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

Jukka Uskonen, Antti Tenhiälä*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

18 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)420-429
Number of pages10
JournalInternational Journal of Production Economics
Volume135
Issue number1
DOIs
Publication statusPublished - Jan 2012
MoE publication typeA1 Journal article-refereed

Keywords

  • Activity-based costing
  • Customization
  • Uncertainty

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