Best Practice in Choice Navigation Processes

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1 Putting Mass Customization to Practice: A Case Study of FESTO Best Practice in Choice Navigation Processes RWTH Aachen University: Franziska Miebach, Frank Steiner FESTO: Renate Kuch, Ralf Höhn, Michael Bernas Abstract: FESTO offers a highly customizable portfolio of components and systems for the automation industry. Besides the development of a solution space and the respective robust processes in the background, the complex structures of the products require a clear and transparent navigation of the customer in the product selection. A suitable tool to realize the guidance for the customer is an online configurator. This case study researches the implementation and background of the customer interface at FESTO. For the preparation of the paper on hand a literature research and interviews with experts of FESTO were conducted. 1 Introduction Mass customization is said to be a great strategy for achieving success. However, there is still only a minority of firms efficiently implementing mass customization. Certain conditions appear to be of importance if a company wants to create value with individual products. Current research points out three capabilities that seem to be of importance: the ability to create a wise solution space, the existence of robust process designs and the ability to offer customers a choice navigation which guides them through the entire product configuration process (Salvador et al., 2009a). It is discussed that the development of these capabilities enhances the chance of a company to master a mass customization strategy more successfully than companies which do not focus on these capabilities. Mass customized products firstly need to be configured by the customer via a fairly complex configuration process, while the manufacturer ought to make sure that the customer knows what he needs to do. The great degree of interaction between the company and the customer therefore required should to some extent be supported. The implementation of a configurator that guides customers to their preferred end-product would be an option. Such a configurator allows the customers to choose and configure their desired products from the solution space of the manufacturer. Complexity and confusion should be reduced during the entire process. However, to generate added value with the help of a configurator, a company needs to maintain and build interfaces with other systems and programs inside the manufacturing company. Thus, the configurator cannot only be seen as an external guiding tool for customers, but it also has to serve internally as a coordinating and process automation tool concerning production process. This case study discusses how FESTO s configurator works - internally as well as externally - and compares this to management literature. In conclusion the case study will discuss if FESTO is indeed a best practice concerning choice navigation. 1

2 2 Mass Customization at FESTO FESTO AG & Co. KG is a world leading manufacturer of automation technique. The family business was founded by Gottlieb Stoll in 1925 in Esslingen am Neckar. FESTOs activities include the development, production and marketing of technical products while standing for service, quality and reliability. Worldwide FESTO engages employees. About of them are solely responsible for the personal support of customers. FESTO serves over customers and regional offices in 176 countries secure the personal points of contact. In 2011 the turnover amounted to more than 2 billion, which is a record in the FESTO company chronicles. FESTO s product range contains pneumatic and electrical automation technology in approximately standard offerings. Each year, FESTO introduces approximately 150 new products. Some of them are actual new developments; others are progressions or alterations of previous products. Through the deployment of modular systems for customer specific solutions, the possible product variations are numerous. Some of these products are, for example, pneumatic and electrical actuators, valves, valve terminals and products for the handling- and assembly technology. The main industries in which these are applied are the automotive-, electronics-, food- and beverages-, biotech- and pharmaceutical-, and the process industry. Industries are quite evenly split as the turnover of each single industry does not exceed 15 % in total. The product variations are part of FESTO s customized products. Mass customized products present about 2/3 of the product offering and account for almost 70 % of the turnover. A main reason for FESTO to implement mass customization was that customers expect products to fit exactly, wherever they want to put them into use. For a customer, there are products that he really needs and there are products that could be beneficial if they are adjusted to the situation. These individual needs and their solution are what matter to FESTO as innovations and the interaction with the customer are key competences of FESTO. The company wants to offer standard products, but at the same time Festo wants to be able to react efficiently to individual demands. FESTO has decided to implement a mass customization strategy, because the strategy best fits customer demands. The customers themselves, in business-to-business (BtoB) markets, are quite cost-conscious. Their own production must operate frictionless and has to exactly fulfill its task. Modular products, as FESTO offers them, present an opportunity to only choose those parts of a machine that the customer really needs. This way, the customer does not have to pay for module parts he does not need but which are, nevertheless, included in all standard products. In the context of mass customization, literature highlights the importance of the manufacturercustomer interaction (Gilmore et al., 1997; MacCarthy et al., 2003). To FESTO this interaction with the customer is of great importance. During every step the customer can expect support from an employee. There is marketing staff who helps the customer to find the right solution to his problem while in the case of complex solutions a project engineer will join the process. The consolidated annual report states that along the supply-chain FESTO tries to support the customer in every step of the process: consulting, selection of the products, installation by plug-and-work, and service at the customer s site (e-bundesanzeiger, 2011). 2

3 Regarding the configurator, the process should certainly be self-explanatory though the customer can certainly ask for support from experts at the head office or call on his sales engineer. However, in most cases the customer s knowledge will be sufficient enough to use the configurator. The customer himself is an expert in his field and the knowledge on his working project should be enough to usually understand the product configurations. 3 FESTO s Configurator and the Online Shop For FESTO, the online shop developed into an important platform regarding the whole sales activities in Germany. Beside the classical shop functionalities for any kind of customer, automated BtoB ordering processes are implemented. All of these processes do not require any human interaction. The FESTO online shop supports the customer in the engineering and ordering process along the entire supply chain. Its electronic catalogue provides all up-to date information on the product and its modular variants and is fully integrated into FESTOs management system. The electronic catalogue is a tool for search, selection and design of a product giving an overview of the different product families. Through the online shop it provides basic data, characteristics, the main selection criteria and the product family s features and benefits. It supports a project during the following steps: selection, design, order and after-sales. Different customers have different needs and literature finds that a personal account can create more acceptance for a configurator system, because such an account offers individualized information and thus an increase in value to the customer (Rogoll et al., 2003). At FESTO, the user can choose between three authorization profiles. The first profile is for mere catalogue users. It grants access to all product data and to 2D and 3D CAD models as well as the possibility to save multiple BOMs for projects. The second profile allows access without order function, linked to a customer ID. The user receives pricing and delivery information and can track the order. In extension to the second profile, the third includes an order function. The customer can order online and directly receives sales confirmation. The online shop can be used by all registered customers of FESTO. Each customer can request access to the online shop via his own customer ID. Relevant customer information such as discounts, prices, etc. is picked out from FESTO s SAP system via this ID so the customer receives information about the product. The possibility to directly transfer data to FESTO is given to BtoB customers when they provide a certain turnover. Then, the customer s and FESTO s IT systems can be connected. This allows further automation of the process. For example, the Canban system of the customer might report a shortage in couplings and automatically triggers an order at FESTO. After finding the right product in the catalogue, the actual configuration process starts. The product search is quite simple: There is a choice between entering a new search and directly entering the catalogue. For a detailed search desired features can be selected or already selected items can be changed. 3

4 During construction, the user can access a diverse range of tools with which FESTO helps the user in the engineering process. With integrated software tools it allows the user to specify product characteristics and parameters. An online shop cannot offer the customer an actual assessment of the product. Therefore, a simulation or a visualization must replace an in-store evaluation (Franke et al., 2002). For a visualization of the configured product, FESTO s configurator can draw on the product documentation, where drawings of the single components are deposited which can be connected to a new product. An exemplary visualization of a valve block can be seen in Figure 1. The user can download the CAD-file and view it from several perspectives, transparent and exploded. Figure 1: Exemplary Visualization For the simulation of technical details, the process is only a little bit more complex than for the visualization. In the product documentation, information on the technical details is deposited. Independent software tools calculate the new data with the technical details of the components. Skjevdal et al. show that one of the things a user focuses on besides the visualization is the existence of possible construction software as an additional service (Skjevdal et al., 2005). These tools can be found on FESTO s homepage, which enable the customer to simulate a situation that represents exactly his own production environment. For example, a tool offered is FluidDraw. Through this additional software support, FESTO wants to accompany the customer s every step of the value creation chain. It is an additional service to the customer that strengthens loyalty and goes beyond the information provided by the online shop. An exemplary simulation of a cylinder can be seen in Figure 2. First, the components can be selected, and then the results of the simulation will be provided. 4

5 Figure 2: Exemplary Simulation Furthermore, FESTO offers CAD models in multiple formats so every customer can view and download the visualization, all technical details and a list of all possible spare parts. This spare parts catalogue can be accessed via the online shop and provides exploded component drawings and a list of parts as PDF documents. The user can check which parts he can use in connection with his ordered product. All this information, in addition to the single configuration process, support the findings by Wind et al. that BtoB customers expect a greater insight into processes than BtoC customers (Wind et al., 2001). FESTO reacts to these demands by offering a widespread range of additional support and tools. The configuration contains two main steps. First, basic features are selected defining the main attributes for a valid configuration. By entering the application information, the configurator will suggest further compatible tools. The second step involves attributes that adjust the product to the customer s needs. During the whole process, the customer can see all product information at a glance and compare it to other products. This information includes CAD download, accessories, documentation, data sheets, pricing information, delivery date and pictures. The CAD download is a direct offer and available in all common data formats. The delivery date can be given because every product contains information on its specific delivery time. This information is entered by the responsible product manager. The manager enters information on needed delivery time and the suppliers delivery dates. Thereby, the configurator is able to provide the customer with a delivery date. According to Rogoll et al. a configurator structures a company s knowledge (Rogoll et al., 2003, p.21). It displays all possible variants automatically (Bourke, 2002, p.1) by relying on an underlying structure. Gardner shows several structures, one of them being a rule based approach. In this rules database all relevant data is deposited (Bramham et al., 2010), for example, data on engineering or the allowed linkages to other module parts (Malis et al., 5

6 2003) and the customer s input is checked by rules on its validity (Gardner, 1998). At FESTO, the configurator uses a rule based model. It works with the selection of attributes the customer makes. The audit of the configured attributes runs constantly in the background. Here, the configurator uses its relationship knowledge to verify combinations. This knowledge previously needs to be entered by the employees. The attributes are then evaluated and, if proven to be correct, a bill-of-material is constructed. Production will later use this list to manufacture the product. Using specific questions the configurator guides the customer to the solution. The responses allow for an Ident-code to be built by which FESTO can identify the correct product. After selecting a product via FESTO s type designation or part number, the configurator will ask several questions to narrow down the possible solution space until the configuration is complete and can be built according to the customer s wishes. The configurator is directly connected to the SAP system, which only allows for possible and constructible combinations. It constantly checks back on the customer settings and asks for further input as long as some settings are missing. Figure 3 shows a valid configuration process; all possible options are selected correctly and the configurator will allow the user to transfer the product to the shopping basket. Figure 4 shows an exemplary configuration process that is not completed yet. The configurator gives feedback on the validation and shows where a selection is missing. Figure 3: Exemplary Configuration Process 1 6

7 Figure 4: Exemplary Configuration Process 2 In the third phase, ordering, a complete list of parts can be added to the shopping basket and the system will check on individual prices and availability, provide part numbers and product names as well as display the required quantity. This basket can be saved, delivery information can be changed and the list of parts can be exported to Excel. Additionally, there is the possibility that the customer can import his own list of parts into the basket. In addition to the import of customers own lists, products can be added to the shopping basket via FESTO s part number, a type code or the customers part number. The shopping basket can be saved for later access or adjustment of the purchase. Furthermore, the customer can alter the delivery date, choose the shipping method, decide on full- or part-delivery or whether the products should be sent as a whole or at availability, and check the current availability. As soon as the customer submits his order, it is split and, with the help of the part numbers, sent to the proper production site or ordered at the storage facility. There, the order goes to the assembly-to-order product division. Here, the order is commissioned, pre-assembled, moved to final assembly and tested. Every configured product is provided with a testing program by the configurator and does not leave the firm as long as it has not run through the 100%-test. As soon as the order is ready the logistics provider will be informed. In the after-sales phase the online shop provides tracking of the order (directly linked to the UPS site) and easy access to re-orders. The order can be found through an order number, part number or FESTO s order number. All orders from the cart will be shown and under details, specific information on the status of each order item will be revealed. 4 Conclusion Mass customization at FESTO seems to be successful, because of the technical competence and the ability to respond to customers needs. It is FESTO s belief that customer needs are better served when FESTO s own personal is on the customer s site and involved in the process instead of just asking the customer what he wants. This interaction with the customer creates benefits that otherwise would be hard to achieve. 7

8 To FESTO an online shop must be straightforward. It should not scare the customer by its sheer complexity but simplify the standard processes and eliminate the customer s inhibition level. FESTO put great effort and manpower into the task of simplifying the online shop and teaching the customer about the possibilities offered by the shop. Therefore, FESTO seems to fulfill the definitions requirements. References Bharadwaj, N., R. W. Naylor and F. ter Hofstede (2009). "Consumer Response to and Choice of Customized versus Standardized Systems." International Journal of Research in Marketing 26(3): Bourke, R. (2002) "Product Configurator Software: Understanding the Differences." 2PDM 4(12): 1. Bramham, J. and G. Kruse (2010). The Tyranny of Choice - You Choose. The Economist. Paris, Economist Newspaper Limited Bramham, J. and B. MacCarthy (2003). Matching Configurator Attributes to Business Strategy. The proceedings of the 2nd World Congress on Mass Customization and Personalisation, Technical University of Munich. e-bundesanzeiger (2011). Konzernabschluss der Festo GmbH & Co. KG zum Geschäftsjahr vom bis zum Elektronischer Bundesanzeiger. Festo.com. (2011). "FESTO Homepage." Retrieved August and September, 2011, from Fogliatto, F. S. and G. J. C. da Silveira (2008). "Mass Customization: A Method for Market Segmentation and Choice Menu Design." International Journal of Production Economics 111(2): Forza, C. and F. Salvador (2002). "Managing for Variety in the Order Acquisition and Fulfillment Process: The Contribution of Product Configuration Systems." International Journal of Production Economics 76(1): Forza, C. and F. Salvador (2007). Product Information Management for Mass Customization. New York, Palgrave Macmillan. Franke, N. and E. v. Hippel (2003). "Satisfying Heterogeneous User Needs via Innovation Toolkits: The Case of Apache Security Software." Research Policy 32(7): Franke, N. and F. T. Piller (2002). Configuration Toolkits for Mass Customization: Setting a Research Agenda, Technische Universität München. Gardner, D. (1998). "Configurators for Mass Customization." Agility & Global Competition 2(2): Gilmore, J. H. and B. J. Pine (1997). "The Four Faces of Mass Customization." Harvard Business Review 75(1): Holthöfer, N. and S. Szilágyi (2001). Marktstudie: Softwaresysteme zur Produktkonfiguration. Paderborn, Heinz-Nixdorf-Inst., Univ. Paderborn. 8

9 Huffman, C. and B. E. Kahn (1998). "Variety for Sale: Mass Customization or Mass Confusion?" Journal of Retailing 74(4): MacCarthy, B. and P. Brabazon (2003). "In the Business of Mass Customisation." Manufacturing Engineer 82(4): Malis, M. and L. Hvam (2003). Application of Configurators in Networks. The proceedings of the 2nd World Congress on Mass Customization and Personalisation, Technical University Munich. Neuberger, C. (2007). "Interaktivität, Interaktion, Internet." Publizistik 52(1): Rogoll, T. and F. T. Piller (2003). Konfigurationssysteme für Mass Customization und Variantenproduktion: Marktstudie Strategie, Erfolgsfaktoren und Technologie von Systemen zur Kundenintegration, ThinkConsult. Salvador, F., P. M. de Holan and F. T. Piller (2009a). "Cracking the Code of Mass Customization." MIT Sloan Management Review 50(3): Schwartz, B. (2005). The Paradox of Choice. New York, Ecco Skjevdal, R. and E. Idsoe (2005). The Competitive Impact of Product Configurators in Mass Tailoring and Mass Customization Companies. The proceedings of the 3rd World Congress on Mass Customization and Personalisation, Hong Kong. Tseng, M. M. and J. Jiao (2001). Mass Customization Handbook of Industrial Engineering: Technology and Operations Management. G. Salvendy. New York, Wiley: Wind, J. and A. Rangaswamy (2001). "Customerization: The Next Revolution in Mass Customization." Journal of Interactive Marketing 15(1): Zipkin, P. (2001). "The Limits of Mass Customization." MIT Sloan Management Review 42(3):