Design of Coproductive systems: Is Service modularity preferable over Resource flexibility?

Journal: Global Journal of Flexible Systems Management

Synopsis:
Companies are increasingly pioneering new competitive business models of mass customized services to craft a unique positioning in the market. Coproductive models are gaining traction to deliver such customized services. Coproduction systems involve the customer as a productive resource alongside the firm’s resources to co-create this customized service. Flexibility is a critical process competency for the delivery of customized services. Prior studies have analysed multiple types of flexibilities in various business contexts.

However, studies on the role and types of flexibilities involved in the design of coproduction systems are relatively sparse. This study analyses two alternate types of flexibilities viz. Resource flexibility and Service modularity and their operational implications in the case of coproduction systems. Particularly it examines the role of level of coproduction, positioning of the customer performed activities in the process flow, and the interplay of level of coproduction with other system parameters in selecting the design alternative.

This study employs simulation modelling, using ARENA package, to obtain the performance measures of the two alternative design strategies in action. The empirical parameters for the system that is modelled are from a leading wealth management company based out of India, where the authors had access to rich data. Although motivated from their context, the model is kept fairly generic, in order to study the operational impact on companies following any business model involving partial coproduction.

Contrary to popular belief, the results indicate that the dominance of the resource flexibility strategy is not absolute for coproductive systems especially when costs are considered. Service Modularity strategy is preferred for systems with higher levels of coproduction and when customer-performed tasks are positioned in the middle of the process flow. The sensitivity analysis shows that not all service providers implementing a resource flexibility strategy can respond in the same way to changes in system conditions.

When resource costs are considered, there exists a zone where the sensitivity demonstrates a perverse effect. Furthermore, the study results show that pure strategies are superior to mixing components from the two alternatives and the authors characterize their preference in the form of a single threshold policy. The insights from this study will also be of interest to practitioners designing and managing coproductive systems.

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