Spackling: Smoothing Make-To-Order Production Of Mass-Customized Products With Make-To-Stock Production Of Standard Items

Consider a mass customizer who produces multiple variants of a product in make-to-order fashion, and who also produces some standard variants as make-to-stock. The authors of this paper evaluate pricing and production issues from a joint marketing and operations perspective. Marketing determines prices while operations choose between three production strategies as it sets capacity. A key result is that under the logic-based assumption for the marketing model, it is optimal for all mass-customized products to be priced at the same absolute dollar markup, implying all add-on options are priced at cost.