Modular approach to product development not only helps in reducing the product development time but it also helps OEMs to cater to the customised needs of consumers in an effective manner. Modularity in process also helps OEMs to be more flexible in their business operations. NRI Consulting & Solutions takes a deep dive into the relevance of modularity in the automotive context.
Growth in the Indian automotive market has also been accompanied by maturity of consumers, who in turn have become more demanding. One of the most prominent changes has been the shortening of product life cycles (PLC) and the need to have a larger variety of products to cater to the different consumer segments. In addition, there are the large mega trends of electrification, shared mobility, autonomous vehicles and connectivity. All these factors make predicting when where and what the consumers will buy in future a challenging task. It is this VUCA (Volatile, Uncertain, Complex & Ambiguous) environment that has brought the spotlight on modularity in vehicles.
Modular approach to product development not only helps in reducing the product development time but it also helps OEMs to cater to the customised needs of consumers in an effective manner. Modularity in process also helps OEMs to be more flexible in their business operations.
MODULARITY AS A CONCEPT
Modularity is defined as the degree to which a system is made of independent but interlocking parts. Modularity in itself is a concept, which is applied in a wide range of applications, where there are complex and interconnecting systems. However, it is important to understand that a modular system is different from an integral system, (1). Modular system is made up of independent part clusters called modules and these modules are connected using standard interfaces, while on the other hand, an integral system is made up of independent parts linked together.
In the automobile industry, modularity was introduced with the idea of catering to the maximum number of customer solutions, while gaining maximum synergies across the product lines and product variants, (2). This highly useful concept of modularity is not just limited to design of products; it fits well in production as well as inter-firm systems, (3).
In production, the main production lines are divided into sub-lines that can be interconnected to create multiple line variants possible. It helps in using the same set of sub-lines to produce a variety of products, while keeping the material movement in check through cohesive modules. Similarly, modularity finds its applications in inter-firm systems, where the sub-lines can be made modular and moved outside the firm to take advantage of lower cost by suppliers or to gain from their specialised expertise.
PRODUCT DEVELOPMENT IN A MODULAR ENVIRONMENT
The transition of integral architecture into modular architecture calls for consideration of various external and internal factors affecting the product. An exhaustive study of all the requirements is imperative as it is difficult to remodel an already designed modular system. The module conceptualisation stage takes into account an overview of the external environment as well as an assessment of the current product portfolio before designing modules. Enabling conditions can be created by alignment of tools, processes and organisation structure with modularisation, (4).
1. External Environment Overview: External environment overview comprises market dynamics, competitor strategies and customer needs. Changes in the market scenario owing to technological upgrades and usage trends may affect product life cycle. Besides this, the introduction of new legislative norms or modifications in the existing ones also substantially affects the market. For example, the regulatory norms for emissions and safety are expected to bring about a significant technological change in the passenger vehicle segment, whereas for commercial vehicles, the newly announced axle load increase norms are resulting in new vehicle configurations. Thus, an understanding of market dynamics is crucial for module design. In addition to this, an organisation should also consider the offerings of its competitors along with the major cost and performance drivers. These factors, together with the changing customer requirements, give an overview of the external environment for product modularisation.
2. Portfolio Assessment: The ‘re-use vs re-create’ conundrum can be addressed through evaluation of the internal factors i.e. portfolio assessment of the firm’s product range, available technologies and competencies. Product families are defined by taking into consideration the market segments, functional requirements and price-performance mapping results. Growth opportunities for the existing and upcoming products are identified and thereby the total number of variants is computed. The identified growth opportunities help to understand how long the proposed vehicle platform will exist and thus help to determine the degree of modularisation.
The identified product families then undergo decomposition into systems, sub-systems and components. Design dependencies of these components are identified and the level of criticality for each of them is documented.
3. Module Conceptualisation: A common product architecture acts as an interface between modules and platforms and ensures easy interchangeability of modules across platforms without affecting other modules. In order to design product architecture, a design interface matrix for the components is constructed. In addition to this, a team interaction matrix for mapping the information network for modules across organisational teams is also constructed. The resultant matrix, obtained by merging the two matrices, evaluates the design dependencies and organisation boundaries by overlaying the multiple matrices and finally results in defining the product architecture, (6).
All interchangeable vehicle modules are aligned to certain commonly defined coordinates called anchor points. In case of an engine, the position of engine cooling supply and return line is fixed with respect to the engine. This ensures varying degree of cooling as different radiator sizes can be packaged with different engine sizes. Similarly, powertrain options with varying horsepower can be interchanged at the anchor points without changing the chassis design of the vehicle.
In a commercial vehicle, wheel base and rear axle configuration are the variable position modules whereas the cab, engine and front axle comprise of the fixed position modules with anchor points for other modules, (7).
4. Enabling Condition Creation: The transition from integral architecture to modular architecture requires enablers in the form of modifications in organisation structure and processes. A permanent cross-functional module design team needs to be formed, which comprises of experts from every technical area in the organisation. This team is responsible for development of modules for all products of the firm. Since modularisation leads to an increase in inter-functional dependency, it is imperative for every functional team to have a uniform understanding of the modular processes and their purpose. A well-defined rule set allows the organisation to keep control over the changes made in the modules as it will affect the entire product family.
Tools like standardised templates for analysing inter-component interaction and design flow analysis, IT systems and clearly defined processes enable structured flow of information. Data transparency on all modules enables maximum possible standardisation without creating redundancy. An effective inter-plant information network also needs to be established so that learnings from one plant are passed on to other plants of the organisation. Such structured flow of information would help in achieving greater flexibility and thus enhance the overall productivity of the organisation.
Modularity as a concept is multi-layered and, therefore, module targets viz. the product, the product development organisation, the division of labour and the division of knowledge are defined. Defining module targets helps in integrating modularisation into processes. In addition, a clearly defined governance structure, escalation process and budgeting process for module development are ways to align modularisation with processes.
IMPLICATIONS OF MODULARITY
Modularity has significant business implications across the automotive supply chain.
1. Cost Benefits: Modularity helps OEMs to achieve lower costs by allowing shared development costs and reduced production costs with shared tooling and processes, (8). With increased feasibility of component modification, there is an increase in the number of common parts across models, thereby lowering costs further through additional economies of scale. Also, supplier negotiations are simplified as there are lesser number of parts to deal with. Various OEMs have stated that modularity could lead up to 20-30 % reduction in cost of developing new products once it is fully implemented. This could result in significant competitive advantage for the OEMs.
2. High Product Variety: Incremental changes in module parts can result in varied product configurations. This allows OEMs to offer more product variants with same number of parts as compared to the integral architecture.
3. Shorter Time to Market: Along with lowered costs, OEMs could also be benefitted with a shorter time to market with up to 25-30 % reduction in new vehicle development time, (9). This is possible as modularity allows concurrent development of modules, incremental improvements in product, decoupled technology development and shorter time to test and validate. Thus, modularity can provide OEMs with a competitive advantage as it allows quicker adaptation of changing customer needs in dynamic markets and changing regulations.
4. Reconfiguring Supply Chain: Successful implementation of modularisation requires changes in the manufacturing arrangements between suppliers and OEMs. OEMs may decide on developing components or modular sub-systems from their suppliers, based on the degree of modularisation. In case of developing a sub-system, a modular consortium of suppliers can be established, wherein suppliers deliver components to the OEM assembly line and also provide labour for assembling them into sub-systems. Suppliers can also choose an alternate way to this arrangement, wherein they assemble components into sub-systems in their space and then deliver to the assembly plant of OEM. This practice is followed even today in some OEM plants.
5. Performance Improvement in Aftermarket: Modularity benefits the aftermarket with increased number of common spare parts, thus lowering inventory costs and simplifying processes, (10). Commonality of spare parts helps customers in two ways. On the one hand, it helps in achieving economies of scale in ordering as well as manufacturing of spare parts, which is transferred to customers in the form of lower spare prices. On the other hand, it reduces the inventory holding cost by customers such as fleet owners as the mix of spares in the inventory goes down. In addition to spares, modularity also reduces the overall service cost for customers. The cost saved through common service tools and reduced variety of service personnel training is usually transferred to customers in the form of lower service charges.
Growing economy, changing customer requirements and uncertain regulatory environment requires automotive OEMs to utilise the synergies among product variants to fulfil various demand requirements. Modularity is a very powerful concept and if implemented strategically, can provide significant advantage for automotive industry players, (11).
ASHIM SHARMA is Partner & Group Head at NRI Consulting & Solutions in Gurgaon (India)