Design of Coproductive Systems: is Service Modularity Preferable over Resource Flexibility?

Flexibility is a critical process competency for delivering mass customized services. Coproduction systems involve the customer as a productive resource alongside the firm’s resources to co-create this customized service. This study analyses the performance and applicability of resource flexibility and service modularity for the design of such 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. We employ a suite of simulation modelling tools towards this purpose. 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. Our 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, our results show that pure strategies are superior to mixing components from the two alternatives and we 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.