An assessment of the effect of mass customization on suppliers' inventory levels in a JIT supply chain

Abstract In some industries, mass customization requires a supplier to provide an Original Equipment Manufacturer (OEM) with a wide range of variants of a given part. We consider an OEM-parts suppliers system for an automotive supply chain where parts are delivered to the assembly line several times a day in a just-in-time environment. Simulating varying assembly schedule and parts delivery schemes, we assess the effect of mass customization on the level of inventory the supplier needs for each variant in order to prevent stockouts. We find, among other things, that as the level of mass customization increases, there tends to be an increase in the level of inventory the supplier needs to maintain for each part variant in order to prevent stockouts. Theoretical support is provided for the phenomenon. The presented framework is also useful for evaluating the levels of mass customization that will enable the manufacturer meet customers’ requirements in a cost effective manner. Furthermore, the study confirms the superiority, in terms of inventory levels, of the min–max over the min–sum optimization framework.