Achieving cost leadership means consistently demonstrating, with data, that your product’s total direct material and labor costs are lower than those of your competitors. In the durable goods industry, this challenge intensifies due to increasing product complexity, redundant components, and operational inefficiencies. However, by focusing on four key elements — Brand Architecture, Competitive Cost Analysis and Modeling (CCA), Component Architecture, and New Platform Introductions — you can systematically drive cost leadership.
Each of these elements addresses a distinct part of the cost structure. Brand Architecture ensures your products are aligned with customer expectations, helping you avoid over- or under-designing. CCA allows for the benchmarking of costs at the module, subsystem, and full product levels, which can lead to significant material cost reductions. Component Architecture streamlines procurement and manufacturing by reducing redundant parts, while New Platform Introductions bundle cost-saving initiatives into comprehensive product redesigns.
When executed together within a modular product architecture, these elements become exponentially more effective. Modular architecture provides the structural foundation for sustained cost leadership by eliminating inefficiencies and ensuring that improvements are scalable.
Brand architecture defines what your brand stands for and establishes performance and design guidelines to reflect this identity. A well-crafted brand architecture ensures a consistent balance of features, quality, and price across your product portfolio.
Figure 2 illustrates the brand architecture for a notional multi-brand home appliance company’s family of major brands. Each brand is positioned to target specific customer segments and price points, ensuring that the design and performance meet distinct needs. Where brand overlap occurs, aesthetic and performance differences are strategically created to appeal directly to each target group.
Figure 2. A representation of brand architecture for a notional home appliance company with a family of major brands. Each brand is targeted at specific types of customers with specific needs and desires in each product category. It is interesting to note that the more emotionally involved product categories have the largest number of brands and the greatest spread of price points.
A clear brand architecture prevents unnecessary costs from over-engineering and avoids the risk of customer dissatisfaction due to under-engineering. It provides a framework for efficient resource allocation throughout the product development process.
Modular product architecture allows companies to standardize components across products while maintaining flexibility for differentiation. This helps reduce costs while still delivering brand-consistent products that align with customer expectations.
Competitive Cost Analysis and Modeling (CCA) breaks down both your products and your competitors' products into subsystems and components. This allows for a detailed comparison of costs at each level.
By identifying where your products may lag in cost efficiency, you can set clear, data-driven cost reduction targets. This ensures that efforts are focused on the most impactful areas for profitability and competitiveness.
Modularity simplifies the comparison process by breaking products into standardized modules, making it easier to benchmark and target cost reductions. By bundling these savings into new product introductions, you further amplify cost leadership.
Figure 3 shows how CCA and modular product architecture work together to deliver cost leadership by enabling targeted cost reductions at the module level.
Figure 3. Competitive Cost Analysis is a critical input to any modular product architecture effort. By understanding cost comparisons to the competition on a module variant by module variant basis, a path to cost leadership can be charted. Bundling groups of cost reductions on a module-by-module basis into new product introduction projects is a clear way to consistently lead the competition consistently and enduringly with respect to product cost.
Component architecture focuses on rationalizing and reducing the number of unique components used across your product lines. This strategy simplifies procurement, manufacturing, and inventory management.
As depicted in Figure 4, component architecture involves identifying and eliminating redundant parts, streamlining the portfolio to focus on the most efficient components that can be used across multiple products
Figure 4. The high-level process and value capture approach for a combined component architecture and modular product architecture effort. Savings are generated in multiple ways over time. The fact this work is done in the context of a modular product architecture ensures that captured savings are sustained over time as the modular architecture has continuously evolved to a cost leadership position.
Reducing the number of components lowers procurement costs, simplifies manufacturing processes, and shortens time to market. Over time, these streamlined components deliver significant cost savings.
By leveraging a modular architecture, companies can design products with standardized, reusable components, modules, and sub-systems that are shared across product lines. This reduces redundancy while maintaining the flexibility needed to offer diverse products.
New platform introductions provide an opportunity to re-engineer product families by reducing platform redundancy and consolidating platforms. This enables companies to minimize variations, simplify manufacturing, and achieve significant cost savings.
Figure 5 demonstrates how consolidating platforms can reduce complexity and enhance cost competitiveness. By collapsing volume from multiple manufacturing lines into one, companies can maximize operational efficiency while maintaining performance.
Figure 5. Looking across a company’s product line-up, there are often opportunities to consolidate platforms. Here we look to maximize volume on the America’s Top Loader platform by collapsing volume from three manufacturing lines into one. Similarly, the Global Top Loader platform is simplified by consolidating three manufacturing lines and processes into one while adding the 27 inch diameter drum volume to the Americas Top Loader line-up. The Global Top Loader becomes more cost competitive by consolidating volumes on a smaller cabinet size. The Twin Tub platform is an opening price point and somewhat niche platform serving a limited number of markets, so it has been left alone from a platform consolidation perspective.
Consolidating platforms reduces manufacturing complexity, enhances operational efficiency, and lowers costs. Standardized components and subsystems across product lines further support cost reduction efforts.
A modular architecture allows companies to introduce platforms that can accommodate multiple product variants without adding unnecessary complexity. This flexibility reduces costs, accelerates innovation, and sustains long-term cost leadership.
Achieving competitive cost leadership requires more than isolated cost-saving measures. By aligning Brand Architecture, Competitive Cost Analysis and Modeling, Component Architecture, and New Platform Introductions, companies can systematically reduce costs while maintaining product quality and customer satisfaction.
However, the true potential of these elements is unlocked when supported by a modular product architecture. Modularity provides the structural foundation for efficiency, scalability, and resilience. By reducing complexity at every level—components, platforms, and processes—modularity not only enhances cost-saving efforts but also ensures that companies remain agile, innovative, and competitive over time.
Adopting a modular approach will help your organization consistently deliver value to customers and shareholders, while advancing toward sustained cost leadership in your industry.
If you find this topic interesting and want to know more about how we can help with post-merger integration, please get in touch with me. I'll be happy to set up a meeting to further the conversation.
Chief Account Executive
hank.marcy@modularmanagement.com
LinkedIn
Dive deeper into reducing complexity and achieving cost leadership with our exclusive three-part series: From Pain to Profit: The Cost of Complexity and How to Reduce It.
Part 1: Understanding Optimal Product Complexity
Explore how to systematically address complexity in product lines.
Part 2: Quantifying the Value of Complexity Reduction
See how reducing complexity impacts your bottom line and leads to cost leadership.
Part 3: Realizing and Sustaining the Benefits
Learn actionable steps to capture and maintain the value of reduced complexity.
Watch now to deepen your understanding on how to drive cost leadership in your organization!