Transcript No Slide Title

The Paradigm of
Mass Customization
ME 546 - Designing Product Families - IE 546
Timothy W. Simpson
Professor of Mechanical & Industrial
Engineering and Engineering Design
The Pennsylvania State University
University Park, PA 16802 USA
phone: (814) 863-7136
email: [email protected]
http://www.mne.psu.edu/simpson/courses/me546
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Overview of Lecture
• The Paradigm of Mass Customization
• Role of Production, R&D, Marketing, and
Finance/Accounting in Mass Customization
• Example: Cannondale Shifts from MP to MC
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Evolution of Auto Production
Local craft shops designed
In mass producing
and handcrafted the earliest
automobiles, Ford
cars. Vehicles such as the sacrificed individualism
1911 Springfield were
but was able to slash
custom-made but
prices. Consumers got
exorbitantly priced.
Reference:
(Cox and Alm, 1998)
Today’s production
methods give buyers
the best of both
worlds—low prices
and custom design.
identical models, but
productivity soared.
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The Paradigm of Mass Customization
“A new paradigm of management is emerging, one in
which variety and customization supplant standardized
products, heterogeneous and fragmented markets
spring from once homogeneous markets, and product
life cycles and development times spiral downward.”
(Pine, 1993)
• Stan Davis is created with coining the term MC in 1987
in his book Future Perfect where he wrote:
“The more a company can deliver customized goods on a
mass basis, relative to their competition, the greater is their
competitive advantage.”
• At its limit, mass customization is mass production of
individually customized goods and services.
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“Mass customization is best defined as a delivery process through
which mass-market goods and services are individualized to satisfy
a very specific customer need, at an affordable price. Based on
the public's growing desire for product personalization, it serves as
the ultimate combination of ‘custom-made’ and ‘mass production.’
And it is rapidly emerging as the organizing business principle of
the 21st century.”
http://www.mass-customization.com
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: How Do They Do It?
“Anything that can
be digitized can
be customized.”
• To understand how this is accomplished, we must first
examine the role of production, R&D, marketing, and
finance/accounting within MC organizations.
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Role of Production in MC Firms
Focus:

Total process efficiency (not just those activities which are
operating on or transforming the product).

This includes both productive and unproductive time, e.g., time
materials spent in inventory or other non-operational activities
such as handling, moving, inspecting, reworking, recording,
batching, chasing, counting, and repacking.

Interested in process throughput - ratio of the time a product is
being transformed to the time it is in the production system.
Positive Effects:
• Low Overhead and Bureaucracy

Due to the holistic, systems perspective on production process.
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Positive Effects of Production in MC (cont.)
• Optimum quality

In Japan, a defect is a “treasure” because its discovery
uncovers a process of shortcomings that, when corrected,
yields higher quality and less waste for all subsequent
production runs.
• Elimination of waste

Results from holistic, systems perspective of process
– production is viewed as a series of steps, each adding
either value or cost to the product
– reduce and eliminate all steps that do not add value
– process efficiency soars.
• Continual process improvement

Results from focus on total process and elimination of wastes.
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Positive Effects of Production in MC (cont.)
• Low inventory carrying costs
Inventory is viewed as waste, adding costs and inefficiency
 Lowering inventory lowers inventory costs.

• High labor productivity
Results from elimination of wastes in production process
through JIT and Lean Production
 More opportunities are available for workers to learn about
what they are doing and to improve the process as less and
less inventory is used and less and less time is involved with
the total process.

• Integration of thinking and doing

Focus on total process efficiency results in joint management/
worker involvement in defining and improving the process and
through the integration of thinking and doing.
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Positive Effects of Production in MC (cont.)
• High utilization of and investment in worker skills

Continual improvement provides opportunities for education
and training, including cross-training in multiple skill areas.

High utilization of and investment in worker skills reinforces the
positive aspects of the entire system.
• Sense of community

This results from improved management and worker relations,
extending outward to suppliers, distributors, and other
companies involved in the production chain.

MC firms realize that everyone involved in the supply chain is
responsible for customer satisfaction, which occurs only by
working together as a community.
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Positive Effects of Production in MC (cont.)
• Low total costs

Results from reduced overhead and bureaucracy,
improvements in quality, elimination of wastes, reduced
inventory costs, and increased worker productivity.
• High production flexibility

Results from effective use of machinery and automation to
enhance worker skills rather than replace them (borrowed from
craft producers).
• Greater variety at lower costs

The final result of all of the positive effects of focus on total
process efficiency.
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Detrimental Effect of Production in MC
Detrimental Effect:
• Demanding, stressful environment?

Lean production and JIT techniques eliminates all waste and
buffers, leaving little margin for error.

Workers may encounter more stress with increased
responsibilities and decreased idle time (no longer are they
bored with repetition of mass production assembly lines).

Production processes must be strictly adhered to and quickly
performed.
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Role of R&D in MC Firms
Focus:

Continual incremental innovations in both product and process
with much more emphasis on the Development side of R&D
(~90% of R&D in Japan).
Positive Effects:
• Continual improvements, eventual technological
superiority
During 1950s and 1960s when Japan was rebuilding from
WWII, U.S. and European corporations thought nothing of
selling and licensing their technologies to Japan which was not
considered to be a competitive threat.
 Mass producers paid little attention to process improvements
and as a result, lost technological superiority over time due to
lack of continual improvements.

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Positive Effects of R&D in MC (cont.)
• Integration of innovation and production

Incremental improvements are best achieved through
integration of developers directly with production so that they
learn and know what the problems are.
• Frequent process innovations

Yields technological superiority in manufacturing and
development processes.
• Low costs and short cycle times

Results from focus on continual innovation and improvement.

Much more frequent product innovations and introductions can
be made at much lower development costs, especially true if
the technology has already been developed and proven
elsewhere  lower risk of product failure as well.
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Positive Effects of R&D in MC (cont.)
• Mutually beneficial relationships with other firms
Focus on incremental innovations and improvements
encourages using technology from wherever it can be found
and adoption of whatever innovations will bring products to
market faster, focusing the supply chain on meeting customer
wants and needs better and more quickly.
 E.g., in Japan suppliers share 30% of the engineering effort
with automobile producers; in U.S., only 6% share.

• Better fulfillment of customer wants and needs
Continual and incremental improvement provides the basis for
better fulfillment of customer wants and needs.
 Time-consuming breakthrough innovations are extremely
prone to “miss the mark” while companies making incremental
innovations can more quickly follow the moving target.
 Companies can also lead the market and move it into areas
that anticipate customers’ latent wants and needs.

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Detrimental Effect of R&D in MC
Detrimental Effect:
• Lack of breakthrough innovations?

Companies can get mired in the myriad of incremental
innovations and improvements and never make breakthrough
innovations.

However, an accumulation of a number of incremental
innovations can yield the equivalent of a single breakthrough.
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Role of Marketing in MC Firms
Focus:

Gaining market share by fulfilling customer wants and needs—
first domestically, then in export markets.
Positive Effects:
• Filling the niches

Begin to gain market share by filling the niches.
• Ability to respond quickly to changing customer needs
Companies may not be sure what niche a new product may fill.
 But because marketing is so good at capturing customer
feedback and development is so good at incremental
innovation, they will put out a product just to see what
happens, listen to the “voice of the customer,” and make
incremental improvements to introduce improved products.

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Positive Effects of Marketing in MC (cont.)
• Market takeover

As niches are filled, they expand and create new ones,
fragmenting the large, homogeneous market as more
customers find their true desires are being met.

Four stage strategy:
1. Market Opportunity Identification – identify market
segments which are being inadequately served.
2. Development of Market-Entry Strategies – devise entry
strategy into market niche based on distinctive
advantages that can be demonstrated in marketplace.
3. Market-Takeover Strategies – devise and modify strategy
over time to expand market niches and capture more of
the market.
4. Market-Share Maintenance Strategies – create strategies
geared to further market share success by continuous
monitoring of changing customer desires.
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Positive Effects of Marketing in MC (cont.)
• High sales domestically and through exports

Gaining market share in export markets takes time and may
generate little to no profits for years; however, the domestic
market provides the profits for these ventures.
• Technology-intensive products

Natural tendency is to move toward or extend product
technology through incremental innovation strategies.
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Detrimental Effect of Marketing in MC
Detrimental Effect:
• Too enamored with technology?

Some companies may become to enamored with their
technology and lose sight of their customers, e.g.,
–
Toto Ltd. makes high-tech toilets which have seat warmers,
perform urinalysis, and are paperless.
–
Matsushita makes washing machines which have optical
sensors to determine load size and dirtiness from which
micro-processors can determine which of 600 load cycles
are optimum.
–
Nissan has 87 different steering wheels from which to chose
for one of their vehicles.
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Role of Finance/Accounting in MC Firms
Focus:

Information useful for managers and workers.

E.g., if the goal is to reduce # of parts in a product, particularly
non-standard parts that tend to increase indirect labor, then the
company may allocate overhead based on the # of parts or
add an overhead surcharge for any custom parts.
Positive Effects:
• Sound long- and short-term decisions

Because information is useful to both workers and managers.
• Long-term investments in capital, people, and
technology

Realize that long-term investments are required in order to
maintain strategic competitiveness.
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Positive Effects of Finance/Accounting in MC (cont.)
• Low costs, high profits

Instead of designing a product and then determining its cost,
“target costs” are determined based on what the market can
bear, and these are allocated to each component of the
product and to the departments or suppliers responsible for
those components.

Once target cost is met, focus shifts to reducing costs incurred
to make product with each new product generation or as
competitors improve their products and processes to lower
their costs.

The equation of importance is:
Price – cost = Profit
and not
Cost + Profit = Price
as in financial accounting systems for mass production firms.
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Positive Effects of Finance/Accounting in MC (cont.)
• Attention to core competencies

Usefulness of information allows managers and workers to
focus on the task at hand, namely, improving process
efficiency in production, meeting customer wants and needs in
development, and gaining market share. Attention to their core
competencies is what allows them to be successful.
• Long-term supplier interdependence


Target costs are not “thrown over the wall” to suppliers any
more than they are to internal departments.
Companies work with their suppliers to achieve their target
costs and reductions over time and are willing to support them
with engineering help, process innovations, and even extra
time if necessary.
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Detrimental Effect of Finance/Accounting in MC
Detrimental Effect:
• Stockholders ignored?



Is this good or bad?
Aren’t the company “stakeholders”—employees, suppliers,
customers, and stockholders—all going to benefit if the
company does well?
Yes, despite the fact that the focus is on long-term health of the
company and not on short-term gains.
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Mass Customization
• Shift to MC is affecting nearly everyone and everything:
automobiles, IT companies, telecommunications, personal car,
beverage, breakfast cereal, fast-food restaurants, insurance,
and banking
• Mass customizers believe that a company will:
have greater sales if it better satisfies its customers’ individual
needs and wants,
 further fragment the market by offering even more variety and
customization, and
 better satisfy customers’ needs and wants through further
market fragmentation.

• At its limit, mass customization is mass production of
individually customized goods and services.
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Comparison of MP and MC Paradigms
Focus
Goal
Key
Features
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Mass Production
Mass Customization
Efficiency through stability
and control
Variety and customization
through flexibility and
quick responsiveness
Developing, producing,
marketing, and delivering
goods and services at prices
low enough that nearly
everyone can afford them
Developing, producing,
marketing, and delivering
affordable goods and
services with enough
variety and customization
that nearly everyone finds
what they want
• Stable demand
• Large, homogenous markets
• Low-cost, consistent quailty,
standardized goods and
services
• Long product development
cycles
• Long product life cycles
• Fragmented demand
• Heterogeneous markets
• Low cost, high quality,
customized goods and
services
• Short product
development cycles
• Short product life cycles
© T. W. SIMPSON
Example: Transformation at Cannondale
• Bicycles typically consist of: 11 tubes, 2 tips, 2 dropouts,
2 stayends, a bottom bracket, a brake bridge, and up to 4 lugs.
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Frame Joining
• Frame tubing can be joined in a variety of ways,
depending on material type, desired properties, etc.
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MP at Cannondale
• Until 1988, Cannondale had a factory similar
to most other bicycle manufacturers.

Mitered tubes were machined, and numerous jigs were built for
holding tubes during machining and welding operations.

Tubes were ordered and inventoried in large lots to reduce unit
prices.

New designs took a long time from inception to delivery,
because tubing suppliers had to re-tool to make the specified
tubes.

Prototypes were built one at a time in the factory's machine
shop, and once a new design was decided on, new jigs had to
be built for each change in tubing or frame design.
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MP at Cannondale (cont.)

Large batches of identical tubes were mitered together to
minimize the time required for setting up tooling for each
operation; and jigging, tacking, welding and assembly
operations were done in the same large batches to utilize the
prepared tubes.

Forks had to be built or ordered from outside suppliers for
every size of each type of frame.

Heat-treating was done in a huge oven for four hours to allow
the heat to "soak" into the tubes uniformly to the correct
temperature.

Frames were hoisted into the oven in a $14,000 stainless steel
rack that held 100 frames at a time; and all 100 were plunged
into the quenching bath together.

The rack was so heavy that the oven and quenching bath were
primarily heating and cooling it.
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MP at Cannondale (cont.)

In between loading and unloading the rack, the oven was idle;
it had to be fired up again to heat treat the next batch.

After heat treating, every frame had to be re-aligned.

To finish off the production process, the frames were painted
automatically with a spinning paint-robot. Each color change
required flushing and cleaning the entire paint system.
• The bottom line: bikes were only assembled in quantity.
• At any time, Cannondale had a large inventory of the
bikes most recently produced, but a minimum inventory
of bikes that were produced a few months before,
according to how well they had anticipated demand.
• If any models sold out, Cannondale had to wait until
other large batches moved through the system before
they could replace them.
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Cannondale Begins Conversion
• In 1988, Cannondale's managers decided they wanted
the company to become a player in the worldwide
bicycle industry.
• Instead of producing overseas, they thought they could
economically produce high quantities of quality bikes in
the U.S.—although this would require significant
changes in the company's production methods.
• Recognizing that they didn't have the kind of money to
quintuple production by using traditional methods,
Cannondale sought to re-think every operation the
company performed.
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Cannondale Implements CLIPS and CPR
• CLIPS—Cannondale Low Inventory Products System.

The intent was to increase the flexibility of manufacturing
operations by reducing or eliminating special tooling, reducing
inventory, and shortening product cycles.

Cutting operations were completely overhauled, and a new
computer-controlled materials-delivery system running on a
ceiling track was installed.

Batch sizes were reduced, and new systems for monitoring
and tracking products were implemented.
• CLIPS followed by CPR—Critical Product Replacement

Under CPR, 90 percent of dealer orders were shipped
complete with only six days of inventory.
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Problems with CPR
• Problems with CPR:

The pace and productivity that CPR created was far beyond
anything Cannondale had seen in the past.

The technology and human culture weren't yet up to the task,
though.

For one thing, the innovations took far too much of the
company's computer memory.

Furthermore, the drastic change required more training for the
workers.
• The result was that CPR was removed soon afterward
as a successful experiment that was ahead of its time.
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Bicycle Factory Conversion
• Conversion of Cannondale’s bicycle factory began in
1990.
• In 1994, while only partially through the conversion,
Cannondale is building more than five times as many
bicycles—while maintaining less inventory—than it did
in 1989.
• Productivity has increased 240 percent from 1988 to
1993.
• Let’s take a virtual tour of Cannondale’s factory to see
how they did it…
http://www.cannondale.com/factoryb/
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Cannondale Factory Tour - CAD
• All of Cannondale’s
bicycle frames are
designed on high-tech
CAD systems in the
R&D department at the
Bethel, Connecticut
headquarters.
• New frame designs are
then sent via modem to
the Cannondale factory
in Bedford, PA.
The following are excerpts from http://www.cannondale.com/factoryb/f2.html
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Cannondale Factory Tour - Raw Tubing
• With the exception of
carbon fiber/aluminum
Raven models, all
Cannondale bicycles are
built from lightweight 6000
series aluminum tubes with
different diameters, shapes,
and wall thicknesses.
• 6000 series aluminum is
used because it can be
shaped and machined
much easier than 7000
series aluminum or metal
matrix aluminum
compounds.
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Cannondale Factory Tour - Laser Cutting
• Computer guided lasers
are used to precisely cut
aluminum frame tubes to
the proper length.
• Selected tubes are also
mitered to wrap around
adjoining tubes.
• The lasers provide a
cleaner cut than traditional
cutting methods and ensure
incredibly tight tolerances
for greater weld integrity
and a stronger frame.
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Cannondale Factory Tour - Tabs & Slots
• The tubes on Cannondale
frames feature a unique,
patented tab-andcorresponding-slot design that
aligns the tubes for welding.
• By eliminating the need to build
numerous production fixtures
for each size and every new
frame style, this tab-and-slot
system dramatically reduces
pre-production engineering
chores and allows Cannondale
to bring innovative new models
to market with amazing speed.
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Cannondale Factory Tour - TIG Welding
• The 6000 series
aluminum frames are
then TIG welded
together by hand.
• Welding the thin-walled
6000 series aluminum
tubing used in cuttingedge bicycle frames is a
surprisingly difficult art to
master.
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Cannondale Factory Tour - Heat Treating
• Cannondale then heat-treats
their frames to restore the
tubes to their original strength
after welding.
• A frustratingly difficult (and
expensive) process to perfect,
heat-treating allows
Cannondale to actually use
less material to achieve the
necessary levels of strength.
• Many other manufacturers use
thicker-walled tubing or
reinforcing gussets, both of
which add weight.
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Cannondale Factory Tour - Sanding
• Beyond the obvious aesthetic
benefit, smooth, sanded welds
help prevent stress-risers which
can occur at the outer edge of an
unfinished weld, where the weld
abruptly ends and the tube wall
is suddenly thinner and more
prone to accumulated stresses.
• The gradually tapering walls
created by properly finished
welds, however, disperse
stresses over a wider area,
allowing Cannondale to use
thinner walled tubes for a
lighter frame.
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Cannondale Factory Tour - Painting
• For the most even, most
consistent coverage possible,
Cannondale paints their
frames electrostatically
whereby the frame carries a
small electronic charge that
actually attracts individual
paint particles.
• After painting, each frame
has its decals applied and is
clear-coated with a durable,
protective finish.
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Cannondale Factory Tour - Testing
• Cannondale has invested
over a million dollars in
their Q-Lab, an in-house
testing facility for bicycle
frames and components.
• A new frame design
typically spends more
than two months
undergoing five different
batteries of tests:
1. fatigue testing,
2. impact testing,
3. finite element analysis testing,
4. computerized field testing, and
5. brittle-coat testing.
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http://www.cannondale.com/custbike/c2.html
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Excerpts from “Tour de Cannondale”
“At the heart of the now patented production system is the goal of eliminating any need for changing tool set-ups.
Starting from the beginning, a bicycle is now designed on the CAD-CAM system, in which archetypal modular
drawings of partial frame assemblies are made and changed on a computer screen. If a new type of tubing is
required, the system designs and CNC-machines the steel swaging blocks required to shape stock tubing into the
new tubes on an in-house swaging machine. The computer then instructs laser cutters and electric arc plasma
cutters to miter each tube precisely—based on the new design—and to cut water-bottle-boss holes, vents, notches,
and seat-lug slots at the same time. One unique feature of Cannondale's miters is the tabs cut into the bottom of
each miter to fit into corresponding notches in adjacent tubes. These tube-cutting operations are done in tube sets for
each individual frame, since the speed of the mitering is the same as in huge lots of, say, identical down tubes. The
quick-tighten chucks that rotate the tubes under each laser or plasma cutter are universal and independent of tube
size or shape.
The frame front-triangle tacking jigs can hold any frame, regardless of geometry. The computer dictates the height
of the bottom of the head tube relative to the bottom bracket, and dialing this height into the jig is all that's needed to
change from one frame type or size to another. The tabs and notches hold the tubes in their proper locations relative
to one another, and each joint is tack-welded together.
Each frame-tacking center and rear-triangle assembly consists of two rows of certified welders who weld the tubes
together. A tracking system allows Cannondale to know who welded each frame that comes out of the factory.
The huge heat-treating oven has been replaced by a new, patented design with three chambers, each holding
eight frames at a time. Racks move each load of eight frames via a ceiling track. One passes into the oven's front
chamber, where the temperature is brought up to that of the inner chamber, which stays constant. It then moves into
the inner chamber as another batch behind it moves into the first chamber. After a few minutes, the first batch moves
into a third chamber, which, like the first chamber, protects the inner chamber from temperature variations. Frames
stay in each chamber for only a few minutes, since they just need to reach heat-treating temperature briefly. The old
oven took four hours to accomplish the same thing, bringing the temperature up slowly so that in any frame among
the 100 being treated, thin tubes weren't being overheated while thick ones were being under-heated. Now,
thermometer probes are screwed into the thick and thin tubes of sample frames to monitor the heat treatment daily.
The temperature of the quenching bath is also monitored constantly and cooled back down to the proper
temperature after each rack of eight frames is plunged into it. This ensures that each frame gets a consistent
quenching temperature. It no longer varies as it used to—based on where the frame was in the lattice of 99 other
frames and how much the quench bath heated up when the huge steel rack carrying the frame was dropped into it.
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Excerpts from “Tour de Cannondale” (cont.)
Cannondale used to use a very expensive automated frame aligner that would check and correct the alignment of
every frame in the softened stage, immediately after heat-treating. After implementing the new heat-treating system,
the company found that the machine wasn't doing much, since the frames were coming out in much better alignment.
Since their new tracking system tells the engineers everything that's happened to every frame, they continued to
tweak various steps to improve the alignment further. They now find that a misaligned frame is very rare, so they took
out the expensive automated aligner. Engineers still check the alignment of every frame, but if they find one that's off,
it's discarded.
Where forks used to be stocked with every length of steering tube required, Cannondale now only keeps very long,
unthreaded ones on hand in each model. They have a machine that can cut and thread steering tubes after painting,
and they only prepare forks to order now.
Painting used to be done by an automated, rotary spray-robot. But the robot has been removed to provide more
flexibility in color choices. It was also removed because the new paints required by the Environmental Protection
Agency don't smooth out as well without the volatile organic components they used to have, and forcing them through
the old rotary atomizers yielded less-consistent results. Removing the solvents in the paint—according to the new
regulations—also requires the paint to be catalyzed to cure, which means it will harden up inside paint equipment.
Spray gun makers, DuPont, the Environmental Protection Agency and Cannondale have worked together closely to
come up with a new system. Frames are now hand-sprayed with guns that mix the paint and the catalyst together in
the stream ahead of the nozzle. Since the paint won't harden in the guns, a painter can have numerous guns to
spray many different colors. He or she simply paints frames in one style until a new instruction tag comes along the
conveyor, then switches to the new color; there's no cleanup in between.
In the future, Cannondale plans to oversee the entire operation with a computer program designed by University of
Connecticut engineers. Each day, the jobs scheduled for that period will be put into the computer, which will come up
with the most efficient flow pattern. If a machine breaks down, the computer will come up with the most efficient
production routing without it. The computer will also alert managers to which stations will be idle at which times
during the day. Using these stations during such time would result in no increase in output, so this "spare" time will
be utilized for other workers to be trained on that station or for maintenance of the equipment.
Monitoring the quality of the products is an extensive testing lab. It's very well equipped in terms of repetitivefatigue-testing and impact-stimulating machines. Ongoing research in real-world conditions is conducted by wiring
bicycles with strain gauges connected to portable computers.”
From: Lennard Zinn’s article “Tour de Cannondale” which appeared in VeloNews (1994).
PENNSTATE
© T. W. SIMPSON
Press Release 2/1/99: Cannondale Custom Frames
“After four years of custom-building lightweight, high-performance bicycles for the racers on their pro cycling
teams, bike-maker Cannondale is offering to custom-build lightweight road frames for the masses. With their new
Custom Cannondale program, the Connecticut-based company is letting cyclists everywhere choose from more
than 8 million possible frame and color variations of their super-light, super-fast CAAD4 aluminum road frame.
Cannondale frame designer Chris Peck explained that custom frames aren't just for racers. "The Custom
Cannondale program is for anyone who wants to maximize their comfort and performance on a bike," said Peck.
"There's no question that the fit between frame and rider plays a critical role in performance and comfort - that's why
virtually every pro road team rides custom frames. The same advantages provided by a custom frame would be
appreciated by anyone who is serious about the time they spend on their bike. And of course," concluded Peck, "a
custom frame is perfect for anyone too large or too small for conventional, off-the-rack frame sizes." According to
Peck, women in particular often have difficulty finding frames to fit their dimensions.
Here's how the program works: An interested customer visits a participating Cannondale dealer for a fitting
session, where the dealer assists the customer in selecting from as many as 39 possible seat tube lengths (in halfcentimeter increments), 23 possible top tube lengths (half-centimeter increments), seven possible seat tube angles
(half-degree increments), and two possible bottom bracket heights. The customer then chooses from 33 different
color options, a matte or gloss frame finish, and eight decal options (plus the option of a personalized decal with the
customer's name).
The dealer takes a deposit from the customer and faxes the order to Cannondale. Using their patented, flexible
manufacturing process, Cannondale then hand-crafts a CAAD4 aluminum frame to the customer's exact spec's.
Within six weeks, the custom frame is on its way from Cannondale's Bedford, Pennsylvania, factory to the dealer.
(The dealer can then either swap a customer's existing components over to the new frame, or assist the customer in
selecting new parts to outfit the frame.) Suggested retail price on the custom frame is $1,399, and will include a
lightweight Slice Carbon carbon fiber fork.
Customers interested in learning more about the Custom Cannondale program should visit Cannondale's web
site at http://www.cannondale.com. The web site has considerable information about the program and the CAAD4
frame, including answers to frequently asked questions and an on-line frame building function that allows customers
to create an on-screen, virtual custom frame. The application also automatically calculates nine other frame
specifications (wheelbase, for example) that result from the four dimensions plugged in by the customer.”
Source - http://www.cannondale.com/bikepres/19990201.html
PENNSTATE
© T. W. SIMPSON
PENNSTATE
© T. W. SIMPSON
Recall: Role of Production in MC Firm
Focus:

Total process efficiency
Positive Effects:
Low overhead and
bureaucracy
 Optimum quality
 Elimination of waste
 Continual process
improvement
 Low inventory carrying
costs
 High labor productivity

Detrimental Effects:

Integration of thinking and
doing
 High utilization of and
investment in worker skills
 Sense of community
 Low total costs
 High production flexibility
 Greater variety at lower
costs

Demanding, stressful environment?
PENNSTATE
© T. W. SIMPSON
Recall: Role of R&D in MC Firm
Focus:

Continual, incremental improvements
Positive Effects:
Continual improvements, eventual technological superiority
 Integration of innovation and production
 Frequent process innovations
 Low costs and short cycle times
 Mutually beneficial relationships with other firms
 Better fulfillment of customer wants and needs

Detrimental Effects:

Lack of breakthrough innovations?
PENNSTATE
© T. W. SIMPSON
Recall: Role of Marketing in MC Firm
Focus:

Gaining market share by fulfilling customer wants and needs—
first domestically, then in export markets
Positive Effects:
Filling the niches
 Ability to respond quickly to changing customer needs
 Market takeover
 High sales domestically and through exports
 Technology-intensive products

Detrimental Effects:

Too enamored with technology?
PENNSTATE
© T. W. SIMPSON
Recall: Role of Finance/Accounting in MC Firm
Focus:

Information useful for managers and workers
Primary Benefit:
Sound long- and short-term decisions
 Long-term investments in capital, people, and technology
 Low costs, high profits
 Attention to core competencies
 Long-term supplier interdependence

Detrimental Effects:

Stockholders ignored?
PENNSTATE
© T. W. SIMPSON