Risk Management of Mass Customization in Supply Chain Management

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Risk management of Mass customization in Supply Chain Management

Ching-Hua Huang, Cai Wei, Lam Shan Kong, Ching-Hsin Lee, Po-Chun Chen,

Faculty of Business, Economics & Law, University of Queensland, Australia

Key words: Risk management, Supply chain, Mass customization Abstract
Companies nowadays have faced critical issues on managing the supply chain system and how to make it work smoothly is the main goal that is willing to pursue. This article is going to identify the risks in supply chain management and take mass customization as the key element to elaborate, and two examples are brought out to emphasize the importance of it. At last, negative impacts addressing the management and some recommendation of avoidance are given for future research and company implication. Introduction

In the production oriented era of 1970s, the mass production strategy had commonly adopted in the industries that the process option was make-to-stock; the materials were released in a push system. On striving to be more competitive in the global markets, companies have been struggling from another radical change in the recent decade which has created a more decentralized organization system to keep up with the competition. The business focus has changed into customer oriented which prefers an adaptive manufacturing strategy like mass customization, which has adopted a hybrid of make to order or build to order approach and the material flows are somehow in a rather pull based (Coyle, et at. 2009 p. 600). Dell, Motorola, Hewlett-Packard, General Motors, Ford, Chrysler, Toyota, Proctor and Gamble are the successful examples of overcoming this transition and successfully have introduced or incorporated mass customized strategy into their business models (Selladuraim 2004). Since the transition from mass production to mass customization has hidden some potential risks to the supply chain, unsurprisingly, there are still a lot who are still struggling for the appropriate ways for effective incorporation of mass customization strategy. As such, this paper attempts to (1) discuss the supply chain risks especially relating to mass customization, and (2) analyze the successful elements of mass customization using HP as an example, (3) identify the potential risks behind the practices, and (4) discuss how those risks can be managed and minimized in the supply chain operation.

What could be the potential risks in supply chain?
Recently, the business environment has changing rapidly due to the growing global market; it derives a variety of issues from end-customers and suppliers. However, customers definitely pursue high quality goods or service but low price, on the other hand, the firm has to measure the higher velocity of change in both supply and demand side. While a firm is ought to achieve high performance in supply chain, which must ensure its structure is consistent with business strategy, otherwise uncertainties might influence demand as well as supply side (Shan 2008). Hendricks and Singhal (2005) claim that academicians and practitioners have reckoned if supply chain risk management does not manage appropriate , it may have negative impact on supply chain operation in terms of demand side risks, supply side risks and the supply chain risk management process. Furthermore, demand side risk is rather than supply side, because the suppliers can be selected by the firm then reduces the uncertainties. It could also be suggested that environmental uncertainty increases the importance of supply chain management (SCM); many suppliers can perform well in a stable environment, while fewer can perform well under turbulent circumstances. Therefore, Chakravarthy (1997) suggests that people who in charge in the company must know about multiple turbulence factors as well as supplier’s certain issues and relationships well. Thus, when facing the numerous risks in supply chain, an organization must identify, measure and appraise its...
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