Who benefits from standardization & modularization, MTS or ETO ?

Pratistha Suhasini August 31, 2016

Connected_Manufacturing.jpg“There are no limits. There are only plateaus, and you must not stay there, you must go beyond them.” -Bruce Lee 

Thanks to technology, the world is now more like a small global village. We have travelled a long way from the first industrial revolution of mechanized production to the second of mass production, followed by the third of information technology. And now, manufacturing  is ready to embrace the next tide of industrial revolution and transformation through ‘Industry 4.0’.

‘Smart’ is not just going to be limited to your cell phones, instead we have smart factories, homes, machines, appliances, automobiles and so on. Now, let’s see the downside of this aggressive growth and development. Competition, coupled with whims of globalization and uncertainties of fluctuating financial markets has compounded the challenges faced by manufacturers. Without a doubt, most manufacturers,  despite being keen investors with innovation, remain focused with their top goal as sustainable growth in revenue and profits. So, do they need some other disruptive technology to enable that? Not necessarily!

lego.pngBack to the basics again.

There are certain simple techniques in engineering and manufacturing when implemented strategically, could still result in considerable savings and optimization of costs and resources.

One such approach is Modular Standardization. See, nothing disruptive! 

Standardization & modularization are time tested approaches that are being followed by engineers since many decades. Standardization is the practice of normalizing affordable parts and manufacturing components throughout a product line, and/or across multiple manufacturing sites. Modularization is the practice of breaking down manufacturing systems into various, holistic modules or sub-systems for more efficient and affordable production.

Both of these approaches have been popularly used in the Made to Stock (MTS) type of manufacturing. Let’s understand what it does for MTS products.

These products are mass produced based on demand forecasts, with little or no customization. It is no wonder that MTS manufacturing benefits immensely from standardization & modularization approaches. But, it is not the same in the case of Engineer to Order (ETO) products.manufacturing_automation.jpg

ETO products are highly customized and designed based on specific customer needs. So, manufacturers have struggled to implement these approaches directly into designing and manufacturing ETO products. These approaches may sometimes hinder innovation or restrict development considering the nature of the product.

But, interestingly, this cloud has a silver lining.

When implemented together holistically, these approaches can result in considerable savings in cost, thus improving the revenue potential. Even though ETO products have high customization, do they really need to be designed from scratch every time a need arises?  

Price_sensitivity.pngFood for thought.
While different customizations can be done to come up with new features and functionality, standard sub-assemblies, modules or parts can still be used. These play a major role in accelerating the development time, thereby reducing the time to market

Since these standard and modular parts have already been used in other assemblies, their quality and reliability have been previously discovered. This contributes hugely to improving the overall product quality.

Use of these parts or sub-assemblies also helps in optimizing the supply chain costs and reduces any additional holding costs. Since the supplier-vendor ecosystem is established for these parts, there is no need for the purchase team to hunt for new vendors or negotiate with existing vendors for the new part. All of this hugely contributes to cost savings through supply chain optimization and thus overall reduction of product cost

It’s no wonder that this holistic approach, when strategically implemented, can drastically impact the product development ecosystem to make standard quality products faster and much less expensive.

For some more information on the benefits of standardization and modularization, click the image below .

Benefits of Standardization & Modularization

Topics Product Cost Optimization Product Quality Time to Market Product Development Solutions