SIMPLIFYING COMPLEXITY Leveraging modularity in the industrial equipment industry

Modularity allows manufacturers to deliver a highly diverse product line while avoiding the complexity of engineered-to-order processes. For more than 15 years, Modular Management has helped industrial equipment (IE) companies apply modularity to their product development. With interest in modularity on the rise, Compass spoke with Alex von Yxkull, president and CEO of Modular Management, and Johan Källgren, partner, on the challenges of modularization.

Compass: What are the major trends for companies in the IE industry?

A. VON YXKULL: Over the years, demand for diversity has become greater and greater. Everyone wants to have their unique feature or unique design, and this has created a lot of complexity for companies. The trend we are seeing is that IE companies put too many engineering hours into developing each individual product. Providing customers with unique products reduces their margin, increases costs, and eventually consumes their profits. The complexity created by this engineered-to-order type of approach is costly not only for engineering, but for purchasing, quality management, and other peripheral activities. It negatively affects a company’s potential.

J. KÄLLGREN: Another challenge for IE companies is to get into their client’s process as early as possible so that they can suggest design improvements or convince the client to use their type of equipment. In this way, lead times go down for everyone, and customers obtain a more cost-effective price than if everything is specifically tailored for them.

Since these modules are predefined, IE companies can bring this to the table early during their customer’s specification process and spend more time on innovation and quality improvements. From a competitive point of view, this is a huge step. It is a game changer that propels IE companies into another league.

90%

By developing a modular architecture, MTS Systems Corporation reduced overall part numbers by 90%.

Which companies are not good candidates for modularity?

J.K: Manufacturing companies across the whole scale from one-off to mass production can benefit from modularity. Examples range from ABB Power Systems, which builds one-off power plants, to Whirlpool, which manufactures 100,000-plus of a model. However, modularity can greatly benefit companies where there is a level of complexity or a higher rate of innovation in the product assortment. Many IE companies fall into this category, which makes them ideal candidates for modularization.

We see many examples of companies that have made spectacular improvements thanks to modularity. One example at MTS Systems Corporation, producers of mechanical test equipment for the automotive, aerospace, construction and biomedical industries, involves the design of their servo hydraulic load frames. By developing a modular architecture for the frames, they reduced overall part numbers by 90%, from 11,000 unique part numbers required to build 150 unique product variants to only 800 unique part numbers required to build more than 100,000 unique product variants. It’s a marvel of design efficiency.

“Modularity can greatly benefit companies where there is a level of complexity or a higher rate of innovation in the product assortment.”

Johan Källgren Partner, Modular Management

Why all the recent talk about modularity? Why has this not been more prevalent in the past?

A.v.Y: Even though some companies, like Volkswagen, embraced modularity more than 20 years ago, implementing modular architectures has only recently become a more accepted strategy. People are more confident with this approach because they see that it brings results. Why has this not been more prevalent in the past? Because “modularization” could be a long and difficult journey if not done in the right way. Companies must have a long-term view of their business and make big investments. They need to engage all their key cross-functional players to reap the full benefits of modularity. It takes managerial courage and a bold management team to make this decision in year zero and to have to wait until year two or three to see any benefits.

What should a company that is thinking of going modular take into consideration before making a decision? What are the key success factors?

A.v.Y: To begin with, companies must have a very clear vision of where they want to go and how modularity can help with that. Leadership needs to understand the cross-functional monetary value in the supply chain, in R&D, in sales, and top management and build a real strategy around modularity. The decision to go modular has to be anchored at the very top of the corporate ladder. This is not something that should be left in the hands of R&D. R&D can design it, but they cannot define it themselves.

The second success factor is to understand your customer. If you start from a technical point of view – in R&D for example – you cannot reach the market with the right offering. If companies do not understand how to build this configurable architecture in the right way, it can lead them down the wrong path.

What showstoppers do OEMs need to address when speaking to IE prospects about going modular?

J.K: The shift to modularization can be difficult. Top management needs to understand the value of going modular. They have to dedicate resources within their organization to execute a program like this. Without this resource commitment, it would be inadvisable to continue.

What are the foundations for a successful partnership between a customer and a modular solution consultant?

J.K: The consulting company is a facilitator that helps the client make the transition to modularization. There has to be mutual trust. Another aspect is executive sponsorship: having a voice that keeps top management informed, addressing questions on a daily basis, showing the results of modularization as things progress, and laying the foundation for subsequent phases. Having executive sponsorship helps keep the momentum to continue this journey to successful completion. So I guess we can sum it up in three words: commitment, sponsorship and trust. These are the keys to success. a sustainable success as companies having established modular architectures typically enjoy much higher profitability than the competition for many years.

Modular Management

In the early 1990s, a team of dedicated researchers at Stockholm’s Royal Institute of Technology and IVF* began investigating the drivers behind modularization and how it was being successfully employed in product design, development and marketing by a number of companies including Sony, Honda, and Scania. Using their research, the team built a working model for approaching and implementing modularization in an organized, effective way.

That model, and its successful testing, formed the basis of Modular Management’s formation in 1996 as a product development consulting firm and still constitutes the core of the firm’s operations. Today Modular Management has offices in Sweden, the United States and Asia, and provides product development services to customers in Europe, North and South America, India and China. Over the course of 20 years, the initial research project evolved into a powerful tool for companies to reach their full potential through the use of modularity.
*The research institute for Sweden’s engineering industry

by Dora Laîné Back to top
by Dora Laîné