Modular Sourcing Improves End-To-End Supply Chain Efficiency

By Ram Venkataraju

Companies operating globally, in a wide range of markets, cater to various needs of customers, with different requirements.  This requires having the flexibility to offer a large variety of products, which increases complexity, costs, and efficiency.  Companies need to develop a strategy, to manage offering these wide varieties of products, with an increased standardization of components.

Traditional product design within product life-cycle management (PLM), focuses on integrating product requirements into design, but fails to address the need for variants without increasing complexity.

Modular design is an approach that enables the standardization of components, and facilitates offering a wide variety of product
phone cut away-1configurations.

A product with modular design is created by combining standardized components or modules that can be combined in different ways. Examples of systems with modular design include buildings, computers, cars and solar panels.

Modular sourcing is a sourcing strategy that allows companies to realize supply chain efficiency gains; through procuring standardized modules or sub-assemblies from suppliers. This will require development of standardized modules, during product development, and working closely with the suppliers to ensure module development is realized. Modularity benefits span the entire supply chain, as shown in Figure 1.

modular product architecture-3

Figure 1. Modularity Benefits

One of the critical aspects of modular sourcing is developing modules. Our approach to modularization of a product is defined in 5-phases as  shown in Figure 2.

Phase 1: Clarify customer requirements. Understand the primary objective of the company, to pursue modularization, and learn how modularization will help the company achieve its strategy and satisfy customers. Companies need to gather the voice of the customer and the voice of the business to guarantee that they are met via modularization efforts.

Phase 2: Select technical solutions. Translate customer requirements into functional requirements. Identify functions and sub-functions necessary to meet each functional requirement and develop a functional structure. Identify product components for each function and sub-function, and develop the overall product structure. Identify interfaces between each component within the product structure.

Phase 3: Generate concepts. With the product structure defined, and interfaces identified, identify modules based on ideas from standardization and variants, assembly processes, and feedback from suppliers.

Phase 4: Evaluate concepts. Evaluate the developed modules and alternatives, based on various factors, such as cost, flexibility of changes, and level of modularization. Evaluate how modularization will help the company achieve its strategy and meet customer requirements.

Phase 5: Improve each module. Evaluate if the current level of modularization will help the company achieve its strategy and continuously improve modules until the objectives are met.

Once modules are finalized, the supplier collaboration has to continue to ensure the supplier has the necessary processes and technology developed to make the modules.

modularization approach-1

Figure 2. Modularization Approach

CGN Global has worked with clients in heavy equipment manufacturing, to address their business imperative of improving product response time to the market, have a competitive and flexible cost structure and evaluate make vs buy strategy. We assessed the internal requirements and facilitated workshops to evaluate a make vs. buy strategy, cost breakdown, product design, assembly processes and supplier footprint, and generated modularization ideas by working with various functions including engineering, manufacturing, purchasing, logistics and suppliers.  Ideas were generated and project teams were established to execute ideas that include modular design and sourcing, resourcing for supplier base consolidation, assembly process improvement, and material cost reduction. Modularization efforts resulted in reducing time to market by 12%, 6% total cost reduction and 15% supplier reduction.

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