Expected and Realized Costs and Benefits from Implementing Product Configuration Systems

Expected and Realized Costs and Benefits from Implementing Product Configuration Systems

Kasper Edwards (Technical University of Denmark, Denmark)
DOI: 10.4018/978-1-60566-260-2.ch012
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Product configuration systems (PCS) are a technology well suited for mass customization and support the task of configuring the product to the individual customer’s needs. PCS are at the same time complex software systems that may be tailored to solve a variety of problems for a firm, e.g. supporting the quotation process or validating the structure of a product. This chapter reports findings from a study of 12 Danish firms, which at the time of the study have implemented or are in the process of implementing product configuration systems. 12 costs and 12 benefits are identified in literature, and using radar diagrams as a tool for data collection the relative difference are identified. While several of the firms are mass customizers it is not the primary driver for implementing PCS. The analysis reveals that expected and realized benefits are consistent: 1) Improved quality in specifications, 2) Using less resources, and 3) Lower turnaround time. Interestingly, the realized benefits are all higher than the expected benefits. The expected benefits highlight the motivation, and this has implications for human factors as they point in the direction of significant changes to come in the adopting organization. It is observed that product configuration projects are treated as simple technical projects although they should be regarded as organizational change projects.
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Customers have become accustomed to the price of mass produced goods and are increasingly demanding that products are customized to their personal needs. But, unlike previously, customers do not wish to pay a premium for customized goods, which are now becoming a commodity rather than a special case. This is referred to as mass customization (Davis, 1987) and has indeed become an important issue for many firms.

A means for firms to achieve mass customization is the use of product configuration systems. A product configuration system consists of a computer model of a product, which contains information about the relationship between the individual components of the product and any noteworthy restrictions, which one component imposes on another. For instance, a product model of a bicycle would have information regarding the frame, wheel, tube, tires, saddle, color and style of the different components etc. Restrictions in the model define what size of wheel fits with a given frame – no use in mounting a 26” wheel on a 12” frame.

The purpose of this paper is to identify the expected and realized costs and benefits from implementing product configuration systems. The paper draws on empirical evidence from a study of twelve Danish firms, which have implemented or at the time of data collection were in the process of implementing product configuration systems. The data used in this paper was collected ultimo 2003 through primo 2004. The main thrust of the chapter is to identify costs and benefits. The identified benefits are then used to understand the organizational implications – which essentially are organizational changes rather than a mere technical project.

The chapter is structured as follows: The next section explain what a product configuration system is. This is followed by a section briefly describing the project, study and methodology, which again is followed by a description of the involved firms and the results. The results are presented, and the implications for human factors discussed.

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