As manufacturing practitioners we constantly assess our production numbers and quickly see that 80 percent of our volume comes from 20 percent of our customers, part numbers etc … or so we think. But imagine the following;
We’re stuck in a hit-driven mindset – we think that if something is not a hit, it won’t make money and so won’t return the cost of production. We assume, in other words that only hits deserve to exist. But executives at iTunes, Amazon, Netflex and even e-Bay have discovered that “misses” usually make money, too. And because there are so many of them, that money can add up quickly to a huge new market.
The concept of the Long Tail is the part numbers and customers that we continue to support yet represent minimal volume individually. However we know that lower volume allows for greater margins if you can supply the needs effectively.
What’s amazing about the Long Tail is the sheer size of it. Take Books: The average Barnes and Noble book store carries 130,000 titles. Yet more than half of Amazon’s book sales come from outside its top 130,000 titles. Consider the implication: If Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is larger than the market for those that are. In other words the potential book market may be twice as big as it appears to be, if only we can get over the economies of scarcity.
The article provided by Tim written by Chris Anderson for Wired Magazine looks deeper at the Long Tail. http://www.wired.com/wired/archive/12.10/tail_pr.html . Although the article really speaks about the entertainment industry is has strong potential in traditional manufacturing. It takes me back to an earlier stage in my career with Warner Brothers where a futurist discussed the future or entertainment distribution, where customers would be able to download specific tracks on demand … well guess what, remember purchasing those old 45’s? Today the sale of single tracks of music is at an all time high with customers being able to download a single track for 99 cents.
So if we look at the ability to support mass-customization to satisfy specific customer traits the leverage between Lean Enterprise and the Long Tail could be the key to success for North American Manufacturing.
Long Tail business can treat customers as individuals, offering mass customization as an alternative to mass-market fare.
Such is the power of Long Tail …
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