Is Adopting Mass Customization a Path to Environmentally Sustainable Fashion?
42 Pages Posted: 28 Oct 2020
Date Written: September 1, 2020
Problem definition: In high-product-variety businesses like fashion, mass production systems create environmental waste in the form of overproduction on a colossal scale. Mass customization has been proposed -- without solid evidence -- as a solution. In this paper, we analyze whether mass customization can indeed offer a win-win solution that helps both the bottom line and the environment. We also study the impact of three real policy options: promoting mass customization, charging a disposal fee for overproduction, and recycling.
Academic/practical relevance: There is increasing interest in mass customization of fashion goods, not only because consumers value customization, but also because mass customization is perceived to be environmentally friendly. Our paper puts this advocacy for mass customization to test. We contribute to the literature, which has been largely silent on the issue, by uncovering when mass customization offers a win-win and relating such market outcomes to policy ideas.
Methodology: We develop an analytical model of a mass producer firm adopting mass customization (going hybrid). The firm’s profit-maximizing variety, price and inventory decisions then form the basis of our understanding the environmental impact of adopting mass customization and assessing various policy options.
Results: Adopting mass customization is a win-win in many scenarios, e.g., high (moderate-to-low) product value and moderate-to-high (moderate) product variety cost. Surprisingly, going hybrid can also increase overproduction and hurt the environment. Our policy analyses of the hybrid firm reveal that: promoting mass customization may not always help (in moderate- and low-value-product cases); charging a disposal fee for overproduction does always help; and recycling helps only if it is costly on a per unit basis (and not necessarily if profitable).
Managerial implications: Mass customization can be a win-win, but it can also backfire on the environment. Policy interventions must be carefully thought through because some may have unintended consequences.
Keywords: corporate social and environmental responsibility, mass customization, make-to-order, mass production, make-to-stock, overproduction, pricing, product variety, fashion industry
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