Operation strategy deals with how and where a product is manufactured. There are mass-production, modular production and mass-customization. These are the three common methods of producing a large number of goods or services. Modular production applies to automobile industry almost exclusively, but there are also application in any industry that reuses a complicated design for their product. For example, new houses are mass-built with what’s called a cookie-cutter design.
Meanwhile, most products are produced under mass-production. For example, yellow HB pencils are produced in batches of large quantity and sold in boxes. This is a standardized product which is always in demand. The most common operation strategy for this type of product is mass-production.
However, if mass-customization is used, it can spark new interests and attracts new target markets. If customers can choose to customize the outside color of the pencil to be any color they want, or if they can have their names printed on the side of the pencil, it would be an interesting marketing strategy. Mass-customization’s down side is that it raises costs and unpredictable. It is difficult to budget for mass-customization because the quantity demanded of the product is not known before hand. With mass-production, cost is low because it is standardized. There is only one color ink used for the coat of the pencil, therefore it is easy to budget. In mass-customization, however, there are many colors to choose from, but the manufacturers do not know how much blue would be used for example. The more options to customize, the more costs to keep track of perceptually.