Anticipating Customer Demand For Configured Products

Mass production is predicated on building to a forecast and selling through a retail channel.

• Autos go to auto dealers who then sell to customers
• Big box stores sell mass-produced goods to retail customers
• etc.

Under mass production, when things don’t sell, they are offered at a steep discount by the retailer or scrapped.

A build-to-forecast/assemble-to-order manufacturer of disk storage systems announced a disk drive that was 300% larger than any disk drive ever offered in the marketplace.

Knowing it was contrary to our process and practices, the VP of Operations begged me to give him a single part number for a fully-configured 4-pack of these new disk drives configured in a cabinet. He wanted to kit and build 4 of these configurations which he did–under the mass production business paradigm. He let sales know he could quick ship this configuration with 24 hours notice. He was relentless pursuing sales to take him up on his 4-pack configuration.

The idea of providing a single part number was antithetical to our business process and did not fit the practical realities of our business or customers. But, I “agreed” to letting him conduct his experiment knowing it was unlikely that that particular order configuration would ever be sold. A year later, the VP of Ops let me know that (1) he had had no takers for this special configuration and (2) that he was going to disassemble each one and return the components to stock. I appreciated his honesty.

When you sell highly-configurable products, it is nearly impossible to anticipate actual customer order demand. There are 2 elements of this business:

• “Build-to-forecast” makes modular system components available for subsequent customer orders
• The “assemble-to-order” process recomposes modules into customer order configurations only after actual customer orders are received.

The processes I help clients with consider identical order configurations as being a coincidence. And, that’s the right way to approach this. It’s nearly impossible to anticipate what customers will actually want.

Thought for the week:

“I am an old man and have known a great many troubles- but most of them never happened.” – Mark Twain