May 19, 2013 5:21 pm

Building blocks to cut output costs

When Audi’s new A3 compact rolled off a production line in southern Germany last year, it became the first of as many as 40 new models that will be built using Volkswagen’s new modular architecture.

As it strives to become the world’s biggest carmaker by sales, VW is lowering production costs and boosting commonality across a growing portfolio of diverse brands, while trying to avoid the pitfall that its cars end up looking the same.


Benefits of modular production

It has alighted on the use of common, interchangeable modules – such as the crankshaft, bonnet or infotainment system – that can be assembled in a bewildering number of combinations.

In contrast to the rigid car platforms of the past, VW’s modular system maintains only a few design parameters; for example, the mounting position of the engine. VW is also spending billions of euros redesigning the tooling, processes and layout of its car plants. “With the modular production toolbox we will in the future be able to build different models and different brands on the same production line,” VW says.

Pioneered by Swedish truckmaker Scania several decades ago, modularity is now spreading beyond the automotive sector to fields as diverse as capital goods, energy, consumer electronics and white goods, as manufacturers seek to get to grips with the complexity of producing for global markets.

By piecing together a product from common building blocks or subsystems linked together by standardised interfaces, modularity allows manufacturers to preserve flexibility and build differentiated mass-produced products.

Alex von Yxkull, chief executive of Modular Management, a consultancy, says: “Scania understood the need to reduce complexity but still meet the requirements of the market.”

Scania’s high profits have long been the envy of the industry and producers of cars, trucks, and consumer goods are keen to learn the source of that success.

Siemens, the German engineering company, is following Scania’s lead by piecing together its wind turbines from modules: the blades, a hub, a generator, a nacelle, a tower and a power unit.

Each of the modules can then be divided up into identifiable submodules which are individually testable before installation and can be installed independently.

Henrik Stiesdal, chief technology officer at Siemens’ wind division, explains: “These [modules] need to be genuinely independent and interchangeable – the planes of separation needs to be uniform. You can use different blades but the mating surface needs to be the same.”

Proponents say a big reason to implement a modular strategy is that standardised, homogenised products do not satisfy diverse and demanding global customers; one size does not fit all.

US consumers demand larger refrigerators than their European peers, and their trucks look totally different because of local regulations on length. Meanwhile, China’s emerging elite favour “stretched” saloon cars, for example.

Encompassing Mercedes-Benz in Europe, Freightliner and Western Star in North America, Fuso in southeast Asia and BharatBenz in India, Daimler’s portfolio of trucks brands must satisfy regional driver and fleet operator needs as well as varying emissions and size regulations. Daimler is therefore implementing a modular strategy to help it preserve those varied characteristics whilst maximising economies of scale.

“Commonality is not an end in itself. You have to balance specific regional and customer needs with commonality and scale effects from platform-sharing,” says Frank Reintjes, head of global power train, procurement and manufacturing engineering at Daimler Trucks.

Daimler chose to focus initially on the power train, the mechanism by which power is transmitted from an engine to an axle, as this accounts for more than half of the value added in a truck. Its heavy duty engine platform has already been launched across the North America, Europe and Asian truck brands. In a second step it is now working on standardising transmissions. A decade ago Freightliner trucks used a variety of heavy duty engines provided by external suppliers – now more than 80 per cent are supplied by Daimler.

If done correctly, the consumer should remain unaware that underneath the surface, products contain a lot of common components.

Electrolux, whose household appliances range from dishwashers, to refrigerators and cookers, started a modular approach in 2009. This is designed to increase the number of common components used across its various brands and products but not at the cost of homogenisation or enforcing rigid product dimensions.

In the white goods industry, common cabinets, as well as technology and electronics such as fluid flow, heat exchange, electric motors and compressors, can be used across a range of products such as air conditioning units, ovens and fridges.

Electrolux aims to cut the time from innovation to product launch by 30 per cent by 2015.

“Our strength is being able to deliver differentiated products for various regions and brands that are geared towards consumer preferences,” says Jan Brockmann, chief technology officer at Electrolux.

Modularisation also has big implications for the supply chain. In the motor industry, suppliers must scale up to serve global car platforms.

At Siemens, which produces about 1,500 wind turbines a year, Mr Stiesdal says the system makes it easier for Siemens to decide what it needs to make and what can be outsourced.

Suppliers are invited to bid for particular submodules and are given freedom so long as they fit the basic requirements.

Siemens’ factories may no longer need to produce entire wind turbines – the various modules could in theory be assembled on the field where it is being installed.

“It is very likely that a complete wind turbine will in the future be delivered in three pieces from three different factories in the world and they will work perfectly together when put together at the site,” says Mr Stiesdal.

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