Knowledge transfer dogs manufacturers: Report

NEW DELHI: Most engineers at build-to-order and engineer-to-order manufacturers believe that product complexity is not the primary barrier to customization. According to a research report, they cite lack of knowledge of options by the customer (67 percent) and the field (44 percent) as the primary barrier to product customization efforts. This is according to a research report released today by software maker Cincom Systems.

The report by software maker Cincom Systems "Best Practices: Mass Customization and Build-to-Order Manufacturing" discusses the findings of the industry's first report - from an engineering perspective - on the state of mass customization and build-to-order practices.

"The implication is that the knowledge required to sell customized products is not being effectively transferred to the field and customer. This is not surprising given the lack of strategic investment in front-office processes and systems," writes Jim Wilson, Cincom Program Director and author of the report.

According to this survey, the primary barrier to customization is the effective transfer of knowledge from the back office to the front office. Of the surveyed respondents, 43 percent indicated that inadequate systems are also a barrier to customization.

Internal Expert Knowledge at Risk

Intellectual capital related to products is primarily in the heads of a few experts (64 percent). Twenty-six percent see the loss of intellectual capital through retirement or turnover as a key risk to their build-to-order strategy. Even more concerning is the fact that 35 percent of respondents report that there is no method in place for sharing knowledge throughout the company.

Another report by the same organisation reveals that only 67% of build-to-order and engineer-to-order manufacturers know how much it costs to produce customized products, and 73 percent don't know the cost of engineering change orders.

"Best Practices: Mass Customization and Build-to-Order Manufacturing" discusses the findings of the industry's first report - from an engineering perspective - on the state of mass customization and build-to-order practices.

"Manufacturers that cannot determine the cost of customized products take a huge risk in taking orders that may not be profitable. More importantly, without understanding the cost of selling, it is difficult to make strategic decisions regarding product mix and target customer segments," writes Jim Wilson, Cincom Program director and author of the report.

Increasing revenue with product customization

Despite the lack of cost information, more than half of the survey respondents believe that they have the ability to charge a 10 percent or higher premium with a product customization strategy. While 73 percent of total respondents see product customization as critical for products over $100,000, 25 percent also see them as critical for products under $1,000.

As the building of simple/high-volume products moves offshore, the U.S. manufacturing industry is left with manufacturing very highly complex products. This trend is evident in the numbers. Most engineers (63 percent) have seen requests for customized products increase in demand over the last five years, and 26 percent anticipate that the growth rate will be between 25 percent and 50 percent in the next two years.

Cincom Systems targeted the survey at senior engineering managers at 900 manufacturers of complex industrial, electrical, and transportation equipment and systems between January and February 2007.

Cost to produce customized products