-to-market of new products.
Therefore Intelligent Production always includes the following areas:

The customer in the focus

All functions involved pull also

Management of knowledge and innovation

Geschftsleitung

Technicalline
line
Technical

Manufacturing
Manufacturing

Techniques
Techniques

Development
Development

Holistic production system

TPM (Total Productivity Maintenance)
Shorten preparation time
JIT (Just-in-Time)
Production-on-Demand

Commercialline
line
Commercial

Purchase
Purchase

Organization/
Organization/
dataprocessing
processing
data

Sales
Sales

Technologies of New Economy

E-Commerce
CRM (Customer Relationship Mgmt)
One-to-One-Marketing
Direct sale

Figure 10: Participants and elements of a Mass Customization solution - from view of the organizational structure

10 ACKKNOWLEDGEMENT
This research and development project was funded by the
German Federal Ministry for Education and Research
(BMBF) within the national Research in Production for
Tomorrow Framework Concept and was managed by the
Project Agency for Production and Manufacturing Technologies (PFT), Forschungszentrum Karlsruhe.
11 REFERENCES
[1] Rayport, J. F.: Das Angebot dem Kunden anpassen,
Harvard Business Manager, 2/2005.
[2] Piller, F.; Stotko, C.: Mass Customization und Kundenintegration Neue Wege zum individuellen Produkt, Symposion, 2003.
[3] Configuration system of Sovital for individual vitamin
and mineral preparations: www.sovital.de
[4] Configuration system of Wentus for individual flower
sleeves: www.wentus.de (follow link crewenta)
[5] Configuration system of Kaiser Lacke for individual
paraffin colouring system: www.kaiser-lacke.de
[6] Dahmer, J.: Unternehmensindividuelle, integrierte
Strategie-, Innovations- und Personalarbeit, GfAH
Verlag, 2004.
[7] www.potenzial-check.de
[8] Rother, M.; Shook, J.; Womack, J.; Jones, D.: Learning to See, Lean Enterprise Institute; 2003.
[9] www.life.iao.fraunhofer.de
[10] Project Homepage: www.uni-chop.iao.fraunhofer.de