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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: knittig_psab@compuserve.com

Shinji Shimizu Department of Mechanical Engineering Faculty of Science and Technology Sophia University 7-1, Kioi-cho, Chiyoda-ku Tokyo 102-8554, Japan Phone: +81-3-3238-3859, Fax: +81-3-3238-3405 E-mail: s_simizu@me.sophia.ac.jp

Robert J. Ballon Sophia University 4 Yonbancho, Chiyoda-ku Tokyo 102-0081, Japan Phone: +81-3-3238-4080, Fax: +81-3-3238-4081 E-mail: r-ballon@hoffman.cc.sophia.ac.jp

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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 structure 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.

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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 already 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 experienced significant growth and innovation only because it embraced the concept of modularisation in designing complex products. Kamrani and Salhieh [2] introduced mathematical and genetic algorithm models to product and system design based on the concept of modularisation. The International Motor Vehicle Programme (IMVP) at the Massachusetts Institute of Technology (MIT) embarked on several studies [3] on the contents and influences of modularisation 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.

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Therefore, in this paper, at first, the core concept of modularisation is clarified and present modularisation strategies in the automobile industry are classified. Based on this classification, the intentions and outcomes of present modularisation initiatives in each area are evaluated and the limitations of modularisation in the automobile industry are identified.

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 concentrating on each unit/module individually, the system complexity becomes controllable. Simultaneously, the system architecture is being created, as indicated in Figure 1, which describes 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

Modular System Architecture

Module A Hardware Information

Module B Hardware Information

Integrated System Architecture

Abstraction
Module C Hardware Information

Interface

This simplified representation allows hiding the complexity of design parameters behind modules. This hidden design parameters are relatively easy and inexpensive to change as they affect only the respective module.

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Finally, modules have to be connected to each other by the use of interfaces. In this respect, 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, interfaces contain a certain set of specifications and visible information. These visible design parameters 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 suggested to use standardised sizes for automobiles. Again in 1965, Starr proposed modular production 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 interdependent 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 cycle, as shown in Figure 2. In the automobile industry, modularisation can be classified into modularisation-in-design, modularisation-in-production, modularisation-in-use and modularisation-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

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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-Design
Definition: Decomposition of a vehicle into constituent design parts Automobile Manufacturers Minimising of communication efforts and reduction in development time and cost.

Modularisation-in-Production
Definition: Off-line pre-assembly of components into modules with the subsequent incorporation into main assembly line Driven by: Automobile Manufacturers Goal: Reduction in production complexity, cost, and lead-time.

Driven by: Goal:

Module definition may change Modularisation-in-Use

Definition: Decomposition of a vehicle in order to satisfy consumers requirements Consumer Ease of use and ease of maintenance, low initial and replacement costs, and individuality.

Modularisation-in-Retirement
Definition: Ability to easily separate hazardous materials Driven by: Government Goal: Compliance with environmental regulations and improvement of recycling and re-use efforts for used vehicles

Driven by: Goal:

Modularisation-in-production refers to the ability to group a large number of components into modules and then to incorporate these pre-assembled modules into the main assembly line through a small and simple series of tasks. Modules are predominantly understood as assembly modules. Ease of connection and the combination of components to modules 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-

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placement costs of modules and the ease of maintenance are the major drivers for the purchase 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 environmental 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 designing a complex vehicle manageable. To do so, vehicle designers split the car into controllable 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 development 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 components 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

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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

Component
(Function A, B, D)

Component
(Function A, C, D)

Module A
(Function A)

Module B
(Function B)

Component
(Function B, C, D)

Component
(Function A, D)

Module C Component
(Function B, C)

Module D
(Function D)

Component
(Function C)

(Function C)

Integral Product Architecture

Modular Product Architecture

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 instance, designers can enhance the system by adding new modules or subtracting obsolete modules. Furthermore, if previously hidden information in a module evolves into information, which solves general problems of the whole system, then this information can be transformed into visible information. This process is called inversion [8]. By combining modules in different ways and by adding and subtracting modules, designers 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 module designers focus on and specialise in their respective modules, reducing the failure probability significantly. Additionally, development costs are highly responsive to changes in production volumes, since development costs are one-time product costs. As a result, the more units are pro-

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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 production processes already for decades. Automobile manufacturers routinely arrange to manufacture 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 flexibility of assembly plant utilisation, a reduction of production lead-time, improvement of assembly 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 ergonomics 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 modules 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 available, 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

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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 research efforts. Module suppliers usually have superior and specialised resources and are thus better positioned to develop new technologies. The trend towards modularisation and outsourcing 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 profitability by taking advantage of cost and asset advantages of outsourced modules. Since module 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 provide 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

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feasible if automobiles are assembled from modules. As verified above, modularisation-inproduction 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 automobiles 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 promotion 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 access 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 deassembled 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 increase the productivity of automakers, since used parts can be re-utilised.

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 limitations for automobile manufacturers on the topic of costs, lead-time, technology, brand identity, etc. On the other hand, module suppliers have mainly to tackle with shortcomings in

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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 Automobile Manufacturer Costs Quality Variety Brand Identity Redundancy Recycle-ability
Pace of Technology Advances

Design

Production

Use

Retirement

* *

* *

* * *

Flexibility Ergonomics Employee satisfaction Information Outsource-ability Module Suppliers Costs Consumers Maintenance costs Reuse Resale value Flexibility/Variety Information

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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 expressed by using the symbol .

Figure 4. Explanation of Symbols used in Table 2

Limitation Factor

Limitation Factor

Number of Modules m

Number of Modules m

Limitation Factor

Limitation Factor

Number of Modules m

Number of Modules m

The symbol indicates an upward relationship and the symbol a downward relationship 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 significant 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

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already been discussed in section 3. Consequently, as indicated in Table 2, for modularisation-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 internal 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 complexity 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 decomposed into a certain number of modules with a certain level of complexity and a certain number 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 converging car designs and brand homogeneity. The latter is particularly crucial if visible modules 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 standardised modules may critically damage brand identity. Audi and VW are increasingly accused 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.

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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

High

Indirect Impact on Indirect Impact on Car Outlook Car Outlook

Degree of Effect on Car Outlook
Examples: Tank size, Engine

Direct Impact Direct Impact on Car Outlook on Car Outlook

Examples: Body Shape, Chassis

Best/Most effective Best/Most effective for Modularisation for Modularisation

Examples: Oil Filter, Pistons

Minor Impact on Minor Impact on Car Outlook Car Outlook

Examples: Wheel trims, Sunroofs

Low

Hidden

Visible

Standardised Modules

In contrast, the standardisation of hidden modules with low impact on design and outlook 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 implemented 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, designers 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

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drive-train [9]. In some areas, where the trade-off between modularisation and overall performance is particularly crucial, modularisation-in-design may not be feasible at all. In addition, it is debatable whether customers will accept these trends towards modularisation. 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 manufacturing costs per module are diminishing due to economies of scale and less internal complexity. 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. Combining 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 redundant, i.e. not used by the end-customers, are incorporated in the module at the outset. If

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some functions become redundant, cost and time advantages of modular production are diminished 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 automobile 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

High

Cost advantage: moderate

Cost advantage: high Pace of technology advances: high Leadership: Module Suppliers

Degree of Outsourcing

Pace of technology advances: moderate Leadership: Carmaker

Cost advantage: low Pace of technology advances: low Leadership: Carmaker Low

Cost advantage: moderate Pace of technology advances: moderate Leadership: Carmaker

Simple/ Non-core

Modules

Complex / Core

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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 sensitive 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 transportation. Specifically, the transportation costs depend on how far or close the module suppliers 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 irretrievably. 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 offering 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 considerable chance for them to achieve higher profitability.

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Figure 7. Evolution of Automobile Industry

Automobile Manufacturer Overall Design
Component Supplier Component Supplier

Innovative Concept

Brand

Service

Automobile Manufacturer Design Development Production Assembly

Component Supplier Component Supplier

Module/System Supplier

Module/System Supplier Design Development Production Assembly

Module/System Supplier

Vertical Industry Structure

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 complex 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 advantages 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

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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-inuse. However, while consumers may prefer small and inexpensive modules, modular designs could favour the utilisation of relatively large, but expensive, modules with relative complexity. 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 introduction 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

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re-used may lead to higher product costs, to be paid by the end-user. Consequently, automobile manufacturers have to consider the consequences of modular designs for recycling already 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 indicated 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 difficult 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

Strong

Reasonable Cost Impact Recycleability

High Cost Impact Recycleability Reuseability

Degree of Connection among Modules

Reuseability

Low Cost Impact Recycleability

Reasonable Cost Impact Recycleability Reuseability

Weak

Reuseability

Few

Large

Number of Materials Used

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 connections 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

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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.

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, modularisation-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 automobile 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 converging car designs among different carmakers. This trend towards brand homogeneity is particularly 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 addition, automobile manufacturers will lose their technological leadership and pass on technical control over the whole car production process to suppliers by increasingly pursuing outsourcing of modular design and production activities, and by gradually more relying on suppliers for expertise. Thirdly, modularisation-in-use may impose higher burdens on the end-

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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 cautiously, 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. Boston/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 Programme: Modularisation and outsourcing project Preliminary report of European research team. Retrieved October 30, 2002, from http://imvp.mit.edu/papers/99/modularpaper.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: Interlinked 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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