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002-0201

Modularisation and Its Limitations in the Automobile Industry

Second World Conference on POM and 15th POM Conference, Cancun,

Mexico, April 30 – May 3, 2004

Peter R. Knittig Sophia University

7-1, Kioi-cho, Chiyoda-ku, Tokyo 102-8554 , Japan

Phone: +81-3-5499-5199, Fax: +81-3-5499-5199 E-mail: [email protected]

Shinji Shimizu Department of Mechanical Engineering

Faculty of Science and Technology Sophia University

7-1, Kioi-cho, Chiyoda-ku Tokyo 102-8554, Japan


Robert J. Ballon Sophia University

4 Yonbancho, Chiyoda-ku Tokyo 102-0081, Japan


Modularisation and Its Limitations in the Automobile Industry

Peter R. Knittig Sophia University, Japan

Shinji Shimizu

Sophia University, Japan

Robert J. Ballon Sophia University, Japan

Abstract

The purpose of this paper is to evaluate the recent approaches of automobile manufacturers

pertaining to modularisation and to assess the limitations of such modularisation strategies.

At the outset, the conceptual framework of modularisation is clarified and present

modularisation strategies in the automobile industry are classified. This classification reveals

that carmakers are pursuing different intentions by implementing modularisation, depending

on the area of application. Definitely, the modularisation approaches initiate significant

changes with regard to car design, production, use, retirement, and the organisational struc-

ture in the automobile industry. Besides the undeniable advantages, modularisation strategies

are also subject to certain limitations. In particular, modularisation potentially results in

higher design and development costs, converging car designs, increased production costs,

loss of industrial leadership of carmakers, higher burdens on end-customers, and increased

retirement costs. Consequently, modularisation strategies in the automobile industry have to

be adopted cautiously, considering its far-reaching limitations.

2

1 Introduction

In the last few years, the automobile industry has been increasingly interested in the

concept of modularisation. In fact, automobile manufacturers pursue modular assembly al-

ready for a considerable period of time, mainly in order to take complex and ergonomically

demanding tasks off the main assembly line. These days, carmakers set out to outsource the

assembly of these modules in order to reduce internal costs. Soon automobile manufacturers

could move on to link the idea of modularisation-in-production to modularisation-in-design.

However, respective initiatives are still adopted individually by each carmaker and a possible

industry-wide coordination of modularisation efforts cannot be predicted.

Research studies on modularisation strategies in the automobile industry have mainly

focused on modularisation-in-design. For instance, Baldwin and Clark [1] developed a theory

of design and industrial evolution. In particular, they argue that the computer industry experi-

enced significant growth and innovation only because it embraced the concept of modulari-

sation in designing complex products. Kamrani and Salhieh [2] introduced mathematical and

genetic algorithm models to product and system design based on the concept of modularisa-

tion. The International Motor Vehicle Programme (IMVP) at the Massachusetts Institute of

Technology (MIT) embarked on several studies [3] on the contents and influences of modu-

larisation on the automobile industry. Specifically, in the preliminary report of the European

Research Team [4], researchers at MIT focused on modules used in doors and cockpits and

pointed out future perspectives for the automobile as well as the parts industry.

Despite the relatively wide range of literature available, most of these research studies

focused only on one or two areas. However, modularisation has been adopted at more areas

in the automobile industry and its definition is also not clear. Moreover, the studies mainly

discussed the positive impact of modularisation on the automobile industry, but they did not

consider its possible limitations to carmakers, parts suppliers, and end-customers.

3

Therefore, in this paper, at first, the core concept of modularisation is clarified and pre-

sent modularisation strategies in the automobile industry are classified. Based on this classifi-

cation, the intentions and outcomes of present modularisation initiatives in each area are

evaluated and the limitations of modularisation in the automobile industry are identified.

2 Conceptual Framework and Classification of Modularisation

Complex integrated systems can be transformed into simpler modular systems through

use of abstraction. Multifaceted systems like an automobile are too complex to be managed

efficiently. However, by splitting such systems into smaller units, i.e. modules, and by con-

centrating on each unit/module individually, the system complexity becomes controllable.

Simultaneously, the system architecture is being created, as indicated in Figure 1, which de-

scribes how modules can be combined in a product. In this respect, modules are units, which

work together by being structurally independent from another.

Figure 1. Conceptual Framework of Modularisation

Integrated System Architecture

Abstraction

Module A

Hardware

Information

Module C

Hardware

Information

Module B

Hardware

Information

Modular System Architecture

Interface

This simplified representation allows hiding the complexity of design parameters be-

hind modules. This hidden design parameters are relatively easy and inexpensive to change as

they affect only the respective module.

4

Finally, modules have to be connected to each other by the use of interfaces. In this re-

spect, interfaces specify the links to each module and specify how the module interacts with

other modules. It is possible, for instance, to attach different navigation systems to a car. The

interface consists of two main parts: the interfaces for hardware and information. Thus, inter-

faces contain a certain set of specifications and visible information. These visible design pa-

rameters are very difficult and costly to change, since they are fixed already in the beginning

of a module design task.

Modularisation is not a recent notion. Already in 1914, an automotive engineer sug-

gested to use standardised sizes for automobiles. Again in 1965, Starr proposed modular pro-

duction as a new concept in order to offer product variety at low costs [5]. Since then, various

definitions of modularisation have been developed. For instance, Baldwin and Clark regard

modularisation as a “particular design structure, in which parameters and tasks are interde-

pendent within units (modules) and independent across them” [6]. Takeishi and Fujimoto, on

the other hand, underline that modularisation “entails having larger units in sub-assembly and

also often involves outsourcing these sub-assemblies to suppliers” [7].

Thus, a common definition of the term modularisation does not exist. In addition, the

definitions are mainly developed from the viewpoint of design and production. However,

modularisation has been adopted at more areas in the automobile industry. Therefore, it is

necessary to develop new definitions by classifying modularisation according to the life cy-

cle, as shown in Figure 2. In the automobile industry, modularisation can be classified into

modularisation-in-design, modularisation-in-production, modularisation-in-use and modulari-

sation-in-retirement.

Modularisation-in-design is defined as choosing the design boundaries of a product and

of its components so that design features and tasks are interdependent within and independent

across modules. Modular products can be created through a process of modularisation. This

5

process requires designers to partition design parameters into visible and hidden design rules.

Visible design rules must be established before module design, while the module designer

can establish hidden design parameters later.

Figure 2. Classification of Modularisation

Modularisation-in-DesignDefinition: Decomposition of a vehicle

into constituent design parts

Driven by: Automobile ManufacturersGoal: Minimising of communication

efforts and reduction in development time and cost.

Modularisation-in-ProductionDefinition: Off-line pre-assembly of

components into modules with the subsequent incorporation into main assembly line

Driven by: Automobile ManufacturersGoal: Reduction in production

complexity, cost, and lead-time.

Modularisation-in-UseDefinition: Decomposition of a vehicle in

order to satisfy consumers’requirements

Driven by: ConsumerGoal: Ease of use and ease of main-

tenance, low initial and replace-ment costs, and individuality.

Modularisation-in-RetirementDefinition: Ability to easily separate

hazardous materials Driven by: GovernmentGoal: Compliance with environmental

regulations and improvement of recycling and re-use efforts for used vehicles

Module definition may change

Modularisation-in-production refers to the ability to group a large number of compo-

nents into modules and then to incorporate these pre-assembled modules into the main as-

sembly line through a small and simple series of tasks. Modules are predominantly under-

stood as assembly modules. Ease of connection and the combination of components to mod-

ules play a key role in defining assembly modules.

Modularisation-in-use is the consumer-driven decomposition of a product with a view

to satisfy ease-of-use and individuality. In particular, modularisation-in-use in the automobile

industry refers to consumers buying a car by matching and mixing modules such as sunroofs,

sound systems, wheel trims, etc. to suit their needs. Module definitions in this area mainly

focus on function containment and interface characteristic. Furthermore, the initial and re-

6

placement costs of modules and the ease of maintenance are the major drivers for the pur-

chase decision of consumers.

Modularisation-in-retirement refers to the ability to easily separate hazardous materials.

At present, this modularisation activity is mostly government-driven in order to obey envi-

ronmental regulations, requesting the separation of hazardous materials and proper recycling.

In this respect, modules aim, for instance, at using as few different materials as possible.

3 Intentions and Outcome of Modularisation

Automobile companies are applying modularisation strategies for several reasons. We

will evaluate and assess the different intentions and outcomes of modularisation strategies in

the following.

3.1 Modularisation-in-Design

Carmakers look for modularisation-in-design in order to make the overall task of de-

signing a complex vehicle manageable. To do so, vehicle designers split the car into control-

lable modules, and module designers work within the boundaries of the module. The aim is to

reduce the communication effort among modules and to evenly distribute the risk of devel-

opment efforts between module and vehicle designers. The communication effort, however,

is influenced by the nature of the interfaces. Only, if the dependency between modules is low,

the different design teams are able to work simultaneously and independently from each

other, leading to a reduction in the overall development time.

Furthermore, modular designs may initially lead to a reduction in the number of com-

ponents and interfaces necessary to complete the design task, as shown in Figure 3. While in

a modular product architecture only one function shall be attached to a certain module, in an

7

integral product architecture, several functions can be attached to a component. The reduction

in complexity concurrently leads to a reduction in development costs.

Figure 3. Integral vs. Modular Product Architecture in Design

Integral Product Architecture

Component(Function A, B, D)

Component(Function B, C, D)

Component(Function A, C, D)

Component(Function A, D)

Component(Function B, C)

Component(Function C)

Modular Product Architecture

Module A(Function A)

Module C(Function C)

Module B(Function B)

Module D(Function D)

Accordingly, modular designs allow designers to split systems into modules and later

on to exchange one module for a better version of the same module. The more the modular

design evolves, the more designers are using different methods to improve the system. For in-

stance, designers can enhance the system by adding new modules or subtracting obsolete

modules. Furthermore, if previously hidden information in a module evolves into informa-

tion, which solves general problems of the whole system, then this information can be trans-

formed into visible information. This process is called inversion [8].

By combining modules in different ways and by adding and subtracting modules, de-

signers are able to create a huge number of product variations. The design quality may also

improve when switching from an integral design to modular product architecture since mod-

ule designers focus on and specialise in their respective modules, reducing the failure prob-

ability significantly.

Additionally, development costs are highly responsive to changes in production vol-

umes, since development costs are one-time product costs. As a result, the more units are pro-

8

duced, the lower the unit development costs will become. The use of modular designs may

allow better sharing of modules of a product with those of other products, leading to a more

significant reduction in unit development costs.

3.2 Modularisation-in-Production

Manufacturers have been using modularisation-in-production to simplify complex pro-

duction processes already for decades. Automobile manufacturers routinely arrange to manu-

facture the components of an automobile at different sites and bring them together for final

assembly. The intention of carmakers is to reduce the in-line complexity by shifting complex

parts off the main assembly line to sub-assembly lines. This pre-assembly of complex parts

and the succeeding incorporation of these parts into the main assembly shorten the main line

itself.

The outcome of modularisation-in-production is significant, leading to increased flexi-

bility of assembly plant utilisation, a reduction of production lead-time, improvement of as-

sembly process ergonomics, and the possibility of separate testing of modules. The separate

testing of modules may lead to higher overall product quality, since failures and malfunctions

are eliminated before the modules are incorporated in the final vehicle. The improved ergo-

nomics increases worker satisfaction, which in turn, positively affects production efficiency.

The modular assembly of products allows creating variety by using a relatively small

number of modules in different combinations. Hence, product variety is based on flexibility,

i.e. the flexible combination of modules to final products. Depending on the number of mod-

ules and the number of variations per module, product variety can differ greatly. For instance,

if the product is composed of just 2 different modules with 5 varieties of each module avail-

able, then there are 25 (52) different combinations possible. However, if the product consists

of 5 modules with 10 varieties of each module available, then the product can be produced in

9

100,000 (105) different combinations. The highest level of product variety and flexibility can

be accomplished by relying on assembly of pre-manufactured modules.

Furthermore, automobile manufacturers combine modularisation-in-production often

with outsourcing. Carmakers urge this development in order to profit from the technological

competitiveness of suppliers and to manage without direct investments and expensive re-

search efforts. Module suppliers usually have superior and specialised resources and are thus

better positioned to develop new technologies. The trend towards modularisation and out-

sourcing intensified the merger and acquisition activities in the supplier industry in order to

serve the increasing modular needs of the automobile manufacturers.

Moreover, among carmakers outsourcing is often regarded as a means to improve prof-

itability by taking advantage of cost and asset advantages of outsourced modules. Since mod-

ule production is shifted to suppliers, automakers can reduce costs, i.e. material, plant, capital

costs, as well as assets. For instance, Chrysler has slashed capital requirements for their truck

plant in Brazil by having module suppliers like Dana Corporation and Lear Corporation pro-

vide the capital for their modules. By doing so, automakers try to push the risk of investment

in dedicated assets onto suppliers. The module suppliers, on the other hand, may reduce the

asset specificity of their tooling investments to be able to adjust their equipment easily to new

product modules.

3.3 Modularisation-in-Use

The major objective of modularisation-in-use is to satisfy increased customer demands.

Hence, the major driver for modularisation-in-use will not be the automobile manufacturers;

rather it will be driven by consumer demand and the way, consumers require a specific set of

features for their vehicles. By fulfilling consumer requirements, automakers may eventually

launch built-to-order and mass-customised automobiles. However, this development is only

10

feasible if automobiles are assembled from modules. As verified above, modularisation-in-

production allows automobile manufacturers to offer a wide variety of products in extremely

short lead-times. As a result, the concepts of built-to-order and mass customisation automo-

biles will significantly reduce inventory and costs since cars will only be built when ordered.

Cost reductions will be even higher, if automobiles are sold via the Internet since sales pro-

motion activities and costly dealerships could be significantly reduced. After all, modular

automobiles may also ease maintenance work and maintenance costs due to fast and easy ac-

cess and exchangeability of modules, being advantageous for customers as well as carmakers.

3.4 Modularisation-in-Retirement

The intention behind modularisation-in-retirement is based on environmental aspects

and motivated by governmental regulations. The automobile industry has already improved

their efforts to create “green” cars, which can easily be taken-back, dismantled, and recycled.

A modular product architecture may be advantageous, since modules could be effortlessly de-

assembled for re-use, could serve as spare parts, or could be transformed into different use.

This would increase recycling and re-engineering efforts considerably, but could also in-

crease the productivity of automakers, since used parts can be re-utilised.

4 Limitations of Modularisation in the Automobile Industry

Despite the advantageous outcomes of modularisation strategies for automobile manu-

facturers, module suppliers, and end-customers in the automobile industry, modularisation

also entails certain limitations. Specifically, modularisation strategies generate major limita-

tions for automobile manufacturers on the topic of costs, lead-time, technology, brand iden-

tity, etc. On the other hand, module suppliers have mainly to tackle with shortcomings in

11

relation to costs, while consumers have to cope with limitations in maintenance, resale value,

etc.

Table 2. Summary of Modularisation Limitations in the Automobile Industry

Limitation Factor Design Production Use Retirement

Automobile Manufacturer

Costs ∪ ∪ ↓ * ∪

Quality ↑ * ↑ *

Variety ↑ * ↑ * ↑ *

Brand Identity ↓

Redundancy ↑ ↑

Recycle-ability ↑

Pace of Technology Advances ∩ ∩

Flexibility ↑ *

Ergonomics ↑ *

Employee satisfaction ∩ *

Information ↑ ↑

Outsource-ability ↑ ↑

Module Suppliers

Costs ↑ ↑

Consumers

Maintenance costs ∪

Reuse ↑

Resale value ↓

Flexibility/Variety ↑ *

Information ↑

Automobile Manufacturer

Module Suppliers

Consumers

12

Table 2 provides a list of potential influence factors together with their relationships to

the different modularisation strategies. The relationships are expressed by using four different

symbols, which are explained in Figure 4. The symbol ∪ indicates that with an increasing

number of modules the limitation factor decreases, however, from a certain threshold of

modules the limitation factor increases again. Just the opposite relationship shall be ex-

pressed by using the symbol ∩.

Figure 4. Explanation of Symbols used in Table 2

Limitation Factor

Number of Modules m

↑ =

Number of Modules m

Limitation Factor

Number of Modules m

Limitation Factor

Limitation Factor

Number of Modules m

∪ = ∩ =

↓ =

The symbol ↑ indicates an upward relationship and the symbol ↓ a downward relation-

ship between the number of modules and the limitation factor.

In the following, the different areas of modularisation and their limitations will be

evaluated. However, as the potential limitations are numerous, we will focus on the most sig-

nificant points. To distinguish which limitation factors will be discussed, the respective cells

in Table 2 are greyed. The cells marked with “*” are advantages of modularisation and have

13

already been discussed in section 3. Consequently, as indicated in Table 2, for modularisa-

tion-in-design, we will concentrate on cost and brand aspects.

4.1 Modularisation-in-Design

Automobile manufacturers have to consider carefully the relationship between the de-

gree of modularisation, i.e. the number of modules used in the overall product, and its cost

impact. Generally, it can be said that the use of more modules leads to a reduction in the in-

ternal complexity of each module. Furthermore, the more modules are employed, the higher

is the possibility of simultaneous engineering, resulting in time and cost savings. On the other

hand, if more modules are used, the number of interfaces increases and the overall complex-

ity of the design structure increases as well. The larger number of interfaces and the higher

complexity due to more modules need more coordination and communication efforts, leading

to increased costs. Therefore, the design costs will reach a minimum if the vehicle is decom-

posed into a certain number of modules with a certain level of complexity and a certain num-

ber of interfaces. Moreover, the maximum outcome of modularisation-in-design, i.e. high

cost savings through economies of scale can only be realised if modules and interfaces are

standardised among models, brands, and even among different automobile manufacturers.

On the other hand, the increased utilisation of homogenised modules may lead to con-

verging car designs and brand homogeneity. The latter is particularly crucial if visible mod-

ules are standardised, as indicated in Figure 5, since they have a high impact on car outlook

and styling. Possible examples are body shape, front modules, etc. The use of visible stan-

dardised modules may critically damage brand identity. Audi and VW are increasingly ac-

cused of similar car designs. The same can be said for the Porsche Cayenne and the VW

Touareg, which have been jointly developed by Porsche and VW.

14

Visible modules with a low impact on car design, however, may only slightly influence

brand identity. Although wheel trims, sunroofs, steering wheels, etc. are visible; they have no

significant influence on the general outlook of the automobile.

Figure 5. Impact of Modularisation-in-Design on Brand Identity

Standardised Modules

Hidden Visible

Deg

ree

of E

ffect

on

Car

Out

look

Low

Hig

h

Direct Impact on Car OutlookDirect Impact

on Car Outlook

Best/Most effective for Modularisation

Best/Most effective for Modularisation

Indirect Impact on Car Outlook

Indirect Impact on Car Outlook

Minor Impact on Car Outlook

Minor Impact on Car Outlook

Examples: Wheel trims, Sunroofs

Examples: Body Shape, Chassis

Examples: Tank size, Engine

Examples: Oil Filter, Pistons

In contrast, the standardisation of hidden modules with low impact on design and out-

look has to be pursued in order to fully realise cost savings potentials. Hidden modules with

high impact on car outlook usually have a indirect impact on car outlook and shall be imple-

mented as long as the brand identity is not affected. For instance, the size of the tank has a

relative large impact on the passenger cabin. However, since the tank is a hidden module, de-

signers have enough possibilities to distinguish car outlooks and to preserve brand identity.

Furthermore, the final combination of the modular designed and separately produced

parts may not, after assembly, lead to a workable vehicle because many characteristics of the

relations within the electro-mechanical architecture are not yet fully realized. For instance, to

attain a particular noise/vibration/harshness level at different maximum speeds, engineers

need a profound knowledge of the subtle relationships between the body, chassis, engine, and

15

drive-train [9]. In some areas, where the trade-off between modularisation and overall per-

formance is particularly crucial, modularisation-in-design may not be feasible at all.

In addition, it is debatable whether customers will accept these trends towards modu-

larisation. Customers chose a car because of its respective styling, drivability, functionality

and also its optional equipment. Modular designs, however, imply a loss in performance since

the single modules cannot work as efficiently as an integral car and this is often the major

feature for the purchase decision.

In summary, modularisation-in-design may, under certain circumstances, imply higher

design and development costs as well as lead-times, and may result in a lack of brand identity

and a loss of overall vehicle performance and customer acceptance.

4.2 Modularisation-in-Production

The most noteworthy limitations of modularisation strategies in production deal with

cost aspects, redundancies, outsourcing and technological advancements.

As far as cost aspects in production are concerned, manufacturing and assembly costs

have to be taken into account. In particular, with an increasing number of modules, the manu-

facturing costs per module are diminishing due to economies of scale and less internal com-

plexity. Conversely, an increase in the number of modules causes higher assembly costs due

to increased coordination efforts and the higher complexity of the product architecture. Com-

bining the manufacturing and assembly cost function results in a u-shaped production cost

function, indicating that modular production will deliver the highest cost advantages when

using a certain number of modules with a certain degree of complexity.

In modular production, all feasible functions and tasks, which may potentially be re-

dundant, i.e. not used by the end-customers, are incorporated in the module at the outset. If

16

some functions become redundant, cost and time advantages of modular production are di-

minished by the production labour costs and material costs of unneeded parts.

In conclusion, a high degree of modularisation in production potentially leads to higher

production costs due to increased complexity and redundancies of module functions.

4.3 Outsourcing of Modular Design and Production

By pursuing outsourcing and increasingly handing over module design, production and

assembly to module suppliers, automakers will more and more rely on suppliers for design

and production know-how, leading to a loss of technical leadership and expertise of automo-

bile manufacturers. This is especially true for core modules with high technological content.

While outsourcing of simple modules without core value is advantageous for carmakers in

view of costs and technology adoptions, outsourcing of core modules is particularly sensitive,

as shown in Figure 6. Core modules are usually complex and very time and cost intensive to

design and produce.

Figure 6. Effects of Modularisation and Outsourcing on Technological Leadership

Modules

Simple/ Non-core

Complex/ Core

Deg

ree

of O

utso

urci

ngLo

wH

igh

Cost advantage: high

Pace of technology advances: high

Leadership: Module Suppliers

Cost advantage: moderate

Pace of technology advances: moderate

Leadership: Carmaker

Cost advantage: low

Pace of technology advances: low


Cost advantage: moderate

Pace of technology advances: moderate


17

Therefore, outsourcing of such modules might generate high cost savings for carmakers

and might also lead to increased speed in technology advancements and adoptions, since the

modules suppliers can fully concentrate on the module technology. However, by outsourcing

core modules carmakers surrender the leadership authority in design and production to their

suppliers as well.

It may be advisable for carmakers to keep the design and production of their most sensi-

tive core modules in-house. Although this would lead to only moderate cost advantages and

technology advantages, carmakers would be able to keep their industrial leadership in the

long-term. On the other hand, for simple modules carmakers are able to fully exploit cost and

technology advantages without losing industrial leadership. But these cost and technology

advantages are low compared to core modules since non-core modules are usually simple and

considerably less complex.

The outsourcing of production modules entails another cost aspect, i.e. cost for trans-

portation. Specifically, the transportation costs depend on how far or close the module sup-

pliers are located and on how many modules are outsourced. An increase in the number of

modules outsourced will lead to an increase in transportation costs as well.

If the ongoing trend towards modularisation and outsourcing continues and involves the

core modules of an automobile as well, the structure of automobile industry will change irre-

trievably. In particular, the automobile industry will evolve from a vertically integrated

structure into a horizontal structure, as shown in Figure 7. However, by losing their core

competence, carmakers could eventually become mere brand and service providers by offer-

ing the general car design and innovative product concepts as well as by providing diversified

customer services such as car financing and the distinctive brand name.

The module suppliers themselves regard modularisation and outsourcing as a consider-

able chance for them to achieve higher profitability.

18

Figure 7. Evolution of Automobile Industry

Automobile Automobile ManufacturerManufacturer

Design

Development

Production

Assembly

Component Supplier

Component Supplier

Component Supplier

Component Supplier

Vertical Industry Structure

Automobile Automobile ManufacturerManufacturer

Overall Design Innovative Concept Brand Service

Module/System Module/System SupplierSupplier



Design

Development

Production

Assembly

Horizontal Industry Structure

However, the latter is controversial since automakers still select their suppliers and also

agree on prices and conditions. Therefore, module suppliers are forced to integrate the com-

plex supply chain elements, and are even responsible for the overall quality of the module.

Moreover, a margin increase is difficult since the input costs are transparent.

As proven, outsourcing of modular designs and productions may entail valuable ad-

vantages with regard to costs and technology advancements under certain circumstances.

However, the outsourcing of core modules, in particular, may be highly precarious, altering

the structure of the automobile industry permanently in the long-term.

4.4 Modularisation-in-Use

In this section, we concentrate on the aspects of information, resale value, and mainte-

nance costs, as marked in Table 2.

Although modularisation-in-use is advantageous for consumers and manufacturers

alike, the mass customisation of automobiles potentially leads to an information overload for

automakers as well as customers. In particular, automobile manufacturers which offer their

customers a significant number of options (modules) for mixing and matching individually,

have to keep in mind that they have to handle this high variety of modules throughout the life

19

cycle of an automobile. That means, they have to consider modularisation in use already

during design, production, and in the maintenance process. Customers may be overtaxed in

deciding which modules to choose and how to combine them.

In addition, modularisation-in-use will support the development of a wholly customised

automobile, adapted to individual customer requirements. Although this development seems

favourable for customers, the trend towards customised vehicles makes it also increasingly

difficult, even impossible, to resell such “tailor-made” vehicles. As a consequence, customers

may be forced to separately sell the modules, which formerly made up their automobiles, or

at least, they have to accept a considerable lower resale value in order to find a respective

buyer.

Often, the ease of maintenance is an important factor in determining modularisation-in-

use. However, while consumers may prefer small and inexpensive modules, modular designs

could favour the utilisation of relatively large, but expensive, modules with relative complex-

ity. For instance, integrated cockpits or front modules may be advantageous from the aspect

of design. However, the use of such modules may lead to higher replacement or maintenance

costs for end-users if one defective part of the module necessitates the replacement of the

whole module.

In summary, modularisation-in-use may impose higher burdens on the end-customers

due to increased maintenance and handling costs and a considerably lowered resale value.

4.5 Modularisation-in-Retirement

Limitations to modularisation strategies can also be recognised in retirement, particu-

larly with regard to recycle-ability, reuse-ability, and their cost impact. The future introduc-

tion of new environmental regulations enforces the use of modules since they are easier to

dismantle and recycle. However, the differentiation between parts to be disposed off or to be

20

re-used may lead to higher product costs, to be paid by the end-user. Consequently, automo-

bile manufacturers have to consider the consequences of modular designs for recycling al-

ready in the development phase.

The relationship between recycle-ability, reuse-ability, and cost aspects depends on the

number of materials used in modules and the degree of connection among modules. As indi-

cated in Figure 8, if the module connections are strong and a large number of materials have

been used, the cost impact is high. This is the case since a large number of materials are diffi-

cult to recycle and is even impeded through the strong material connections. Reuse-ability is

reduced since the strong module connections may damage the functionality of modules when

they are dismantled.

Figure 8. Relationship between Recycle-ability, Reuse-ability, and Cost Aspects

Number of Materials UsedFew Large

Deg

ree

of C

onne

ctio

n am

ong

Mod

ules

Wea

kSt

rong

Recycle-ability

Reuse-ability

Recycle-ability

Reuse-ability

Recycle-ability

Reuse-ability

Recycle-ability

Reuse-ability

Reasonable Cost Impact High Cost Impact

Low Cost Impact Reasonable Cost Impact

However, if the connections are weak and only a few materials are used, the cost impact

is low since recycle-ability and reuse-ability are considerably increased. In case the connec-

tions among modules are strong, but only a few materials have been used, the cost impact is

reasonable, since the recycle-ability is enhanced, while at the same time the reuse-ability is

21

diminished. A moderate cost impact can also be observed for modules where the number of

materials is large but weak connections have been used. This is true because recycle-ability is

low due to the utilisation of diverse materials but, on the other hand, reuse-ability is high,

which positively affects costs.

In conclusion, the cost impact of modularisation-in-retirement depends on the degree of

the connection among modules and the number of materials used.

5 Conclusion

In the automobile industry the term modularisation is applied in different areas. These

areas have been classified as modularisation-in-design, modularisation-in-production, modu-

larisation-in-use, and modularisation-in-retirement. This classification reveals that carmakers

are pursuing different intentions by implementing modularisation, depending on the area of

application. Despite their indisputable advantages, the modularisation strategies in the auto-

mobile industry are also subject to certain limitations.

First of all, modularisation-in-design may, under certain circumstances, imply higher

design and development costs as well as lead-times. Moreover, modular design activities may

result in a high degree of communalization and standardization of parts, leading to converg-

ing car designs among different carmakers. This trend towards brand homogeneity is par-

ticularly strengthened when modularising visible parts of the automobile. Secondly, as for

modularisation-in-production, a high degree of modularisation potentially leads to higher

production costs due to increased complexity and redundancies of module functions. In addi-

tion, automobile manufacturers will lose their technological leadership and pass on technical

control over the whole car production process to suppliers by increasingly pursuing out-

sourcing of modular design and production activities, and by gradually more relying on sup-

pliers for expertise. Thirdly, modularisation-in-use may impose higher burdens on the end-

22

customers due to increased maintenance and handling costs and a considerably lowered resale

value. Fourthly, the cost impact of strategies relating to modularisation-in-retirement depends

on the degree of the connection among modules and the number of materials used.

Thus, modularisation is not an invincible strategy; rather it should be applied cau-

tiously, by considering its limitations discussed here, in order to remain competitive in the

global marketplace.

References

[1] Baldwin, C.Y., & Clark, K.B. (2000). Design rules: The power of modularity. Volume 1.

Cambridge, Massachusetts: The MIT Press.

[2] Kamrani, A.K., & Salhieh, S.M. (2002). Product design for modularity. Bos-

ton/Dordrecht/London: Kluwer Acadademic Publishers.

[3] Studies can be retrieved from http://web.mit.edu/ctpid/www/imvp/

[4] Sako, M., & Warburton, M. (1999, October 6-7). MIT International Motor Vehicle Pro-

gramme: Modularisation and outsourcing project – Preliminary report of European re-

search team. Retrieved October 30, 2002, from http://imvp.mit.edu/papers/99/modular-

paper.pdf

[5] Starr, M. (1965, Nov.- Dec.). Modular Production - A new concept. Harvard Business

Review 43, p. 131-142.

[6] Baldwin, C.Y., & Clark, K.B. (2000). Design rules: The power of modularity. Volume 1

(p. 88). Cambridge, Massachusetts: The MIT Press.

[7] Takeishi, A., & Fujimoto, T. (2001, Feb. 28). Modularisation in the auto industry: Inter-

linked multiple hierarchies of product, production, and supplier systems. Retrieved

March 18, 2003, from http://impv.mit. edu/papers/0001/takeishi2.pdf

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[8] Baldwin, C.Y., & Clark, K.B. (2000). Design rules: The power of modularity. Volume 1

(pp. 132-142). Cambridge, Massachusetts: The MIT Press.

[9] Sako, M.& Murray, F. (2000, April 27). Modules in Design, Production and Use:

Implications for the Global Automotive Industry. Retrieved September 10, 2003, from

http://www.univ.evry.fr/labos/ gerispa/lettre/numeros/142/sako-murray.pdf

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