Contextual variety, Internet-of-Things and the choice of tailoring over platform: Mass customisation strategy in supply chain management

Abstract

This paper considers the implications for Supply Chain Management (SCM) from the development of the Internet of Things (IoT) or Internet Connected Objects (ICO). We focus on opportunities and challenges stemming from consumption data that comes from ICO, and on how this data can be mapped onto strategic choices of product variety. We develop a simple analytical framework that illustrates the underlying mechanisms of a product supplier/producer׳s choice between (i) producing multiple product varieties as a way of meeting consumer demand (a “tailoring strategy”), and (ii) offering a flexible and standardised platform which enables consumers׳ needs to be met by incorporating personal ICO data into various customisable applications (a “platform strategy”). Under a platform strategy, the ICO data is independently produced by other providers and can be called on in both use and context of use. We derive conditions under which each of the strategies may be profitable for the provider through maximising consumers’ value. Our findings are that the higher the demand for contextual variety, the more profitable the platform strategy becomes, relative to the tailoring strategy. Our study concludes by considering the implications for SCM research and practice with an extension to postponement taxonomies, including those where the customer, and not the supplier, is the completer of the product, and we show that this yields higher profits than the tailoring strategy.