Modelling Cost from Customer Perspective and its Implications in Build-to-Order Systems

In the process of order fulfillment in build-to-order supply chain (BOSC), one of the most important problems in the corporations is how to improve the cost-effectiveness of BOSC while increase of customer satisfaction is achieved. Meanwhile, the explosion of e-business, especially the Internet-enabled supply chain mode, makes it more cost-effective for manufacturer and customers to interact with each other, and makes it more efficient for customer to understand his/her needs and to express them. However, existing literature to the cost modeling of BOSC is scant. Furthermore, some existing cost models of supply chain are from a perspective of corporation without or with little consideration of some customer factors-such as customer maturity-except customer preference, which is inconsistent with the fact that the present market full of informed and powerful customers is stepping into a customer-concentric and Internet-driven era. This paper has two contributions as follows: Firstly, it develops a cost model based on customer preference in build-to-order systems, from which optimal base product outsourcing policy is inferred. The policy may offer production managers some evidences for their decision-makings. Secondly, from a customer perspective, it shows a cost model involved customer maturity in build-to-order systems. We introduce level of customer maturity as an important independent variable, which is contrast to existing literature. One important inference from the model is that the increasing of customer maturity reduces corporation´s building cost and improves customer satisfaction. This may theoretically provide an explanation for the fact of increasingly close interaction between corporations and customers.