Central Perk: Seth's Blog : On demand vs. in stock

sâmbătă, 26 noiembrie 2016

Seth's Blog : On demand vs. in stock

On demand vs. in stock

"You can have any color car you want as long as it's black."

Henry Ford made cars in black because black paint dried four hours faster than any other color. That fast drying meant that the line worked faster, which made them cheaper. Just as important, he didn't have stockouts--with only one color, the color you wanted was the color he had.

Ever since then, there's been a move to on-demand, built to order and custom work. In everything we do. Freelance work, shoes, baked goods, kitchen cabinets, software, travel plans. And it seems like a cost-free progression. The thing is, it's not.

Most of the cost of everything we buy is in the risk, the starting, the stopping, the waste, the breakage, the planning.

A pair of mass produced shoes can be made for $3. A pair of custom shoes might cost $200 once you count all the associated costs.

McDonald's hit a peak moment of productivity by getting to a mythical scale, with a limited menu and little in they way of customization. They could deliver a burger for a fraction of what it might take a diner to do it on demand.

McDonald's now challenges the idea that custom has to cost more, because they've invested in mass customization.

Things that are made on demand by algorithmic systems and robots cost more to set up, but once they do, the magic is that the incremental cost of one more unit is really low. If you're organized to be in the mass customization business, then the wind of custom everything is at your back.

The future clearly belongs to these mass customization opportunities, situations where there is little cost associated with stop and start, little risk of not meeting expectations, where a robot and software are happily shifting gears all day long.

But if you're not set up for this, if you're hustling your coders or your production line or your painters or whomever to go faster and cheaper, you're fighting the wrong side of the productivity curve. It's like the diner that sought to be a friendly, custom-order place but also promised to be as cheap or as profitable as a fast food place.

These traditional businesses, the small ones, the non-automated ones, can sell custom, sure, but not at the price they used to sell the thing they make in bulk. And too often, organizations undercharge for the custom work and find themselves trapped between the productivity of doing things in batches and the challenge of delighting each customer, who carries his or her own dreams of what perfect looks like.