From Economies of Scale towards Economies of Customer Interaction: Value Creation in Mass Customization Based Electronic Commerce

Mass customization is seen more and more as an application of electronic commerce rather than a manufacturing approach. The paper sets a framework for value generation in mass customization based business models. Traditionally, mass customization was argued to be possible due to the capabilities of modern manufacturing technology. We argue that these capabilities are supplemented by a new set of economies arising not from new possibilities in the fulfillment system, but from a better knowledge position and switching costs resulting from the direct interaction with each customer provided by innovative applications of electronic commerce. By examining and structuring the underlying economic principles of mass customization, not only the limits and constraints, but also the benefits of this competitive approach will be better understood. For better planning mechanisms, the value and costs of a single process have to be known. In this context, we want to provide a starting point for further exploration.