Utilizing additive manufacturing and mass customization under capacity constraints

Abstract

AbstractAdditive manufacturing (AM), originally used for prototyping, is increasingly adopted for custom final part production across different industries. However, printing speed and production volume are two barriers for the adoption of AM for product customization at large scale. Nevertheless, manufacturers could aim to combine the benefits of AM for product customization with traditional mass customization (MC) technologies over the product life cycle (PLC). This approach is showcased in our paper as a manufacturing opportunity and is addressed via a non convex-concave optimization model that considers a monopolist manufacturer producing horizontally differentiated products at scale. To satisfy individual customer preferences under capacity considerations, the firm jointly decides on the inventory, production quantity, product variety, optimal technology-switching times (between AM and MC) and pricing strategy. Our approach can be implemented by decision-makers to leverage customer-centricity and benefit from this novel hybrid manufacturing practice. By deriving a closed-form solution for the production quantity based on an adaptive inventory policy, the resulting optimization problem is solved using the Sample Average Approximation framework grounded by analytical results. Our results demonstrate that the new usage of AM with MC can benefit a manufacturer for customer-centric driven strategies. Significant profit improvements can be achieved with an AM–MC–AM technology-switching scenario under certain capacity conditions and with an increasing-decreasing pricing strategy. Our results also indicate that the benefits of pricing flexibility are highest when capacity is unlimited or when the firm does not hold inventory. Under capacity constraints, a simple decreasing pricing policy combined with inventory performs very well.