MANUFACTURING companies are often the cockpit of a civil war between sales and production departments.

The salesmen want to offer each buyer a product specially tailored for them, to improve their chances of landing the contract. The engineers, on the other hand, want to produce just one item that can be bashed out in vast quantities to minimise costs.

It takes strong management to get the right balance. Consultants Booz Allen Hamilton recently looked at this balance in a pair of rivals in the cut-throat pick-up truck market in the US: the Dodge Ram from Chrysler and Toyota’s Tundra.

The Dodge Ram was available in a staggering 1.2 million different variants, whereas the Tundra came in a relatively restrained 22,000 possible configurations. Yet, despite the lack of choice, the Tundra was gaining market share at the Ram’s expense. The reason? Simpler manufacturing gave substantial economies that could be passed on the to consumer as lower prices.

The situation seems intractable. Manufacturing is governed by the iron law of economies of scale, but even the great Henry Ford was forced to abandon his “any colour as long as it’s black” policy in the face of consumer demand for cars of many colours.

But there is a way that many manufacturers can offer wider consumer choice without increasing costs, according to Richard Verity, of Booz Allen Hamilton. It is called “smart customisation”.

“The smart customisation story starts with the idea that many companies are struggling to balance the supply and demand sides, trying to segment the customer base, while reducing supply chain costs, but addressing the two problems in isolation and counter-productively,” Verity says.

The central idea is to identify the main groups of customers, sort out their needs, and adapt the supply chain to satisfy those needs at minimum cost.

Most markets divide into two main sectors. About 80 per cent of buyers are driven by price and just want the basic product whereas 20 per cent demand special treatment and are prepared to pay for it.

Companies tend to react to this in one of two ways. Some simply instruct production engineers to put together something for the picky buyers. The firm ends up producing an enormous range of special lines and losing all economies of scale.

Other companies try to satisfy demanding customers by upgrading the entire product line.

“As companies go for economies of scale they will try to manufacture products that appeal to all, getting the highest common denominator supply chain,” Verity says. This has an equally disastrous impact on costs. Establishing parallel business streams for each market segment allows production to concentrate on minimising costs for each, while offering each the right combination of price and service.

“You should consider tailoring business streams for each segment — smart customisation gives a supply chain which can be split to supply individual requirements,” Verity says.