Modularity as a Strategy for Supply Chain Coordination: The Case of U.S. Auto

Companies across industries have admired the success of Dell Computersin using modularity as part of a mass customization strategy to achieve build-to-order and a streamlined supply chain. Many companies are attempting to emulate this successful model, including the American automotive industry. Thi...

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Bibliographic Details
Published in:IEEE transactions on engineering management 2007-02, Vol.54 (1), p.172-189
Main Authors: Ro, Y.K., Liker, J.K., Fixson, S.K.
Format: Article
Language:English
Subjects:
Automobile industry
Automobiles
Automotive
Automotive components
Automotive engineering
Automotive industry
Construction
Customization
mass customization
Modularity
Outsourcing
product development
Strategy
Studies
supply chain
Supply chains
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Summary:Companies across industries have admired the success of Dell Computersin using modularity as part of a mass customization strategy to achieve build-to-order and a streamlined supply chain. Many companies are attempting to emulate this successful model, including the American automotive industry. This paper focuses on how the auto industry has been attempting to move to modularity, in part, motivated by a desire to build cars to order. This movement has led to major changes in supply chain practices based partly on imitation of successful keiretsu models in Japan and a move toward modules. This study finds significant impact of modularity on outsourcing, product development, and supply chain coordination based on interviews conducted with automakers and suppliers from 2000-2003. Based on our interviews, we observe that modularity has accompanied a major reorganization of the automotive supplier industry. We identify two major issues that appear to block U.S. automakers from gaining most of the advantages possible through modularity. First, most modularity activities appear to be primarily strategically cost reduction driven, leaving the potential of modularity for mass customization largely untapped. Second, the shift in industry reorganization has not been accompanied by changes in the supply chain infrastructure to encourage long-term partnerships. We contrast this to the more gradual approach used by Toyota as it incorporates modularity on a selective basis and moves to a build-to-order model
ISSN:0018-9391
1558-0040
DOI:10.1109/TEM.2006.889075