On the link between modularity and cost-a methodology to assess cost implications of product architecture differences

Abstract

Modularity has received renewed interest as a product design strategy to accommodate the competing goals of low cost and high levels of variety and flexibility. Modularity has been associated with numerous advantages for firms and customers, including faster product development, greater product variety, and allowing customers to customize products. However, there is a lack of clear understanding of the cost implications of modularity. One reason for this gap is the use of the term 'modularity' for similar, yet often slightly different, phenomena in different contexts, disciplines, and industries. Consequently, modularity is very difficult to operationalize. This paper presents a methodology to address this problem. Arguing that modularity is actually a bundle of product characteristics rather than a single dimension, the method proceeds in three steps. First, unbundling modularity into multiple dimensions of the product architecture allows one to comparatively measure the differences among products along the individual dimensions. Second, building on process-based cost modeling tools, a cost estimation procedure calculates the product costs for the selected life cycle or supply chain phases. The third step links the cost differences to individual product architecture differences. These links can improve the understanding of how individual dimensions of the product architecture affect different costs along the supply chain. A case study of automotive doors is used to demonstrate the methodology.