title: Managing the impact of product variety and customisation on business function and supply chain performance: A comparison between the UK and South Korea
Creators: name: Um, Juneho
Publisher: name: University of Liverpool Repository
Year: 2013

description: Mass customisation is displacing mass production, and a conspicuous trend is for businesses to extend the variety of their products in order to provide more tailored solutions and choice for customers. Flexibility-enhancing initiatives have been implemented in order to help businesses adopt customer-centric strategies to satisfy their high-variety ambitions. Such strategies can require major changes to the way businesses and key business functions are organised; yet it is imperative that these initiatives are implemented and high-variety solutions are profitably achieved without an overall deterioration of business function performance. In particular, most manufacturers have started to recognise that a trade-off exists between product variety and supply chain performance. In order to manage the impact of product variety, numerous variety-related strategies to improve supply chain performance have been suggested. However, different levels of customisation require different strategies and approaches and affect business function and supply chain performance differently. This research aimed to assess the potential impact of product variety on business function performance and test a model designed to manage that impact on supply chain performance qualified by the level of product customisation. Further investigation aimed to determine typical differences in focus on variety-related strategies and supply chain performance according to the level of customisation. Lastly, the research findings compared the UK and South Korea. By adopting a quantitative research method, a survey of 364 manufacturing sector companies from the UK and South Korea was conducted. The results provide theory developments that support and contradict exiting views on product variety-related issues. The key findings and contributions of this research are fourfold: First, the analysis examined the impact of product variety on the performance of five business functions including engineering, manufacturing, purchasing, logistics and marketing according to the type of customisation. The research also investigated the relationships between business function performance, degree of customisation and the level of product variety offered. An increase in product variety was found to influence business functions differently depending on the combination of customisation and variety offered to customers. The findings demonstrate that low customisation types typically had a more significant impact on business function performance than high customisation types with an increase in product variety. In addition, high variety with low customisation displayed the highest negative impact on business function performance due to a mismatch between the level of variety and customisation offered. The results support organisational decision-making by providing managers working in manufacturing environments with guidance on how to provide more supportive business function design for heterogeneous market requirements and responses. In particular, specific findings have important managerial implications for the adoption of different approaches to variety under different customisation profiles. Second, the research tested models designed to support the management of product variety increases on supply chain performance, that is, it examined the relationship between variety control strategies including modularity, cellular manufacturing and postponement and supply chain performance including supply chain flexibility, agility, cost efficiency and customer service. Adopting the agility concept as an external competence of supply chain performance, this research also attempted to develop a procedure to manage variety-related impacts according to the level of product customisation. In addition, the relationship between a variety control strategy and supply chain performance was explored further by considering the level of customisation. In this scenario, supply chain flexibility and agility resulting from a variety control strategy in the model had a positive effect on supply chain cost-efficiency and customer service. However, supply chain agility in a low customisation context played a relatively insignificant role compared to a high customisation context. These findings provide guidance for manufacturers by explaining the structural procedure to manage the trade-off between product variety and supply chain performance. Third, the research is dedicated to addressing differences in variety-related strategies and supply chain performance according to the level of customisation. The results revealed that a high customisation context is associated with a higher level of customer relationships, variety control strategy, differentiation, flexibility and agility than a low customisation context, while a low customisation context is associated with a higher level of cost leadership than a high customisation context. The findings prove the general theory related to characteristics for high and low customisation; however, partnership with suppliers revealed contradictory results and displayed a higher performance in the case of high customisation through joint product development and problem-solving. Finally, the research compares its findings for the UK and South Korea. As expected, the UK exhibits a higher level of product variety, customisation, customer relationships, customer service and differentiation than South Korea, while South Korea displays higher cost leadership and cost-efficiency than the UK. The comparison reveals the weaknesses and strengths of the two countries. For South Korea, higher manufacturing cost due to increased variety with a relatively low level of customisation is a major issue that needs to be overcome. On the other hand, the UK has relatively lower supply chain agility compared to its level of customisation. These findings can help international companies set up specific variety-related strategies in order to achieve global competitiveness. Generally, the results from the research support the proposition of variety management and its relationship to customisation in the supply chain. It also contributes to the current literature by arguing that the complex relationship between product variety and supply chain performance varies depending on the level of customisation. Finally, the research reveals that appropriate variety-related strategies for managing variety qualified by the manufacturer’s level of customisation are imperative for effective and efficient supply chain performance.