A generic activity‐dictionary‐based method for product costing in mass customization

Abstract

Purpose

Estimating product cost at the design stage, often referred to as product costing, is vitally important in the product configuration process in the mass customization paradigm. There are three research streams in this field: analogous, statistical, and analytical methods. However, in a mass customization environment, these methods suffer the drawbacks of poor accuracy, low‐agility and an undesirable degree of detail. It is imperative to develop an efficient framework for product costing in mass customization. The paper aims to address these issues.

Design/methodology/approach

Activity‐based costing (ABC) becomes a new trend in product costing which alleviates the shortcomings discussed above. However, the complexity of ABC probably increases in mass customization with a high degree of variety. In this research, a framework is formalized for product costing in mass customization, in which a generic activity definition is proposed to simplify and catalyze ABC practice in high‐variety production. Moreover, an activity dictionary with a hierarchical structure is developed to bring commonality and modularity to the storage and retrieval of activity data.

Findings

A generic activity‐dictionary‐based method for product costing in mass customization is developed.

Research limitations/implications

The method proposed for product costing provides valuable cost data for product specifications, as well as the activities to create them. Therefore, a product configuration solution can be financially evaluated and optimized.

Practical implications

Based on the methodology proposed, a prototype system has been developed and implemented in a computer‐assembling company.

Originality/value

This paper alleviates the negative impact of activity variety on product costing.

Citation

Chen, Z. and Wang, L. (2007), "A generic activity‐dictionary‐based method for product costing in mass customization", Journal of Manufacturing Technology Management, Vol. 18 No. 6, pp. 678-700. https://doi.org/10.1108/17410380710763859