After the MCPC 2005 conference (http://www.mcpc2005.com), about 40 of our participants went to a three day field trip to China. This was a great experience. During a workshop at Zhejiang University in Hangzhou we could discuss with 50 Chinese business people, consultants and scholars about the state of mass customization in China, both as a market and as a manufacturing location for customized goods. A company visit at Youngor, a Chinese apparel manufacturer, demonstrated a very far advanced mass customization manufacturing and sales operations. And the beauty of the Hangzhou landscape and its lake impressed all of us.
China as a market for customized goods
China is such a large local market with a more and more heterogeneous consumer base. While in many segments still the focus is on fulfilling early demand in local households, other segments, mostly in the large eastern cities, have already a large and sophisticated consumer base. The increasing chasm between income levels creates two more or less separated markets form many goods. Companies like Youngor (see below) target with their mass customization offerings the upper end of the market. Here, demand for customization may be strong according to a number of cultural specialties of Chinese culture:
(1) China has a long tradition in craftsmanship, providing the country both high flexibility and a highly skilled workforce, but also a dedication of some customers regarding highly personalized service.
(2) Crowded cities and communities: Society is still rather uniform but changing fast into a way where uniqueness is honored and appreciated, so customization has a special appeal to many (especially younger) consumers.
(3) Food culture: The Chinese cuisine is highly regional and customized to specific tastes; many Chinese people are highly sensitive to shop for their favorite dish. This may also encourage them to adopt or even demand custom offerings.
And there is weak evidence that China is already moving towards customization: Car manufacturers report that since 2004, more and more cars for the consumer market are not made-to-stock, but are being configured and made-to-order (still not conceivable in the US car market!). Haier, a large manufacturer of appliances, offered already in 2002 customizable refrigerators. While this offering flopped in the consumer market due to a lack of an adequate front-end, it became a hit in the retail market where retailers can order custom versions to differentiate themselves from local competition. And Youngor (see below) has introduced mass customization of suits to the Chinese market at a price point of about 320 Euro / 378 USD a piece.
China as a manufacturer for customized goods
Most often, China is however discussed in western countries as a manufacturing place for custom goods. While there is a large debate if logistic disadvantages would not favor local manufacturing of custom goods close to the markets, several western brands are sourcing the custom goods from China: Most custom sneakers and fashion shoes are produced in Guangzhou for the US and European market, Also, several large US brands like Nordstorm, Polo Ralph Lauren or Tommy Hilfinger are producing some of their custom garments in China.
This trend my increase. China has shown in the past years that its main capability is to build lacking infrastructure very fast. In addition, it can counterbalance coordination demands and complexity handling still with cheap human labor (in one factory which I visited before the conference, almost each single custom order was coordinated and tracked by an individual worker – an easy way to balance the lack of an ERP or MRP system).
But more importantly, Chinese factory managers show no resistance to switch to custom manufacturing if they see a profit opportunity. In many industries, the steadily decreasing order size of standard variants has increased the flexibility and switching capabilities of manufacturers anyway. In addition, the organization of Chinese manufacturing around local industry clusters supports customization perfectly as all players along the value chain are in close proximity to each others.
Most impressing was a visit a Youngor, one of the largest Chinese manufacturers for apparel, including an own custom apparel operations. Youngor produces about 60% of its garments for the local market. It’s suit manufacturing capacity is about 2 mio pieces p.a., and within this segment, custom suits are the strongest growth factor, targeting about 15% of the total capacity. The suits are sold in about 100 of 2000 retail stores owned by the company in China and Japan, using a simple, but clever measurement system combining traditional tape and an easy procedure to set reference points.
The retail price is between 1200 and 5000 RMB (about 150-600 USD), quite a heavy price tag for the Chinese market. Production took place in a very modern, integrated production facility in Ningbo at the corporate headquarters. Individual cuts are calculated in a CAD room, cutting is performed on modern single-ply cutters, sewing operations are performed to a large extend within the normal line producing also standard garments.
I was also very very much impressed the executive manager introducing us to this system. Han Yong Sheng, Vice General Manager and CTO of Youngor, provided a very insightful introduction into mass customization which was very much ahead of the state of discussion beyond many western manufacturers. He shared a great vision of the potentials and challenges of mass customization, and seemed 100% confident in what he was doing and planning. For mass customization, this is a bright future. For western manufacturing, not.