The price of responsiveness: Cost analysis of change orders in make-to-order manufacturing

Jukka Uskonen and Antti Tenhiälä

International Journal of Production Economics, 2012, vol. 135, issue 1, 420-429

Abstract: The ability to produce goods according to customers' specifications may be an important competitive advantage, but it exposes manufacturers to the risk of customers requesting changes in their specifications during the fulfillment of their orders. Manufacturers often accept these change orders in the name of customer service despite the fact that they incur additional costs. This study uses empirical data and activity-based costing to explore the real values and the accrual mechanisms of change orders' costs. The results show that the total costs are considerable, but the analyses also reveal opportunities for cost savings through the categorization of change orders, time fencing techniques, and improvements in information processing.

Keywords: Customization; Uncertainty; Activity-based costing (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:135:y:2012:i:1:p:420-429

DOI: 10.1016/j.ijpe.2011.08.016

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