INSIGHT

Configurability, Configuration and Mass Customization

BY ALEX GINSBURG & JAKOB ÅSELL

A modular product architecture enables you to reduce complexity and accelerate value creation. In this insight you will learn more on what it is and how you can harness it for mass customization.

 
 
Customers want innovative products, fast. Companies want to make customers happy and be 21st century lean. So how does all that work? Modular Management delivers clarity, performance and customer centricity so clients can reduce complexity and accelerate value creation.

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CASE

ABB Robotics

Business Transformation with Product Architecture

Executive Summary

ABB is a market leader in industrial robots and robot software, equipment and complete application solutions.


At the start of 2013, rising labour costs in key industrial markets, ever-increasing demands on quality, and cost reductions in robot design had led to an inflection point. Robots had become a very attractive alternative for many different industries.

Despite new and more aggressive competition, ABB Robotics was getting ready for a spike in the demand curve. And while it was increasingly important to protect prices, maintain market share, stay cost competitive and deliver orders faster and faster, the key question facing the executive management team was how to take advantage of the growth opportunities out there?

The answer was a modularization program and the results were significant:

  • 300% increase in the number of different controller cabinet products
  • 50% reduction in controller parts
  • 50% reduction in the size of smallest controller
  • All controllers ready for remote serviceability
  • 80 independent software development tracks – up from 1
  • < 1 month in time to market for new features – compared to 6 months before the program
  • 50% increase in robot arm assortment
  • Quadrupled production capacity.

 

The new product architecture had additional benefits in terms of process improvements and strategic product management, not least for the software team, where customer values and strategy could be embedded in the modules directly – for the very first time.

As software architecture can easily be circumvented by the coders, it is important to repeatedly go back and look at the reasons why certain functions were grouped into modules. We have done software modularity before, but this time we factored in customer values and strategy. I believe this makes our new architecture much stronger.

Roger Kulläng
Global Software Solution Architect
ABB Robotics

CONTACT

Working together with ABB Robotics on this modularization and transformation program have been challenging and as you can read, highly rewarding. The team at ABB are highly skilled when it comes to modularization and making business work. This project taught me a lot, and once again confirmed that modularization is truly powerful when done right.

Karl Bråtegren, Senior manager
Modular Management

Goals for the Modular Architectur

Strategic Goals

ABB Robotics launched a pre-study into modularity. It was initiated and conducted with the help of Modular Management, and inspired by the business success of a key customer, Scania.

This pre-study indicated that the company should be able to make strategic gains in sales as well as operations by implementing modularity. Complexity, as measured in unique parts, could be cut in half for several product lines and there would be many positive impacts on overhead, direct material and tied up capital cost. In addition, the management team concluded that with modularity it was a realistic ambition to deliver more and better products to ABB customers while improving product quality.

IRB 1100. The Most Compact and Fastest Robot Ever at Launch

Based on the promising results of the pre-study, the ABB Robotics management team initiated a modularity program covering all robot families, including software.

Yet since the competition was getting harder, ABB Robotics initiated a market analysis. The market analysis team was tasked to answer a fundamental question: which customer requirements should ABB Robotics strive to gain competitive advantages in?

A team of product and business line managers conducted over 100 customer interviews. The result was a customer segmentation model and product range specifications for the future modular products.

Product Scope and Goals

First out the gate were the robot controllers.
A cross-functional team used the findings from the market analysis and modular function deployment (MFD) method to create a conceptual modular architecture. Key product requirements were to:

• reduce the size of the controller
• deliver out-of-the-box intelligent safety and online service capabilities
• reduce direct cost
• reduce number unique parts to build the controllers
• enable controllers to be built by robots.

Modular, OmniCore Robot Controllers

Next up was the software used to program and move the robots. A team of leading software architects and system test managers attacked the structure of the current software. The ambition was to:
• move to a new software architecture that enables continuous release of features
• secure high independence from the hardware
• reduce bugs through upstream module level tests combined with fully automated tests of the most common functionality.
• improve the robot software overall to make robots more aware, smarter and connected.

Finally, two teams targeted robot arm modularity. Here the targets were to:
• create a technically more consistent robot arm architecture
• enable more re-use
• expanding the number of robot arm variants used for different applications.

Business Results

The results of the modularization program were significant.

Controllers

  • Number of different controller cabinet products increased by 300%
  • Unique parts cut in half
  • Size of smallest controller cut in half
  • All controllers equipped with intelligent safety capabilities, allowing removal of fences
  • All controllers ready for remote serviceability.

Software

  • Number of possible independent software development tracks were expanded from one to up to 80. ABB Robotics will scale to the number of development tracks that they see makes most sense for their customers and their own operations.
  • Level of fully automated tests are set to increase to over 90% of all test cases
  • Time to market of new features will be reduced to less than a month for many features compared to approximately half a year at the starting point.

Robot Arms

  • Product assortment expanded by over 50%
  • Number of unique parts reduced by more than 30%
  • Entire range of industrial robot arms built around only a handful of main layouts compared, which is less than half compared today.

Operations

  • Number of production lines reduced by 50%
  • Factory footprint of the new production lines to be cut in half compared to today
  • Production capacity quadrupled from 2013 level
  • Robots will be produced by robots assisted by humans in a mostly collaborative fashion.

And there were additional benefits.

According to Roger Kulläng, Global Software Solution Architect, ABB Robotics, “As software architecture can easily be circumvented by the coders, it is important to repeatedly go back and look at the reasons why certain functions were grouped into modules. We have done software modularity before, but this time we factored in customer values and strategy. I believe this makes our new architecture much stronger.”

If you are inspired by the ABB Robotics case and  interested in understanding  how your product architecture can benefit from a modularity program, please fill in form below and our specialist team will contact you to.

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Why module design?
INSIGHT

Why Modular Design?

BY LUTHER JOHNSON

Does your product design methodology support your company strategy​?

Most companies today are operating in multiple market segments and regions where customers demand unique products customized to their preferences with a steady stream of new features and performance.

Companies are also looking across their established internal silos to find ways to improve the performance for their organization. 

The challenge is to simultaneously meet the market demand of mass customized products while cutting internal costs, complexity, lead times and time to market.

In this insight paper Luther describes the difference between Traditional Design and Modular Design methods, with suggestion on how you can implement modular design in your product development process.

Luther Johnson

AUTHOR
Customers want innovative products, fast. Companies want to make customers happy and be 21st century lean. So how does all that work? Modular Management delivers clarity, performance and customer centricity so clients can reduce complexity and accelerate value creation.

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More readings

Guide To Agile Line Production

Guide How to Design for Fast Service

CASE

Edscha Trailer Systems

FOR MARKET LEADERS

Product Architecture Power

In order to reduce the number of part numbers, while maintaining and growing the number of product variants, the team at Edscha Trailer Systems paid special attention to the primary mechanical system of the sliding roofs. 

They optimized the interfaces and modules that make up the hinges, rollers and rails. 

The result? 

What used to take 108 different component variants was reduced to 32 module variants connected through standardized interfaces.

The consistent implementation of modular platforms is one of our major strategic concepts for the future. The competence and know-how that Modular Management offers has been a great support for us when implementing changes of vital importance in the areas of R&D and manufacturing processes.

Anders Birgersson
Edscha Trailer Systems

Company Description

VBG, now part of Edscha Trailer Systems, was started in 1951 by an engineer, Herman Krefting, who had a passion for making improvements to traffic safety. He designed and patented a new truck coupling that greatly improved the attachment of trailers to heavy trucks. The business he started to manufacturer these couplings grew rapidly during the 1950’s and continued to grow over the years with the addition of new coupling products and new sales offices across Europe.

Today, the VBG Group is in the business of developing and manufacturing many different components for the heavy vehicle industry. It is comprised of four divisions that total $ 375M USD in annual revenue. Sales are direct to OEM vehicle manufacturers or to specialty truck body builders, and there are also retail outlets for aftermarket purchases.

The VBG Truck Equipment division is a leading supplier of coupling equipment for truck and heavy trailers. It has more than 50% market share for coupling equipment through VBG and Ringfeder brands. Customers are truck and trailer manufacturers and aftermarket body builders who assemble specialty vehicles from chassis they purchase from the manufactures.

The Edscha Trailer Systems division is a leading supplier of moveable enclosures for trucks and trailers. It has just below 50% market share for sliding roofs through the EdschaTS and Sesam brands. Customers include European trailer manufactures Krone, Wielton, Tirsan, Kässbohrer, Fruehauf und Berger along with truck body builders and aftermarket retailers. 

The Ringfeder Power Transmission division is a global market leader in mechanical power transmission niches within and energy and shock absorption for widely differing industries including construction, machinery, power and mining.

The Mobile Climate Control division is active in the market for climate control systems for buses, off-road, utility and defense vehicles. The division is focused on customized solutions in small to medium-sized series. Its solutions include heating, ventilation, air conditioning, and controls, as well as a wide range of associated components.

Business Description

Up through the 1980s, the company focused on improving and delivering the core set of trailer coupling products under a single brand name. In addition to the original couplings, they developed high quality fifth wheel attachments for semi-trailers and tow-bars for automobiles. Sales grew steadily over the years and they expanded with in northern Europe with new sales offices and more advanced manufacturing facilities.

In the 1990s VBG started acquiring other small companies to add to products and brands to their portfolio. They added complimentary products and new products to go after different markets. The complimentary products were aligned with existing products and they strived for synergy across the businesses and bottom-line cost savings.

With growth and acquisitions, VBG was faced with having to offer a large assortment of products into a relatively small market where the flow of orders was highly varied. Costs and lead times were on the rise due to the large number of different products and they had little to no ability to gain scale. The production of drawbar couplings was customer-controlled, and variations in the number of incoming orders were managed by re-allocating resources, working overtime, employing temporary personnel and maintaining high volumes of inventory to cover the peaks. VBG was having trouble keeping up with their competitors with offering the product features demanded by customers.

In 1993, VBG began a relationship with Modular Management. An initial modularity project was completed for the original truck couplers, and it succeeded in lowering total costs and reducing the number of unique parts and article numbers by 42%. A series of modularization projects were some of the major contributors to raise net profits. There was also a considerable reduction in lead-time that made it possible to deliver products to customers in Scandinavia within 24 hours

In 1997, VBG acquired Ringfeder who was a direct competitor for trailer couplings and also offered machine elements for power transmissions. By leveraging the Modular Product Architecture that was previously developed, VBG was able to quickly integrate Ringfeder couplers into the VBG product family gaining the efficiencies of a single product platform.

Edscha Trailer Systems

In 2005, the company increased its product diversification with the acquisition of Edscha Trailer Systems  and Sesam sliding roof systems for trucks and trailers. The company is the inventor of the sliding roof system for trucks and trailers with products that enable easy cargo loading from either the top or sides of a truck. The Sesam included the same types of products with lower price and performance. 

In 2009, the global economy reduced the overall demand in the truck market. Edscha Trailer Systems and Sesam were the hardest hit in the VBG portfolio when OEMs were unable to move inventory of trucks and trailers. Many fewer sliding roof systems were being installed. The lower demand had exposed the inflexibility of the product costs to the volume of production. 

Having been a recent VBG acquisition, sliding roof systems had not yet benefited from the creation of a Modular Product Architecture. Past success with implementing modular platforms gave VBG the confidence that this approach would be a viable solution for the cost challenges of this division. Edscha Trailer Systems ’s journey will be the subject of the remainder of this case story.

Typical Trailer Sliding Roof System offered by Edscha

Product Marketing & Management

For Edscha Trailer Systems it had become increasingly difficult to differentiate trailer systems products from competitors. On average, the market was conservative, and innovations required real changes in customer value and extra time for customers to adapt.

The marketing team at Edscha Trailer Systems identified a unique product offering for each model year. They decided what features and options would be offered to customers as standard products while special features could be developed upon request. The team was also balancing the two brands, Edscha Trailer Systems and Sesam, and inevitably they were offering some products with overlapping performance. 

Product Design & Engineering

Sliding roofs are a mature product line and there have only been incremental changes over the years. The engineering team was small and had never completed a large product development project. The annual change in product offering required only small design changes, and the team spent the rest of the year fulfilling customer requested options. They also spent a large amount of their time on solving quality issues. 

Product Operations

Portions of the products we assembled at the Edscha Trailer Systems  factory in the Czech Republic where purchased components for the sliding roofs were cut and riveted together. Other components were delivered directly to OEMs or to the retailers for assembly on the vehicles. Most components are sourced exclusively for the company from 140 different suppliers. In 2011, they produced approximately 30 000 to 35 000 sliding roof systems.

The consistent implementation of modular platforms is one of our major strategic concepts for the future. The competence and know-how that Modular Management AB offers has been a great support for us when implementing changes of vital importance in the areas of R&D and manufacturing processes.

Anders Birgersson
Edscha Trailer Systems (formerly VBG)

Modular Architecture Goals

By creating a Modular Product Architecture for sliding roof systems, Per Ericson sought to significantly reduce their overall costs and make the business more robust to downturns in the market. 

Per looked to combine Edscha and Sesam branded products into the same product platform. He was confident in the fact that VBG had realized many benefits in 1997 doing the same with the VBG and Ringfeder trailer couplers.

We are acting in a mature market with hard competition from both local and international players. Through a modular concept, we can increase our completive edge and work more efficient with a good profit level. Modular Management supported and guided us through the process from being a company with a large assortment with unique components to a modular structure with drastically fewer components. My opinion is that we would not been in the position to work through this process by ourselves. Modular Management’s support and guidance was needed and necessary to bring the project to a successful ending.

Per Ericsson
Formerly Edscha Trailer Systems, retired 2017

The Himalaya project was launched in January 2011, and the investment would all be paid back within 4-5 years after the product launch. The company looked to develop the underlying product architecture and then implement specific products via smaller projects that reduce risk and increase speed to market. The key performance indicators for the project included the following:

  • Meet customer´s various demands via increased configurability
  • Increase barrier for competitors by being an undisputed market leader
  • Be agile with faster time to market and reduced time to delivery
  • Reduce the number of unique components.

Revenue Growth

Edscha Trailer Systems sought to maintain their market share defending it from a new and growing competitor. This would be accomplished by offering additional, desirable product variants and a substantial reduction in average lead time to the customer.

Profitability Improvement

 

The downturn in the market was a harsh awakening for the company. They needed to make drastic changes to their product costs basis in order to remain solvent in the future. The overarching goal was to reduce the number of unique parts by 70%. These are parts that needed to be designed and managed within the supply chain system. With part number reduction, it was estimated that the number of different suppliers could be reduced by 70% and inventory costs would be reduced by 45%. Direct material costs would be reduced as well.

Business Results

By the end of 2013, Edscha Trailer Systems was already seeing the impact of their modularity efforts with trailer sliding roof systems. Even though the product had not yet officially launched, they were seeing the impact of decisions and efficiency improvements that had been made along the way. Backward compatibility allowed new components to work in old systems. 

Edscha Trailer Systems – enhanced profitability in continued weak market

Heading into 2013, the division expected the trailer business to perform positively and that demand would increase in the second half of the year. However, the market remained weak for much of 2013 and it was only toward the end of the year that an improvement could be seen. Despite this weak market, where growth in turnover for the division only amounted to 1 percent, Edscha Trailer Systems improved its profitability and its operating margin rose to 9 percent. Lower costs and more efficient processes contributed to this and the division expects to further improve profitability as a result of the launch of the newly developed generation of sliding roofs in the market in 2014. However, it is principally the result of the anticipated increase in turnover volumes due to the improved market situation that Edscha Trailer Systems will also produce the necessary growth. The main market driver over the next two to three years is primarily the clear need to exchange or replace the existing trailer stock in Europe.

I hold great hope and expect Edscha Trailer Systems, with its strong market position and newly developed products, to have a solid basis in 2014 to continue its journey towards long-term profitable growth

Anders Birgersson talks about the financial impact in the 2013 Annual Report

Future cost savings were also being booked as new contacts
were being negotiated with the smaller set of suppliers. Overall cost
reductions were zeroing in at 15%. This was very close to the initial estimate
by the team and Modular Management. Upon these early successes, the Edscha Trailer System division has already launched the development of another Modular Product Architecture
for the line of sliding roofs that are installed on tipper trailers. 

Product Marketing & Management

The market launch of the new product range will be coordinated with each customer and should be implemented within one calendar year.

In addition to key customers, the team performed a market study of 20 truck body builders and 130 end customers. They confirmed with customers that increased product variety and reduced lead time would be the key to maintaining their market share. They also discovered that product reliability, safety and fast open and close are the critical customer experiences they needed to deliver.

Through the development of the Modular Product Architecture, the marketing and product engineering teams have developed new ways of working together. They have created a strong connection between customer needs and the technical solutions provided within the product. They know very clearly what modules and components deliver significant customer value and prioritize their product development efforts accordingly.

Product Development Engineering

The clear product priorities allowed the engineering and design team to spread out the development effort over time. With limited resources and funds, the team could not develop the entire range of module variants in one large program. They first developed the underlying product architecture that would last over time and then some of the key common module variants. Then, they could space out the introduction of additional modules over time. In fact, the product could be launched while the team was still developing new modules variants. They planned to keep introducing new ones to support the ongoing need for product variety in the market.

Development time for new module variants was set to the following:

  • New module or important module variant is 12-18 months (requires prototype and field test)
  • New product update (module variant without prototype of field test) in 6 months
  • Customer adaption: hole pattern of minor change will take 1 month.

A long-term focus around modularity has been implemented in Edscha Trailer System’s design department. Specifically, the team is much better at designing for production and supply chain and is saving money down the line. Even if it makes the design effort a bit more complex, they are developing and maintaining interfaces that enable efficiencies within operations.

Product Operations

The impact to product operations could be estimated early on as the team negotiated new deals with their suppliers. With reduced part numbers they could plan for higher volumes, fewer suppliers, less inventory and lower costs. At the start of the project, the team predicted a certain reduction in direct material costs, and after the initial planning with suppliers, they were achieving a reduction very close to the original predicted figure. The number of suppliers was reduced from 140 to 40.

The benefits of a more efficient supply chain were being extended to the retailers. Many were planning to keep less stock on hand because they were getting shorted lead times from EdschaTS.

 

Modular Architecture in Action

In order to reduce the number of part numbers while maintaining and growing the number of product variants, the team at Edscha Trailer Systems paid special attention to the primary mechanical system of the sliding roofs. They optimized the interfaces and modules that make up the hinges, rollers and rails. 

What used to take 108 different component variants was reduced to 32 module variants connected through standardized interfaces.

39 Hinges Reduced to 4. 23 Rollers Reduced to 5.

44 Rails Reduced to 8

SPECIALIST
Anders Leine

Anders Leine

SOLUTION
CASE

Sidel

Business Transformation with Product Architecture

CASE

Sidel

In the face of increasing complexity and aggressive competition, Sidel CEO Mart Tiismann decided to invest in a modular product architecture program. The results were remarkable.

Executive Summary

Sidel is the leading global provider of PET solutions for liquid packaging 

The company is market leader in blowing, filling, labelling, material-handling and line-engineering solutions for the beverage, food, home and personal care industries.

In 2010, Sidel was struggling with a complex assortment and high costs for order engineering.

Since the company sells both complete lines and individual subsystems, a relatively high degree of product complexity and order engineering can be expected. Yet the situation was made worse by a Sales culture of saying ‘yes’ to all market requests for customization, and this was more than a question of culture. The market needed more configurable solutions. 

While Sales was saying yes, Engineering and Supply were having a hard time delivering what was sold and the competition was heating up. Margins were under pressure, not least as the competition ate into the most lucrative customer segments, geographies and solutions. 

In the face of increasing complexity and aggressive competition, Sidel CEO Mart Tiismann decided to invest in a modular product architecture program. The results were remarkable:

  • 60% of solutions sold were now configure to order – up from 33%
  • 40% reduction in part numbers
  • 50% fewer new part introductions
  • 10% in reduced cost
  • >300% in product assortment configurations
  • 30% reduction in total cost of ownership
  • 50% shorter order to delivery lead time
  • 30% shorter time to market
  • 80% reduction of engineer to order hours.
CONTACT
Mart Tiismann

As CEO of Sidel, I learnt that it’s possible to transform a business by connecting products, customers and organizations. Modular product architecture and information management tools made it possible.

Mart Tiismann, Former CEO of Sidel Group

Full Case Story

Sidel

In 2010, Sidel had 5 300 employers and a turnover of EUR 1 400 million. 

The company ran engineer-to-order operations at many of its 26 plants for liquid bottling, blowing, filling, capping, labeling and conveying solutions.

Sidel’s product portfolio includes both entire lines and subsystems, with all the products needed for packaging liquids: blow molding machines, fillers, conveyors, labellers, pasteurisers, palletisers, depalletisers, robotic equipment, end–of–line operations, service and spare parts. 

Sidel’s systems are innovative, large, complex and high precision. They are built from expensive materials, demand big and costly spare parts, and run at high speed with high tolerance.

In 2010, the high degree of order–engineered custom products was resulting in lots of customization in production. In fact, every third product had some type of new feature or design.

Challenges

In ‘The Discipline of Market Leaders,’ Treacy and Wiersema present three value disciplines: Operational Excellence, Customer Intimacy and Product Leadership. This is the transformation model Mart Tiismann focused on together with Modular Management’s Alex von Yxkull and Alex Ginsburg.

Both challenges and targets for the Sidel modularization program were structured according to the value discipline model with the goal of reducing costs, increasing market share and increasing price premiums.

Sidel’s business challenges were analyzed and summarized as reasons why the company wanted to initiate a modularization program. Each challenge was allocated to a specific value discipline.

Treacy and Wiersema's Value Disciplines

Product Leadership

  • Need to focus more on innovation – and less on redesigning parts – to regain market leadership.
  • Cross–fertilization and use of innovation partners will demand a modular product architecture and defined interfaces
  • A solution range based on derivates of a standardized base model will leave too many holes and unpredictable complexity costs.

Operational Excellence

  • Too many parts and too many suppliers make systematic improvement impossible
  • Unstable designs make a truly global supply chain impossible
  • Complexity costs are much higher than understood.

Customer Intimacy

  • Standardization of the product offering does not work
  • Order engineering is too slow and expensive.

The next step was to set clear goals.

Goals for the Modular Architecture

Goals for the architecture development program were set according to the same value framework as the challenges.

Product Leadership

  • Improve technology leadership
  • Reduce time to market 
  • Improve performance, primarily speed of new product introduction and improved total cost of ownership.

Operational Excellence

  • Reduce lead times 
  • Reduce complexity costs through fewer parts needed
  • Enable the splitting of design, sourcing and assembly across different geographical locations
  • Enable increased reuse and reduce customer–specific engineering
  • Improve quality.

Customer Intimacy

  • Enlarge the product offering
  • Better serving the increasing variety of customer requirements
  • Enable the development of services.

Liquid Packaging Line

Program Scope

The scope of the modularity program was Fillers, Blowers, Conveyors and Labellers and focused on:

  • Need for market-driven variance and development
  • Complete line configurations, harmonization and balancing of performance
  • Equipment internal modularization and compliance to complete line interfaces
  • Additional focus on control systems (complete line and equipment)
  • Process and information management for maintaining modular products
  • Process and information management for configure-to-order.

Results

Product Configurations

Sidel’s new modular product architecture included the building blocks, or module variants, needed for a better and bigger product assortment. Product–specific results included:

  • More solutions on offer, including triple the number of blower products
  • More options available on more products, thanks to standardized interfaces
  • Aligned product ranges, with specifications defined at complete line level
  • Three conveyor ranges were moved to one architecture, leading to better performance and a higher degree of configurability – without increasing complexity – and 30% fewer new part numbers.

Previous Conveyor Range

New Modular Matrix Conveyor Range

Business Results

The business results were even more remarkable:

  • 60% of solutions sold were now configure-to-order – up from 33%
  • 40% reduction in part numbers
  • 50% fewer new part introductions
  • 10% in reduced cost
  • >300% in product assortment configurations
  • 30% reduction in total cost of ownership
  • 50% shorter order to delivery lead time
  • 30% shorter time to market
  • 80% more engineering hours available for new product development.

As CEO of Sidel, I learnt that it’s possible to transform a business by connecting products, customers and organizations. Modular product architecture and information management tools made it possible.

Mart Tiismann, Former CEO of Sidel Group
HOT TOPIC

Configurable Construction Systems

BY MÅNS RIDZÉN & TOBIAS MARTIN
CONSTRUCTION

How to Improve Productivity in the Construction Industry?

By Måns Ridzén & Tobias Martin

Construction has a hard time to match the productivity of other industries. 

Although there have been multiple phases of industrialization, these changes have had varying degrees of success. And despite efficiency gains, the construction industry remains relatively traditional. 

For example, despite the promise of prefabrication to deliver higher quality at lower cost, there’s an evident risk that product quality is sacrificed for process efficiency. And even these process benefits can be questioned compared to improved on-site production methods.

What’s clear is that construction companies are looking for ways to improve productivity. 

What’s also clear is that there’s not a one-size-fits-all solution. 

Configurable Construction to Meet Stakeholder Needs

Industry stakeholders want different things and these differences are driven by location and climate, regulations, respect for local traditions and the balance between the needs of construction companies, real estate owners and consumers.

This variety of needs is well suited to a modular approach, where different modules can be interchanged and rearranged thanks to standardized interfaces. The result is a construction system that can be configured to meet the needs of the market and provide solutions to satisfy all stakeholders.

Configurable construction systems can add value for construction companies and end customers through increased productivity, reduced lead-times and improved quality and product performance. This article looks at how companies can move from more traditional, custom-crafted construction to a configurable, truly industrialized system that meets all stakeholder needs.

From Custom-Crafted to Configurable

Start With What Delivers Value

Before starting out on a journey to create a configurable system, it’s important to set clear targets and plan how to reach them. These targets must be set specifically for your organization and will depend on company strategy, legacy and starting point.

Some companies see competence limitations in construction design as one of the biggest risks, and therefore set design re-use and CAD-automation as one of the main targets for their construction system. Others focus on direct material savings, quality improvements, value add for customers or digitalization. Successful companies understand what to focus on, how to set targets and how to connect them to actionable KPIs.

If the scope is wide, there will be reason to question whether it’s possible to select one technical or process solution for the whole range. For example, in a high-value segment a standardized kitchen setup might be used to enable a high degree of prefab. But in a high-price segment, the end customer wants more freedom to design the kitchen, including cabinet interiors, pushing the variance point later in time, pushing down the possible prefab degree.

One of the biggest long-term effects of utilizing a construction system is to be able to improve it continuously over time. Project-based businesses traditionally have a hard time to close feedback loops and continuously improve the product over time. Instead, there’s a risk that the wheel is reinvented in each new project. Construction is project based by nature, but this does not stop the central definition and governance of a construction system.

From Project Based to Configuration Based

Avoid Pitfalls

While the potential value is great, if you approach a new construction system from the wrong angle it can lead to big problems. Even when interfaces are in the right position and module variants are specified according to market demands, value will not materialize unless your processes, IT-systems, suppliers and company culture are adapted and aligned.

If strategies are not aligned properly, and not incorporated into the construction system itself, there will be a gap between company vision and implementation. 

Experience suggests that many companies fail to properly assure that the construction system is flexible enough to be used in construction projects with different needs, thereby forcing projects to depart from set interfaces. Other companies risk focusing more on internal needs than the needs of end users, resulting in poor product performance. If you don’t attack these issues head on, your investment in productivity improvements is likely to fail.

Configurable Construction Systems and Prefab

A common misconception is that moving to prefabricated construction elements is the same thing as implementing a construction system. 

The choice whether production should be located onsite or offsite is part of the construction system’s supply chain strategy, and it’s not clear that a bigger prefabricated share will help realize productivity improvements. For example, market requirements, such as flexibility and late customization, may drive production activities to onsite. 

It’s important to carefully match product flexibility with process capability and customer value. For example, customization that generates significant customer value can be be made onsite, while other elements should be optimized for efficiency and prepared offsite.

A construction system should rather be defined as a system prepared for configuration. 

The first step is technology selection, i.e. standardizing on a specific frame system or multiple systems depending on market requirement. The second step is to have predesigned parts that are configured into a building. The higher the degree of centralized preparation, the less work needed in the design of each building. In reality, different parts of the building system will have different levels of preparation depending on the market challenge. Following this, the level of prefabrication can be optimized for each part to reach efficiency and configurability targets.

How Prefabricated Construction and a Construction System Work Together

How to Start?

Construction has some of the most complex and extensive products of any industry, varying from large buildings to huge infrastructure projects. One of the earliest and most important decisions is how to scope the construction system.

A building is a complex system made up of numerous sub-systems structured in multi-layered hierarchies. Dependencies between sub-systems and variance of execution between projects drive complexity in the design, production and maintenance of a building.

Even if the long-term vision is to have all or at least most of the building’s sub-systems as part of a construction system, it makes sense to slice things up in bite size pieces. Before digging into each sub-system, you can benefit from analysing the current state and identify which sub-system has most potential in relation to investment needs. This enables you to plan the overall journey to a configurable system and materialize that potential in iterative steps, starting with the part of the product that will give most return on investment.

Industry Disruption: Risk or Opportunity?

New actors tend to disrupt markets and leave established actors behind if they fail to adapt. The construction industry is likely to see an increasing level of disruption in the coming years, especially in some markets.

Decentralized production, complex permit processes, exposure to economic cycles, competence shortage and a multifaceted legacy are just some of the challenges facing the industry. What has been considered efficient before is no longer good enough. Industry specific conditions has held the industry back from some of the technological and organizational advances seen elsewhere.

As innovation continues at speed, we’ve reached a threshold where systems, technologies and processes can deal with the needs of the construction industry, and we’re seeing how leading organizations are adopting. Companies that find the balance of when and what to invest in will be greatly awarded, even if it’s a fine line and there are several uncertainties going forward. Whatever the right path is, you will have to be fast, flexible and efficient, which makes an investment in a configurable construction system important. Configurable construction will enable you to meet different stakeholder needs, stay on top of market trends and keep your organization together.

In the near future we’re likely to see new constellations of vertical integration. Larger construction companies will take a life cycle management approach to buildings, where the second and third tenant is a new customer. And this places new requirements on the construction system, with stable interfaces for future upgrades, and on the information management systems needed to handle the lifecycle perspective of the buildings.

The construction industry is changing fast and a construction system that can be configured to meet changing needs could well be a prerequisite for success. Either you adapt as competitors set the framework for the future or you lead the change.

QUOTE

Configurable construction systems can add value for construction companies and end customers through increased productivity, reduced lead-times and improved quality and product performance.

Måns Ridzén,
Modular Management
CASE
PEAB PGS
SOLUTION
PALMA SOFTWARE

PALMA®

This is the world-class solution for product management.

Standing for Product Assortment Lifecycle Management, PALMA is cloud-based strategic software to create, document and govern modular product architectures. With this unique structured approach you can design and document product architectures. You can also connect enterprise systems and secure business goals.

Built on an in-memory database platform, PALMA is faster and more capable than anything else on the market, so you can create configuration rules without coding, govern product architecture life cycles and create a business advantage.

HOT TOPIC

Software
Modularity

By Karl Bråtegren

SOFTWARE

How to Avoid Roadblocks?

Karl Bråtegren, Senior Manager at Modular Management in Stockholm, shares some thoughts on software modularity and how to avoid roadblocks.

KARL ON ONE OF HIS FAVORITE TOPICS

What is Software Modularity?

Software modularity is the decomposition of a program into smaller programs with standardized interfaces.

Microservices is a hot trend right now, and it’s essentially about small modules that are built into a whole software system. Spotify and Netflix talk about how they work with microservice architectures, and before this there was a similar trend called Service-Oriented Architecture (SOA) that targeted bigger modules.

Software modularity pretty much shares the same definitions as hardware modularity, with strategically- and functionally-clean modules that are driven by customer needs and share standardized interfaces. You basically allocate different functions to software modules and then implement them in source code.

A common way of referring to interfaces between software modules is Application Program Interfaces (APIs). For example, Google and PALMA expose APIs to the external world, and when you create software modules it’s like creating APIs within the product.

Why is This a Hot Topic?

The main driver is that software is rapidly becoming a bigger part of many products.

Software is delivering on the most important customer values and companies need to be much faster in development to stay ahead of competition. With modularity you can secure product leadership with separate modules that can be developed quickly without being locked into a complex web of other software functions. Basically, you can avoid roadblocks.

A second driver is ‘hardware portability’, a topic that many clients are looking at right now.

Hardware portability means that you want to be able to move the software solution from one hardware to another, enabling you to easily change hardware supplier. Electronics like PCBs, for example, can reach end-of-life quickly and you need to replace them. You also want to take advantage of better and cheaper hardware when it becomes available. If you have inflexible, over-dimensioned software that doesn’t scale well with the hardware, it makes it very hard to move the solution to a lower performance piece of hardware. With the right modules in place, you can isolate hardware impact to specific modules and enable hardware scalability and portability.

A third driver is that you can’t do everything on your own.

You want to make use of open source and leverage third-party specialist expertise. It’s much easier to plug in third-party software, for example navigation and vision processing, into a modular architecture than a monolithic one. You would in this case aim to create modules with the aim to source them from a strategic partner.

What’s Your Personal Experience of This?

We’ve recent client experience, but an older example is when I worked as Product Manager at Siemens Mobile Networks. This was back in the old days of Wireless Application Protocol (WAP), General Packet Radio Services (GPRS) in mobiles and slow networks.

At Siemens we didn’t have a WAP proxy to sell to operators and wanted to launch our own product. What we did was to partner with an American company that had a proxy server with compression technology, and they then made their APIs available to us. Using these APIs we could develop services aimed at the cell phone service providers and make a viable and attractive solution. We also discovered that we needed a WAP protocol stack, so we found a Finnish company with a commercially available WAP-stack that we could plug into.

This is a practical application of our strategic sourcing driver from the Module Indication Matrix (MIM), but at Siemens we didn’t think much about it back then. We just bumped into challenges that had to be solved and found a way to solve them with strategic partners.

What are the Opportunities for Companies?

There are many reasons to invest in software modularity, but it’s basically about being fast and flexible. By developing new features faster, and more frequently, you can provide new software and hardware products that better meet customer needs.

You can also work with the continuous release of new features, while maintaining quality and not putting product reliability at risk. In an integrated or monolithic architecture, there’s a risk that when you introduce a new feature update the whole product goes down. If it’s a robot, for example, this means the whole line stops. Even if the update feature is quite small, like a nice new Graphical User Interface (GU), customers will be scared – or won’t even dare – to update if it’s in a big monolithic package. This has been a real issue and in some cases it still is.

Without a flexible, modular software you have a slower development pace, more bugs, more testing issues and more time to release. You’re also forced to live with old and expensive hardware and run end-of-life hardware projects, often in panic mode.

MONOLITHIC AND MODULAR DEVELOPMENT HIGHWAYS

What is Modular Management Able to Offer?

We’re able to offer a unique approach in Modular Function Deployment® (MFD) which solves many of the challenges mentioned earlier.

I haven’t seen any other structured approach that explains how you should think if you want to move to microservices or a more modular software architecture. There are rules of thumb in the software world, like separation of concerns, but there is no real method like the one we have.

MFD is unique because it takes customer values into account. This is extra important for software, because for a lot of modules you don’t need parallel variants of the source code, you just need to increase speed in delivering on certain customer values. In other words, you need to rapidly bring out new versions of these modules.

With MFD you can also consider company strategy up front, for example hardware portability, strategic sourcing, carry over and technical specification. One scenario is that when you offer integration capabilities to the external world you may need different protocol stacks. An example of this is to offer many different industrial Fieldbuses (ProfiNet, EtheNnet/IP, DeviceNet…). They will typically come with their own variants of the code. This is an example of when we would apply technical specification as a strategic driver. In the end, this could be enough reason to create a module for the Fieldbuses.

Many of our clients typically have good technical software architects. Architecture is a skill that’s important when you work with software because it’s so abstract. You don’t have brackets and pumps to touch and feel, so software architects are typically comfortable in talking in functions and working with architecture diagrams. But they often overlook customer values and strategies, or at least don’t have a systematic method to approach these critical drivers and how to reflect them in the architecture.

THE CUSTOMER-CENTRIC METHOD FOR PRODUCT ARCHITECTURE CREATION: MODULAR FUNCTIONAL DEPLOYMENT (MFD)

Any Final Thoughts?

I’ve heard software architects say that it’s more difficult to describe exactly what you mean when it comes to software, just because it’s so abstract. You also have a very high degree of freedom in implementation since you’re not bound by physics.

This level of freedom makes it easier to circumvent the architecture during implementation, so it’s always important to go back to why you defined a module and make sure it’s implemented accordingly. That’s where we come in. 

For more information, contact me via the button below.

CASE

As software architecture can easily be circumvented by the coders, it is important to repeatedly go back and look at the reasons why certain functions were grouped into modules.

We have done software modularity before, but this time we factored in customer values and strategy. I believe this makes our new architecture much stronger.

Roger Kulläng
Global Software Solution Architect ABB Robotics
SOLUTION
MODULAR MANAGEMENT SPECIALIST

There are many reasons to invest in software modularity, but it’s basically about being fast and flexible. By developing new features faster and more frequently, you can provide new software and hardware products that better meet customer needs.

Karl Bråtegren
Senior Manager
Modular Management

PALMA®

This is the world-class solution for product management.

Standing for Product Assortment Lifecycle Management, PALMA is cloud-based strategic software to create, document and govern modular product architectures. With this unique structured approach you can design and document product architectures. You can also connect enterprise systems and secure business goals.

Built on an in-memory database platform, PALMA is faster and more capable than anything else on the market, so you can create configuration rules without coding, govern product architecture life cycles and create a business advantage.

CASE

Johnson Controls Hitachi

How Market Segmentation Helps Bridge Strategy and Products

INTERVIEW

Why Market Segmentation?

Rodolphe Jacson shares some thoughts on market segmentation and product planning.

Please introduce yourself

I’m Director of Global Product Management at Johnson Controls Hitachi (JCH), based in Tokyo. 

JCH offers Residential Air Conditioner (RAC), Package Air Conditioning (PAC) for light commercial application and Variable Refrigerant Flow (VRF) systems for commercial buildings. We also supply chillers, compressors and IoT-connected offerings.

The job of my team is to analyse market trends, define product strategy and build product roadmaps in collaboration with our local presence. After building the roadmap, we develop products with cross-functional teams (Engineering, Procurement, Manufacturing and Sales) in order to meet customer, channel and company expectations. The Global Product Development Division is often defined as the engine for growth.

How do you link market needs to product development?

At JCH we collect market trends and customer needs for product development roadmaps. We have 3- to 5-year roadmaps, but they’re often much shorter due to innovation and regulatory changes in terms of energy efficiency, refrigerant use and safety.

For example, one hot topic right now is which refrigerant to use. Ongoing policy changes will impact in just a few years, so we have to prepare for different scenarios. This is not like the car industry, where you can have a 5-7-year development platforms. Our business is more dynamic, like TVs and appliances, where something new comes out almost every year.

Our job is to feed market needs into the product vision, position, pricing and specification, not least at kick-offs with engineering teams who’ll develop and deliver the product.

Why did you choose to work with Modular Management?

It basically came as a package, as we’re working to implement modularity in JCH. This whole package, or journey, starts with understanding market requirements and customer needs. Then you move on to Modular Function Deployment (MFD) and the product architecture. 

For me, market segmentation is a very important opportunity, because we can be a bit technology driven. Most of my team started in engineering and moved on to product management, and despite our success, there’s a risk of focusing too much on technology and stacking features on top of each other. You should never lose sight of the end-customer. 

The customer needs to be in the centre of the conversation. You have to ask, “What really matters?” And to be able to do that, you have to clarify your segments and define groups of customers who want to achieve the same outcome.

How did it go?

It went well. 

We started with the customer journey, when people first start thinking about buying air conditioning. We linked the outcomes to what they want, clustered and grouped them, and looked at providing benefits based on what’s important for each group. With trait-based segments you put the same importance on the same set of benefits and look less at others. The same kind of customer has the same kind of view.

We fully implemented this methodology and ended up with six segments. And with these segments we were able to re-evaluate the size of market based on data and statistics from our market intelligence.

What were the main challenges?

The main challenge is to focus on end-user segments and make sure that their needs drive product development and planning. Our business mainly goes through professional channels, but it’s still important for us to focus on the end user. 

For example, take a hotel. 

We sell air conditioners to distributors and contractors, who in turn sell and install them to a hotel chain. We know that for the channel, on-time delivery, easy selection of product, installation and commissioning will be very important. But the hotel owner will be more interested in energy saving, easy operation or the user experience.

MARKET SEGMENTATION AND PRODUCT PLANNING METHOD

What are the main benefits of doing market segmentation?

The main benefit is to structure and clarify which segments we have and how we should address them. 

We also see how segments can exist in all regions. In the past we’ve had a more fractured, regional focus. Customers in one country were considered to have unique needs. This may be true, but that doesn’t mean that one segment can’t exist in another country or region. In fact, although segment size and market value differ, segments themselves probably don’t. 

Take the example of well-planned heavy user, who thinks a lot about which air conditioner they want at home. This segment may be big in a country like Japan, and smaller in another country where the product has more of a mass market feel. But it’s still highly likely that there are well-planned heavy users in all countries.

Another useful insight is to see whether we’re under- or over-represented in a segment. Analytics show that the global market is worth USD 66 billion. Each segment represents a share of this, and when you put actual sales in each segment, you can see where you’re focusing too much – or too little. It’s important not to unconsciously give up on segments, and by checking the size of each one you can address them properly.

Another benefit is that we can work together across product portfolios (RAC, PAC and VRF), all looking at the same customer benefits. It’s really beneficial to apply a finding like the relative importance of energy saving across both regions and product portfolios. It’s also good to bring together teams together that usually work separately, and get everyone to address the same customer benefits.

What would you have done differently?

The method’s good. No problems there. 

One of the challenges, for each segment, is to design a customer persona. This is difficult because the final document needs to be both very comprehensive and very easy to understand. 

In the end we asked our marketing team and one of their communications agencies to finalize this. The customer persona is important and you need a very fine-tuned document for internal communication. And we’re not specialists at doing that.

What were the key learnings for you?

The real benefit is that you put the customer at the centre of attention. 

Today, we use the customer canvas to benchmark where we are, in addition to competitor comparisons and functional gaps. We spend more time thinking about the needs of the end-customer and the messaging they want. I would have run this exercise for my team in isolation, even if we weren’t proceeding with modularity as a company.

Thanks Rodolphe for your time

JOHNSON CONTROLS HITACHI

Rodolphe Jacson

SOLUTION

Market Segmentation

CASE STORY

MTS Systems

Inspiration for Hardware Design

MTS SYSTEMS

Summary

MTS Systems is a global supplier of test systems and industrial position sensors for a wide array of applications, including wind turbines.

The company faced had a number of challenges, including decreasing profitability and increasing lead times; a proliferation of products and parts that was scaling with growth; and competitors that were offering “good enough” products with lower prices and shorter lead times.

MTS decided it needed a transformative change and launched a modularity program that delivered significant results, including: 90% reduction in total number of parts; 35% reduction in customer project costs; 70% reduction in lead time; 75% reduction of work-in-progress.

Before modularity MTS used 11,000 parts to build 150 product variants. After modularity, the company used 800 parts for 100,000 product variants.

MTS Servohydraulic Load Frame Product Family

CASE

MTS Systems

MTS Systems had a number of challenges, including decreasing profitability and increasing lead times; a proliferation of products and parts that was scaling with growth; and competitors that were offering “good enough” products with lower prices and shorter lead times. MTS decided on a transformative change.

Beginning in 2002, market growth for test equipment was fueled heavily by newly developing countries where local companies were starting to design and manufacture higher quality, higher complexity products. MTS, who had established themselves in these markets years prior, was well positioned to take advantage of these new opportunities. 

As leader of this niche market and inventor of the core technologies, MTS had seen many years of strong profitability. Customers were willing to wait a long time and pay a lot of money to buy a system from MTS. As new competitors entered the market and existing competitors chose new ways to compete, a new level of products was introduced with “good-enough” performance, lower price and shorter lead times. Some customers could no longer justify the additional time and money required to purchase from MTS.

The company was organized into groups around small market niches that included automotive shock absorbers, aerospace aluminum, asphalt road materials, artificial knees and many others. Each group managed a separate profit-and-loss perspective and controlled profitability of every order using margin-based pricing. Over the years, this arrangement led to the branching of MTS’s core business approach toward the optimization of price performance for the narrow slices of the market. It also led to the proliferation of product variations within product areas that required an increasing number of parts to produce. Operations had a very difficult time gaining leverage, and it was hard to identify opportunities for improvement to the overall business.   

Continued growth in the market was limited by MTS’s ability to address the demand for lower prices and shorter lead times. Their project-based operational model became ineffective resulting in increased cost, lead time and quality issues. Operations were pushed to capacity, and the scaling-up of the current system was not a viable business option. A new approach was required to meet the broad range of customer requirements while maintaining long-term profitability.

Product Marketing & Management

A small, disconnected marketing team at MTS attempted to manage the full breadth of markets, products and customer applications that formed the niches. Each area generated new requirements and potential changes to the product, but it could be five or more years before development resources were available to make changes. It was very difficult to keep products fresh once they were launched.

Sales teams were organized by niches, and they consisted of both sales and application engineers. The teams were capable of gaining a deep understanding of what each individual customer needed and would go out of their way to deliver exactly that. Their pursuits were sometimes detrimental to the company in how they consumed time and resources. The teams often knew more about an application than the customer and needed to coax decisions in order to configure a test system. The consequence of this structure was that it led to a broad range of different product configurations. Test systems were built for additional customers within niches, but there was almost no repetition across niches.

In order to improve the efficiency of selling, a product configurator was created for a few product areas that included a range of product performance, features and options. It greatly improved the accuracy of the communication between sales and engineering, but it made no improvement to operations or product management. The configurator included all reasonable product properties that customers may want, but there was no predetermination as how the product would be produced, if it had been built before, or if it was a profitable configuration. Since there was no active connection between the sales configurator and operations, sales people configured whatever the customer thought they needed, and engineering decided how it was designed and manufactured. 

Product Design & Engineering

The product design function at MTS was closely coupled to project engineering. Each customer project had an engineer assigned to follow the order through the system and to troubleshoot when something went wrong. The planning of projects always included a contingency for schedule and cost both of which were burdened by the customer. The goal was to ensure project profitability and deliver it on a promised date even if the date was later than what the customer originally requested.

Each customer project was accompanied by a new set of paper documentation. Little efficiency was gained in engineering even when the sales teams were able to sell close copies. After customer projects were completed and quality problems were resolved, the design teams could then focus their efforts on new product development. Consequently, development activities took a back seat and they were risky activities for product teams to propose. Most of the innovation and new designs occurred on customer orders with the risk built into the price and schedule.

Efficiency gains in engineering were realized only with individual people. Based on their own experiences, each would develop processes to optimize their efforts. In many cases, it was easier for individuals to start from scratch on a project versus reusing someone else’s documentation. This mode of operation covered-up the system-wide challenge because people were doing their jobs well. Problems occurred only when the system of people was disrupted.   

Product Operations

Since every customer test system was new to some extent, many issues during manufacturing became science projects. Each took a lot of time and brainpower to resolve, and involved highly skilled and experienced people. The learnings from issue resolution were stored in the heads of the people who worked on the problem because there was no process to share across the company. Project engineers would try to pick the same operational resources each time they needed to build a system in the same product area.

The wide range of components supported by the supply chain was managed without the support of forecasts or the ability to buy anything in volume. The lead time for projects was established by the component with the longest lead time, and the low volumes offered MTS little buying power and control over prices or designs. Components that were available one year may not be available the next year.

In 2002, MTS was focused on improving the efficiency of their operations by reducing the effort for individual projects. They needed to meet the lower cost levels required by the evolving market. The organization was over-burdened and stressed, but the business proposition to scale-up operations in its current state was not attractive. A new approach was needed to regain control of the system and meet the changing requirements within the market.

These operational issues along with a desire to control and improve overall profitability caused MTS to make sweeping changes to the organization. With a new organization aligned by business functions, they hoped to shift the focus to core profitability and to the identification of business-wide opportunities. As a result, the sub-optimization within market niches was gone, but the pendulum had swung too far in the other direction. Specialized knowledge was not being delivered where it was needed in a reasonable amount of time.

In 2004, MTS launched a series of initiatives to balance the organization and secure their ongoing leadership position in the market. Called the Market Leader Challenge, it sought to improve the competitiveness of the company’s products and processes. Using modular architecture to efficiently deliver products was supporting the Leverage Product Offerings initiative. It would create a new operating model for higher volume products to keep up with market growth in emerging regions, and it would expand the range of product performance and features to address new product entrants.

MTS chose a single product family to pilot modular architecture and intended to work on others in succession. A pilot approach was chosen because the business systems and process that were being created for the product family were not replacing existing ones. The new process could be developed and tested on a small scale with new people and then repeated within another product area. The management team picked product areas that reached across multiple niches and consolidate technical capabilities, and chose servohydraulic load frames as the first.

Revenue Growth

Servohydraulic load frames are used by MTS customers for complex fatigue life and fracture growth studies on metals and composites or for conducting simple tension and compression tests on consumer products and building materials. This is a market niche where competition had increased and MTS market growth potential was threatened. To maintain a competitive offering, they sought to reduce customer lead times significantly lower than their 48-day average.   

Lead time reduction would be accomplished though the new modular architecture that would collect the full scope of this product area into a single product platform. A goal was set to achieve 80% of orders using product configurations of 100% established modules. These could be delivered in a fraction of the 48 days. The remaining 20% of orders would use 80% established modules and would reduce the time to both design and deliver. 

Profitability Improvement

The management team determined that the additional capacity required to meet the growing market demand would come from increased efficiency rather than the addition of resources and manufacturing space. A large chunk of the efficiency would come from having more orders configured instead of designed, and this would lead to a 30% reduction in job cost. 

The operations would also become more efficient by reducing the number of part numbers that needed to be managed by the various teams. By creating a modular architecture, a 90% reduction in total part count was expected. MTS also established a goal to keep new part creation to less than ten per week.

 

With a new approach to delivering solutions to the market, MTS has added the efficiency and capacity needed to keep up with the market growth. By leveraging the similarities of the test systems across applications though a deliberate family of products, they were able to take advantage of some level of scale. In the words of CEO Laura Hamilton, “Modular platforms have helped us build a cost advantage. We’ve reduced our unique part numbers.”

Much of the success at MTS was due to the implementation of teams within the major business functions. These teams of managers and core implementers worked together to figure out how to implement the Modular Architecture in their function. The successful results encouraged the management team at MTS to continue to develop Modular Architectures for other products. This included the family of electronic control system and the family of software applications.

Product Marketing & Management

The initial launch of the servohydraulic load frame product family was a great success. It incorporated an extensive update of the products across the many application niches that would have individually taken ten years or more. The number of overall product variants was increased by more than 100%. Features and system performance for each of the individual applications was increased by sharing across the entire product family.

At the same time the new Modular Architecture was being developed, the sales organization was changing to support the Market Leader Challenge. Sales teams were being deployed regionally instead of by market or application. They were becoming generalists instead of specialists and needed to rely on others for specific application knowledge. The ability to configure products from a predetermined set of designed and managed variants was an important factor in their success with the change.

A new product configurator was implemented that was linked directly to the operational systems. It was based on the modules within the architecture, and whatever was sold by the sales team from the configurator was built by the manufacturing team. The efficiency of the product family was controlled with the predetermine variants offered in the configurator. The people-dependency of delivering product was removed from the process.

A more efficient marketing organization also evolved out of the development of the Modular Architecture. A single product manager was assigned to the management of the common platform components that made up the core of any system. This individual is focused primarily on managing the internal process and issues to improve the operational efficiency of the product. Other market and product managers are focused on the components like software and test fixtures that adapt the core of the system to specific applications. These folks can manage multiple applications and limit their involvement in the core product.

Product Development Engineering

Engineering activities at MTS have increasingly shifted away from delivery of specific customer orders to the up-front design of a planned product platform. In fact, the development of the first Modular Architecture for servohydraulic load frames solidified the need for a research and development department. MTS found that it was necessary to separate the engineers working on new products away from the demands of everyday customer projects.

The platform design of the load frames is a marvel of design efficiency. The overall part numbers were reduced by 75%- 90%. Before the modular architecture there were 11,000 unique part numbers to build 150 unique product variants. With it, they only need 800 unique part numbers to build over 100,000 unique product variants. Many customized test systems can also use a portion of the platform integrating newly engineered content through standardized interfaces.

Documentation is one of the key engineering functions that was addressed in the load frame project. It was once a paper-based process where project-specific drawings were created, printed and shipped with each order. It is now a paper-less process that automatically builds CAD models and simplified eDrawings from product configuration data. It eliminates much of the non-value-added time engineers used to spend on each order, and individual project costs have been reduced by 18-35%.

The electronic documentation now also contains all of the manufacturing information. When a product is configured, the production operations are configured at the same time. The documentation has also become an important tool for governing the Product Architecture. Changes now needed to be planned and approved. Using paper would have allowed the organization to go back to its old ways. 

Product Operations

The initial Modular Architecture project proved to the management team at MTS that they were on the right path to regain capacity and efficiency in their operations. For load frames, the average time in the manufacturing process was reduced from 48 days to 14 days, and the corresponding work-in-progress was also reduced by 75%. In the past, systems would travel upwards of 1.2 kilometers in the plant. Consolidation of operations into modules and the implementation of an assembly cell reduced travel to less than 100 meters. Modules are built and tested ahead of time to ensure they are working when assembled into the test system. The number of steps in the assembly process was reduced from 24 to 10, and there was much less rework. 

The reuse of components across the broad product family allowed the supply chain to be managed with forecasts and higher volume purchasing. The team established tiers of components to go along with their planned product lead times. Tier I items are high demand and closely managed to be always available with short lead times. Tier II items have slightly longer lead times that expand with high demand at a single point in time. Tier III items have the longest lead-times and are not typically held in inventory. These lowest volume components are procured to support each order, but the lead time is consistent.

A significant set of modules that was developed for the modular architecture within the load frame product platform was the integrated actuator beam.  Analysis of the functions of the components indicated that many of them could be combined into this super-sized module. This component is being built and fully tested before it is integrated into the rest of the load frame.

The standardized interfaces surrounding this set of modules allow it to be integrated in multiple configurations of the load frame. Much of the variation required in the system is accomplished with a separate, bolt-on hydraulic manifold module. Variants of the beam module are built using late differentiation. The long lead item of the casting is produced in a limited number of sizes and stored in inventory. The casting is machined per unique variant as it is demanded by customer orders.

This set of modules did not result from the work of a clever design team. It was a result of deploying the Modular Function Deployment® method to identify the location of module interfaces that would accomplish both functional and strategic objectives of the product. The significance of the design is measured by the impact to the customer and the business as a whole.

INTERVIEW

Luther Johnson tells the full MTS Systems case story.

INTERVIEW

How to Manage Innovation?

NIKLAS GUSTAFSSON, KTH EXECUTIVE SCHOOL
NEWS

KTH Niklas on Innovation

We got the opportunity to speak with Niklas Gustafsson, Program Director at the KTH Executive School in Stockholm. Here’s what he had to say on innovation and business transformation.

You focus on innovation management, why?

I think innovation sums up a lot of the challenges we’re seeing today. In this day and age we’re witnessing the introduction of a lot of new technologies and completely new product and service offerings.

We see this in the consumer business, driven by the new tech coming out of Silicon Valley, but it’s also happening in traditional industries. Big changes are under way, from combustion to electric engines, AI, 5G changing the frontiers of telecom, financial blockchains and new sensors enabling the internet of things. All these innovations are going to transform industries of today into something new.

The question is how companies can manage transformation? And this is where innovation management is a very good tool.

What are the main challenges facing companies today?

I think the biggest challenge is to adapt to the new reality that’s coming, especially for manufacturing companies.

There are so many shifts going on at the same time, in technology, business models and internationalization. A lot is being driven by new technology, but technology itself is not the solution. It’s how you convert technology into a viable business model.

For example, the electrification that’s ongoing in the truck and automotive industry is going to put an end to traditional business models and old ways of thinking.

What are the main opportunities?

If you can adapt, innovative technology presents tremendous business opportunities. I think the future looks very good for companies that are able to transform, adapt and re-educate their personnel.

It’s going to be much tougher for traditional companies that can’t adapt fast enough, which in turn presents opportunities for new companies with interesting and exciting new solutions. Innovative start-ups have the chance to completely transform traditional industries, faster than ever before.

We’ve seen this in Sweden in the music industry, where streaming capabilities have created big new companies. Books is another, where big new companies are buying up older ones.

And it’s not just Silicon Valley type start-ups. The airline industry, for example, is changing to meet new environmental demands, and the shipping industry is also going to have to make big changes. These changes will demand innovative thinking.

Another example is healthcare, where the opportunities are enormous, and we’ll need innovation in legislation too. Legislation that fits the old world won’t always fit the new.

What advice would you give to companies?

Fill up on knowledge. Refill. Understand theory, research, as well as practice. 

I give the same advice to academia. Go out, talk, listen and really understand the companies that are out there, and their problems. There’s a balance at this meeting point of theory and practice, and if you find it you’re in a good position to take on technical innovation and business model transformation.

What's the best thing about your job?

I get to meet a lot of interesting people, ideas and questions. It’s where theory and practice meet.

Any links you'd like to share?

I like trying to understand ideas and think one of the best podcasts right now is called Hidden Brain (external link).

Thanks Niklas.

INTERVIEW

What I like most about my job is that I get to meet a lot of interesting people, ideas and questions. It’s where theory and practice meet.

Niklas Gustafsson
KTH Executive School