Modularity, component outsourcing, and inter‐firm learning

Abstract

Modularization of product architectures is a strategy for managing complex design activities and production systems, and associated supply chain issues. It has wide‐reaching implications, from design engineering to business strategy. With standardized interface specifications, component outsourcing is possible, both with respect to the division of tasks in functional specification and detailed engineering of a product architecture. However, failure at the system level could still take place if interface compatibility issues of the outsourced component with the rest of the system are not understood. Outsourcing creates a certain degree of supplier‐buyer interdependence and possibilities for inter‐firm learning. A study of Chrysler Jeeps WIPERs suggested that learning‐by‐failure from one product architecture cultivated closer cooperation between the supplier and Chrysler to solve technical problems as well as to be innovative in searching for the best technological solutions for future product architecture designs.