INTEGRATED PRODUCT AND SERVICE ENGINEERING ENABLING MASS CUSTOMIZATION

Transcription

1 19 th International Conference on Production Research INTEGRATED PRODUCT AND SERVICE ENGINEERING ENABLING MASS CUSTOMIZATION E. Sundin 1, M. Lindahl 1, M. Comstock 1, Y. Shimomura 2, T. Sakao 3 1 Department of Management and Engineering, Linköping University, SE-58183, Linköping, Sweden. 2 Department of Mechanical Engineering, Tokyo Metropolitan University, Japan. 3 Department of Mechanical Engineering, Darmstadt University of Technology, Germany. Abstract Manufacturing companies face many challenges today. One of these is how to successfully meet increasingly diverse customer needs. This paper elucidates, from several perspectives, how mass customization could be enabled using integrated product and service engineering. BT Products AB (BT) produces forklift trucks in Sweden that are customized and sold through various kinds of product offerings, which are also customer-tailored. By doing so, BT can offer their customers increased value through customized product service offerings. This paper shows, through a case study at BT, how the customization issues are tackled by the company. Though the development of products and services is conducted in separate organizations at BT, the company has managed to create successful customized offerings for its customers. However, with a more integrated development BT could become even more successful in its customer offerings. Keywords: New Manufacturing Paradigm, /Product Engineering, Product Systems, Life-Cycle, CAD. 1 INTRODUCTION Customer demands are more heterogeneous than ever before [1]. Perhaps the most challenging task for manufacturers today is determining how to meet the diverse needs of their customers. More than ever before, customers are demanding customized products, and manufacturers are working to achieve customized products for the masses but still maintain high production efficiency, short lead and delivery times, and good customer satisfaction. In research, this approach is often referred to as Mass Customization (MC). In addition, subtle differences among market offerings may lead to a greater impact on business success. Thus, MC is getting more attention as a measure for companies to contribute to higher customer satisfaction. Since the target of MC consists not only of physical products but also of (soft) services, introducing MC requires a holistic view of a company s business processes. Limited space for customization (e.g. only physical products and their production systems) does not lead to optimized solutions. Manufacturing companies, which have traditionally focused primarily on their physical products in the development phase, need to change and make their working procedures broader in their offering development. Furthermore, due to increased customer orientation, manufacturers tend to strive from producing serial products to mass-customized and service-intensive product packages [2]. Mass Customization has been studied by many researchers before, e.g. Pine [1] and Hart [3], and can be defined, according to Anderson and Pine [4], as the design and manufacture of customized products at mass production efficiency and speed. Customer demand for product variety at a reasonable price is fast becoming the rule rather than exception in a number of markets. In literature, a host of new manufacturing paradigms and their associated enablers are positioned as the solution for this next generation of manufacturing [5]. Initially applied to product-oriented industries, mass customization has become a widespread concept in service-oriented industries as well as a way to increase differentiation levels depending on customers needs - and do so without increased production costs. Many manufacturers have to deal with these issues since their customers are increasingly demanding customized products or services. This is, for example, valid for the Swedish forklift manufacturer BT Products (BT), which customizes its forklift trucks according to customer requirements. BT, a part of Toyota Industries Corporation of Japan, is the world s leading supplier of electric-powered warehouse trucks and services. The Group sees its business as anticipating customer needs and delivering solutions for efficient material handling in support of its global base of customers. 1.1 Objective The objective of this paper is to, from several perspectives including those found in the traditional mass customization literature, elucidate how mass customization could be enabled using integrated product service engineering. To do so, the combination of research theories and the industrial case of BT was examined. BT manufactures customized forklift trucks that are sold through various kinds of product offerings such as long-term or short-term rental agreements, which are also customer-tailored. By doing so, BT can offer its customers increased value through customized product and service offerings. The paper illustrates the potential for enabling MC with the aid of integrated product service engineering (IPSE) through a case study at BT. 1.2 Research Methodology The methodology for this research consisted of a literature study in the applicable research areas. Furthermore, for the industrial study at BT, a company which has been studied extensively by the authors, research was conducted on its customization practices with the help of a

2 semi-structured interview with the customization manager and a technical engineer at the division s manufacturing facility for customized products, which is called Special Products. 2 CUSTOMIZATION AT BT PRODUCTS 2.1 Company background BT Industries Group offers customized material handling solutions to improve its customer s efficiency. The group is a complete supplier of manual trucks, electric powered warehouse trucks and counterbalanced trucks. In order to satisfy its customers throughout the truck s entire lifecycle, high demands are placed on the product itself and its functionality, as well as service and spare parts availability. While sometimes the solution is to purchase a new truck, BT s forklift trucks are being rented with increasing frequency. With rental, the customer can attain greater flexibility, reflecting the changing needs of their operation. BT offers numerous combinations of rental plans, enabling customers to manage truck-related activities with both flexible capacity levels and lower, more predictable costs. Several rental programs are offered: Core fleet rental Flexible fleet rental Long term rental Payback rental Short term rental Stand by rental According to those interviewed, BT currently manufactures over 40,000 electric forklift trucks per year, and is on pace to manufacture even more in the year to come. This is in addition to the 100,000 hand trucks it produces each year. Those interviewed for this study estimated that 50-60% of the business for BT Europe was rental. At present, about 12% of BT s products are customized, and some of these customizations are rentals. Historically, sales of specialized forklift trucks have been stable, but the total volume of trucks sold has increased along with the complexity of the specialization. The number of trucks being specialized is very dependent on how the sales companies are organized and how eager they are to find customers who want specialized products. Much of the specialized needs are derived from the customers requirement to make their logistics more efficient. BT has seen an increase in the breadth of its range. At BT s sales company in Sweden, approximately 40% of all sales are customized. In Belgium, Holland and the UK the percentage of specialized trucks sold is also high, about 30% of the total, whereas in other countries such as Germany, the demand for customized BT trucks is much lower. 2.2 Product Customization According to the company s website, BT s aim is to produce trucks that meet its customer s demands. While it offers a standard range of solutions such as hand pallet trucks, warehouse trucks and counterbalance trucks, it also understands its customer s specific demands and can create special modifications to meet them. BT s truck designers work closely with their customers to create and customize trucks to suit specific applications or requirements. Some customizations are extremely simple, and vary only slightly from the company s standard offerings. Others are much more advanced, truly one-of-akind solutions that can take months, even years to develop in close cooperation with the customer (see Figure 1). Simple customization The simple customizations stand for 55-60% of the customized trucks at BT. These customizations include for example writing boards, cup holders, and variants of standard options such as standard ergonomic dimensions for tall drivers, standard lifting heights, and standard fork lengths. According to those interviewed, customization helps to fill voids in the standard product offerings. Customization often entails modifications such as improved strength, increased capacity, or reduced size, and these products can take 3 to 6 more weeks than for standard trucks to deliver to the customer. Complex customization The remaining 40-45% of the special products are more complex trucks that are perhaps only manufactured once. Much of this complex customization cannot be found in the BT price list, but rather is tailored according to the customer s needs and priced accordingly. At times, the customization is so extreme that is in principle a new truck. These trucks have a lead time of 6 to 12 months. Figure 1: BT Product s production percentage per customization type (model adapted from Skjelstad et al. [6]).

3 19 th International Conference on Production Research All product requests that do not fit into the company s suite of standard options, however big or small, are diverted to its special products facility, located nearby its main production facility. This helps to reduce the time for customizations, which range from several minutes to many months to complete. According to those interviewed, the specialized forklifts can be considered as order winners. Just as in its standard production, perhaps the key concern at BT specialized trucks is safety. If a customer wants it but it is not safe, BT will not build it. Also, if it will take too many resources from BT and it is only one truck that needs to be specialized, BT Special Products needs to confirm with its key account managers and sales companies that the order is important for the future. In other words, the Company needs to determine if the specialization will be an order winner or door-opener to a new customer and or market. BT Special Products has a good network for making these decisions. Some customization examples are shown in Figure 2. will speed up the administration of customized orders, today about 1,700 per year (i.e. 4,800 special trucks per year). 2.3 Customization BT offers its customers the alternative of renting to enable them to manage changing circumstances and avoid the uncertainty of truck running costs, as well as eliminate the need to tie up capital and increase flexibility. Within these rental programs, the customers can select and combine to tailor the most flexible solution for their operations. The plans are both long-term and short-term, as previously mentioned. From BTs perspective, the same forklift truck should be used in several rental programs (Figure 3). Sale strategy Long-term Short-term Used Scrap Time Figure 3: Ideal life-cycle for a BT forklift truck (sold through rental programs). Figure 2: Examples of BT customizations. 1) Dual steering module to make it possible to drive seated or standing, 2) Special machine developed for an assembly line for lorry and bus motors, 3) Special fork carriage on LPE240 to make it possible to transport cars, 4) Small counterbalance pedestrian truck available in two lengths depending on required machine capacity [7]. As a part of Toyota Industries, BT has its own customized form of the Toyota Production System (TPS), as they earlier called the BT Production System (BTPS). Modified for the Swedish industrial environment and culture, the BTPS is present in both standard and customized production at BT. With customized production, the increased complexity and logistics makes some aspects of BTPS more difficult to implement. For example, tact time and line production are not practical for one-piece production of a large and varied product line. The manufacturing of customized products was previously performed along with ordinary production, but since the introduction of BTPS, customization has been moved to another facility. The overriding principles of reducing waste, good order, and visualization, however, still permeate the entire development and production process at BT Special Products. For its standard products BT uses configurators, which are software applications that enable customers to order exactly what they need based on allowable choices. However, BT enables its customization without the use of product configurators as several other forklift truck manufactures do. Despite this, the company s system appears to work for them, and there are plans for increasingly automated customization in the future. This Some plans are fully inclusive and combine the truck with routine servicing, parts and breakdown costs. There are also provisions to upgrade or change-out equipment based on changing requirements. Other plans help customers provide for peak-time back-up to supplement its core fleet capacity. Customers have over 8,000 trucks to choose from, and equipment can be rented with different service options ranging from just a day to several years. 3 INTEGRATED PRODUCT SERVICE ENGINEERING The concept of Integrated Product Engineering (IPSE) has been developed to cope with the above mentioned as well as other obstacles and trends found in the current way of developing and operating integrated product service offerings in companies [8]. The overall and general aim with IPSE is to, from a lifecycle perspective, generate and optimize solutions with a combination of products and services that satisfy identified customer needs, and at the same time increase the competitiveness of suppliers. Concepts similar to IPSE are e.g. Product Systems (PSS) and Engineering (SE). The concept does not focus on a single issue but rather incorporates a wide range of issues, e.g. design, production, quality and economy [8]. This is also the case for many traditional product development methods such as QFD, but these focus primarily on the physical product and less on the service content. A handful of IPSE models and methods have been developed, see e.g. Lindahl et al. [8]. The supplier's focus on offering integrated product and service offerings can be a driving force for the development of new and innovative technical solutions, and has proven to be a successful marketing channel for companies aiming to spread new technology to their customers. The IPSE method has a structured approach, e.g. including scope and flow models to span the offering s entire lifecycle, as well as different stakeholders requirements (see Figure 4), e.g. to consider how to customize toward different stakeholders needs and requirements.

4 Economic issues Manufacturingissues Quality issues Environmentalissues issues Marketing issues Et cetera Production phase Operation phase End-of-life phase Figure 4: How different issues relate to different product phases. IPSE focuses not only on the production phase, but also incorporates the use and the end-of-life phases, enabling great potential for business improvements. This opens up new ways for the supplying company to profit from improvement during the use and end-of-life phases, especially if the offering s products are still owned and controlled by the supplier. An example of an improvement is the reduced need for spare parts, energy and consumable goods during use. Earlier studies have shown that companies offerings of service content have often been added on after the products have been designed [9]. One major obstacle with this is that it implies a need to develop the service based on an existing product, since it is very expensive and often unrealistic to change the existing product. This also implies less cost-efficient offerings than could be the case if one could design them simultaneously, e.g. a small change in the product that could make the service much easier and increase the customer s satisfaction. It would also facilitate the customization of the total offer. However, when integrating products and services into combined offerings, the identification and handling of requirements becomes more complicated and requires a more holistic view also incorporating the use phase, since the service is produced and used during the use phase. An example of an IPSE model, illustrated in Figure 5, highlights and illustrates vital activities in the generation of the offering (see also [8]). The two-way arrows in the method symbolize the important communication needed between the different stakeholders within the lifecycle activities. This IPSE-model has a mass customization approach, with a strong focus on the customers and users. Company (supply chain) Concept generation Concept realization Physical products contents Manufacturing / Remanufacturing Need- & requirement analysis Check & contract Support & Maintenance Take back Figure 5: An Interactive design model for IPSE. An IPSE methodology can be followed based on the IPSE model described above according to the following six steps: Step 1 Need and requirement analysis The main issue is to start from the unique customer s needs and requirements, e.g. customization. The identified requirements should primarily be seen as requirements on Customer/User (Stakeholders) the requested function and not as product or servicerelated. In this activity, it is important to have in mind that it is also critical to determine needs and requirements for other stakeholders, e.g. the managing board, authorities and suppliers. Step 2 Concept generation The concept generation differs from traditional concept generation since it better highlights the need to generate concepts in an integrated way, concepts that from the beginning and in parallel processes comprise both the offerings for service and product content. The focus is on finding the best combination of products and services based on the validation of the different requirements stated for the requested function. The combination can be based on standard products and services, but preferably on customized ones since they more likely will give a higher customer value. A useful software tool for this activity is Explorer, which is further described in next section. Step 3 Check and contract In this activity, it is not only important to verify that customers understand what they will gain from the offering; it is also important to verify that the customer is satisfied with the offering. Step 4 Concept realization This concerns the realization of the offering, i.e. production of products needed for the offering but also for the production of the structure for the service that will be produced during the use-phase. In this step, most of the traditional customization is performed on the physical products. Step 5 Support and Maintenance During this activity the offering s function is used. It is during this phase that the service and maintenance are delivered to the customer. Active communication with the customer during this activity is a good opportunity for companies to learn more about their customer s needs for service and how to better identify and fulfill customer requirements, e.g. for better mass customization of future offerings. Step 6 Take-back It is quite common for Integrated Product Offerings that the products ownership is not transferred to the user, and that the products are therefore taken back when the user no longer needs the offering. The IPSE approach can successfully be integrated with a remanufacturing system [10]. 3.1 Explorer Explorer is a software tool which facilitates ISPE [11]. Explorer deals with both the physical product and service activity. Thus, the design space provided by Explorer is wider, resulting in more design options as well as differentiation solutions. Figure 6 depicts the system configuration of Explorer. Organizer Module 1 Module 2 Module 3 Module 4 User Interface Case Base Persona DB Function DB Rule Base Concept Rudder Working Space Development Team Interface Evaluator Figure 6: System configuration of Explorer. Engine 1 Engine 2 Engine 3 Engine 4

5 19 th International Conference on Production Research Explorer provides a modeling scheme which adopts several kinds of sub-models [11]. One of these is the Scenario Model, which adopts the concept called Persona [12] to specify the service receiver s values. The concept Persona, which is frequently used in the practical design of software interfaces, represents features of a service receiver. Scenario Model also represents behavior of a service receiver in a form of state transition. A state is described as a set of parameters with their values. In this way, value design is supported. Explorer allows design teams: to describe the offer (a set of physical products and service activities), even in the early design stage; to make discrimination among customers by using Persona model [12]; to develop the offer; and to evaluate the offer [13]. Figure 7 depicts the flow of developing offerings using Explorer. Following this, Explorer can support design teams to achieve such customization as is practiced at BT (see Section 2), taking advantage of the Persona Model in particular and the wider design space for a service/product. Explorer is at present dedicated to upstream design activities rather than downstream, which most design tools deal with (see Figure 7); however, it is currently being expanded to support the downstream as well. As understood in Figure 7, a product and a service are alternatives for fulfilling a given value. Not only that, but more advanced customization can also be supported by Explorer: customization on the level of value, which is of course more abstract than a physical product or service activity [14]. Explorer Traditional CAD tools Customer Segments Product Functions Detailed Product Production Planning Product Production Plan Analyzing Customers Values Functional Functions Detailed Production Planning Production Plan Explorer (under construction) Figure 7: tools applied to product/service design stages. 3.2 BT Context In previous studies concerning IPSE, the authors have seen that more and more companies are beginning to reconsider their current business model and methods for developing their products. One reason for this, related to production and particularly for manufacturing companies in mature markets, is that their installed base, i.e. their products out at their customers in many cases, is considerable in relation to the number of new products sold, e.g. as in the BT case. At the same time, there exists great business opportunities in helping customers to improve the operation and utilization of their products out at their customers, e.g. by helping the customer to increase productivity, accessibility and life-cycle cost from the use of the product. This is because the delivering company in general is able to build up a deeper knowledge in comparison to the customer concerning how to best utilize delivered products. By doing so, i.e. not only customizing the offering s ingoing products but also adding new customer value by customizing and helping customers in the use phase, delivering companies can bring the mass customization to a new and higher level. This is also something that BT is doing in its offerings, since it focuses on the product s entire life-cycle when delivering an offer. Since IPSE (see also the section about Explorer) manages the aspects above, the life-cycle perspective and the focus on the use phase and how the product and service offerings are developed enables a higher degree of mass customization. BT Special Products uses a unique methodology to manage its customization. For example, it begins with drawings of standard trucks, and breaks them free from the ordinary system to give them new life according to their customization requirements. This new drawing will then only be connected to the special truck currently being developed. BT Special Products also uses its own local network of suppliers that are flexible and can quickly manage any special needs for customization at BT. In addition; BT Special products has set-ups for one-piece production. In order to facilitate standard trucks for customization, BT Special Products engineers are included in the design team at the early idea phase of the ordinary product development. At these meetings, Special Products describes what kind of customization it has previously conducted and which customizations are likely to happen for the new products that are to be developed as standard products. At these meetings, the discussion includes the special products that are to be included in the standardized selection as well as which standards that should be specials in the future. The authors have also seen in their studies, as in the BT case, an increasing interest in the ability to take back used products from customers and recondition them for use at new customers. Related to this are also the benefits from taking away, or better controlling, the second-hand market, which might not be an obstacle for OEMs to deliver new products. Mass customized products could in this case be both an obstacle or not. In the BT case, this is a balance between giving the customer a customized fork lift truck and at the same time providing a truck that, ideally, can be taken back and used at other customer s operations. At the same time, if as in the BT case the ownership of ingoing products is kept by the delivering company, and if the customer pays for the use of the function, it might be more preferable to ensure that the ingoing service and products are more than mass customized. In other words, the customer should want to keep the products for as long a period as possible, even though the extreme customization implies that the customized forklift truck is not worth taking back. 4 DISCUSSIONS AND CONCLUSIONS As Bullinger and Schweizer [2] discuss, large manufacturers are challenging the trade-off between two strategic options: simultaneous improvements in cost structures and differentiation. In this paper, the focus has been on the use of a service engineering methodology in order to reach mass-customized offerings. BT deals with the customization of products and services separately and at different phases of a customer deal. At

6 first, with the Company and customer work together to decide what technical specifications the customized forklift truck should have. When this is agreed on according to rules of security, the production of the truck is conducted. This is also when the level of service is determined with the customer. The customers have different packages of service content that can be customized according their service needs. Many of the forklift trucks that are customized will set the new specifications for new standard trucks. In this way, the customers with special needs develop new ideas for BT products. The case study at BT shows how the customization issues are tackled by a Swedish forklift manufacturer. Though the development of products and services is conducted by separate people in different organizations, the Company has managed to create successful customized offerings. With a more integrated development, BT could be even more successful in its customer offerings. This could be achieved, for example, by having the IPSE mindset along with use of supporting software such as Explorer. This paper has illustrated that with integrated product service engineering, the manufacturers solve the challenges of offering customers customization. 5 FUTURE RESEARCH Methods and tools to support the integrated product and service engineering of customized offerings need to be employed at BT in order to improve its development. Furthermore, the software, Explorer, needs to be further developed in order to meet the industrial requirements put on it. The IPSE methodology must be improved and verified at Swedish manufacturers, something which is currently underway and can be monitored at the research project website: 6 ACKNOWLEDGEMENTS The authors wish to show their gratitude to the staff at BT Special Products who shared information regarding its customization activities. The Swedish Governmental Agency for Innovation Systems (VINNOVA) is also gratefully acknowledged for its support of this research project. 7 REFERENCES [1] Pine J., 1993, Mass Customization, Harvard Business School Press, United States. [2] Bullinger H-J., Schweizer W., Intelligent productioncompetition strategies for producing enterprises, International Journal of Production Research, Vol. 44, Nos , 15 September 1 October 2006, [3] Hart C., 1995, Mass Customization: conceptual understandings, opportunities and limits, International Journal of Industry Management, Vol. 6, No. 2, [4] Anderson D. and Pine J., 1997, Agile Product Development for Mass Customization, Irwin, Chicago, Illinois, United States. [5] Comstock, M., Johansen, K., and Winroth, M., 2004, From Mass Production to Mass Customization: enabling perspectives from the Swedish mobile telephone industry, Production Planning & Control, Vol. 15, No 4, June, pp [6] Skjelstad L., Hagen I. and Alfnes E., 2005, Guidelines for achieving a proper mass customization system, SINTEF Technology and Society, Economics and Logistics, S.P. Andersensv. 5, N-7465 Trondheim, Norway, Proceedings of EurOMA International Conference on Operations and Global Competitiveness, Session: Production and Manufacturing Management, Available online at: r/2005/2005%20skjelstad%20hagen%20alfnes.pdf. [7] Information from BT Products website: dified+trucks.htm, last accessed [8] Lindahl M., Sundin E., Shimomura Y. and Sakao T., 2006, An Interactive Model for Engineering of Functional Sales Offers, Proceedings of International Conference 2006, Dubrovnik, Croatia, May 15-18, pp : Society. [9] McAloone, T. and Andreasen, M., 2004, for Utility, Sustainability and Societal Virtues: Developing Product Management, Proceedings of International Conference Dubrovnik, Croatia. [10] Sundin, E. and Bras, B., 2005, Making Functional Sales Environmentally and Economically Beneficial through Product Remanufacturing, Journal of Cleaner Production, Vol. 13(9), pp [11] Sakao T. and Shimomura Y., 2007, Engineering: a novel engineering discipline for producers to increase value combing service and product, Journal of Cleaner Production 15, pp [12] Cooper, A., 1999, The Inmates Are Running the Asylum. Sams. [13] Shimomura, Y. and Sakao, T., 2007, A Evaluation Method for /Product Engineering, Proceedings of the 16th International Conference on Engineering -ICED07-, Paris, France, in print. [14] Sakao, T., Shimomura, Y., Simboli, A., Petti, L. and Raggi, A., 2007, Applying CAD System to Value Customization, Mass Customization and Information Systems in Business, T. Blecker and G. Friedrich, editors, Idea Group Publishing, Hershey London, The United Kingdom, ISBN , in print. Corresponding author: Erik Sundin, Linköping University, Sweden, Tel: , erik.sundin@liu.se