The Benefits of Modularization

Raghuraman Ramamurthy December 9, 2014

legoModularization, as very commonly known, is the practice of using modules (manufacturing sub-systems) to create, upgrade and develop products mostly along multiple production lines, or a single product line offered in various configurations, in a way that brings significant cost reductions, reduces time to market significantly, yet offering the customers required personalization.

One of the very commonly asked questions is the difference between standardization and modularization. Whereas standardization is the simplifying of product parts and raw materials, modularization is the simplifying of manufacturing systems themselves.

Through modularization, companies can slash their product development and material costs, and facilitate optimization of the total product cost by:

  • Increasing potential for product variety
  • Enabling faster product development, upgrade
  • Improving time-to-market, as well as aftermarket and service support
  • Allowing continuous product and market improvement

Modular Design and Manufacturing ROI

In a recent survey conducted by B-WI, around 74% of manufacturing executives list Cost of Goods Sold (CoGS) and other supply chain factors as major industry challenges, which can hold their business back in today’s competitive marketplaces. This is one of modularization’s greatest benefits for manufacturers; optimized product cost and improved time-to-market across multiple product lines.

Functionally independent sub-systems, implemented in similar production phases or with related product lines, make it possible for businesses to simplify development and greatly reduce material cost during floor-level manufacturing. For companies that offer a variety of similar product SKUs, this means huge benefits for product cost optimization (PCO), including:

  • Reduced product testing, design and per-part costs
  • One-time investment on research and development
  • Mass volume production savings
  • Reduced annual cost in maintaining and upgrading manufacturing solutions
  • Design and part reliability

Modular standardization, when implemented effectively at the start of the design process, delivers huge PCO value for manufacturers, and serves to simplify even the most complex, high volume design configurations. It’s this cost-optimization and streamlining that make modularization key for manufacturers dealing with the challenges of poor time-to-market, and struggling to gain significant market share within their industries.

Following an assessment of design opportunities, prioritization and potential value, modularization can be fully implemented along a manufacturing line in as little as 6-9 months, with instant ROI possible in the months that follow. Improving efficiency and time-to-market with modular standardization is one of the most promising and practical ways to improve market share in 2015.

Intrinsic Growth for Various Industries

Modularization though design sub-systems and functionally independent modules is one of the strongest ways product manufacturers can optimize product cost. Implementing modularization is an ideal practice for companies with multiple similar product lines, which can benefit from simplifying their manufacturing across lines and for products using similar design features.

Whatever products your company creates or industries your company serves, modularization can help you achieve PCO and strategic marketplace advantages. The early adopters of modular designs have been in the:

  • The automotive industry
  • Construction
  • Consumer goods
  • Oil and gas industries
  • Commercial and retail facilities

For manufacturers in the automotive industry and consumer goods, modularization minimizes the amount of production components necessary, while maximizing vehicle variants. By implementing modular design sub-systems, companies can improve market value in a way that preserves quality and lowers development, production and servicing costs.

While the above industries have adopted modularization for quite sometime and have derived benefits from those, other industries like the industrial equipment manufacturers, rotating equipment, commercial equipment manufacturers, etc. have caught up recently and are fast adopting modularization as a means to PCO.

While benefits of modularization have been seen as a boon for the Made-To-Stock (MTS) industries while the Made-To-Order (MTO) and Engineer-To-Order (ETO) industries have seen modularization as being a foreign idea. But in the last few years more and more ETO and MTO companies are looking at innovative ways to modularize their products and thereby cut down on development time, time-to-market and manufacturing and supply chain costs, thereby optimizing their overall product cost.

Companies that make the investments in modularization can see significant ROI and PCO at high turnover rates, enabling growth and delivering results almost immediately. For industrial manufacturers, modularization has been estimated to reduce time-to-market by up to 12%, complemented by an annual 48-67% growth in revenue shares because of a disproportionate increase in their competitive advantage due to increased ability to offer customizations and variety in their product offerings.

Modularization is a strategic, cost-optimizing initiative that companies across manufacturing sectors can take to limit their waste, optimize time-to-market, optimize product cost and improve marketplace performance.


Topics Product Cost Optimization Time to Market Product Development Solutions Standardization & Modularization