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CONSULTANCY AND TECHNOLOGY

Journey

BY MODULAR MANAGEMENT
CONSULTANCY AND TECHNOLOGY

Your Path to Success

Modular Management has been the global leader in product architecture consulting for more than 20 years. We have the consultancy and technology solutions needed to support your entire business transformation.

This journey enables you to reduce complexity in your business and accelerate value creation. With a global team of specialists, we’re able to support you on each and every step, and it’s not just about people and methods, since this structured approach builds an information data model that can be governed by PALMA® technology.

Welcome to the Journey. Welcome to The How Company.

JOURNEY

Create a Competitive Advantage

Consultancy and Technology

The Journey is a tried and tested path to create a competitive advantage. It's a way to solve the executive dilemma - how to optimize operational excellence, customer intimacy and product leadership all at the same time.

Through four main phases – Formulate, Create, Implement and Govern – you can connect strategic direction to the delivery of business value. Through this structured approach, Modular Management delivers clarity, performance and customer centricity, so you can reduce complexity and accelerate value creation. 

The journey enables you to:

  • Formulate company strategy and market objectives into a business case and actionable program plan
  • Create a modular product architecture with design specifications across product families
  • Implement an information model for configurable designs throughout your entire supply chain
  • Govern configurable designs to realize the competitive benefits of a long-lasting product architecture.

Tried and Tested

After more than 20 years and 100 client programs, Modular Management combines consultancy and technology so you can deliver business value. 

Modular Function Deployment® is the foundation method, and synchronizes with a range of methods and tools to help you reduce complexity in an increasingly complex world.

PALMA® strategic software is the tool to build and govern product architectures and the information model that connects customers, products and people. The information model is integrated with CPQ, ERP and PLM solutions, and enables true enterprise digitalization.

The unique consultancy and technology solutions integrated in the journey enable you to solve the executive performance dilemma. CXOs have to optimize operational excellence, customer intimacy and product leadership all at the same time. And this dilemma can be solved. Welcome to The Journey. Welcome to Modular Management, The How Company.

How to Solve the Executive Dilemma?

executive dashboard

SUMMARY

The Journey is a tried and tested path to business success in four phases:

  • Formulate
  • Create
  • Implement
  • Govern

Due to this structured approach, Modular Management is able to deliver clarity, performance and customer centricity, so you can accelerate value creation.

Create a Competitive Advantage

Power of Modular Design

PALMA® Software

This is the world-class solution for product management.

Standing for Product Architecture Lifecycle Management, PALMA is cloud-based strategic software for you to create, document and govern modular product architectures. With this unique structured approach, you can design, document and configure products. 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

MTS Journey

MTS Systems Corporation is a global supplier of test systems and industrial position sensors.

The engagement with Modular Management began with Modular Strategy and Potential Analysis (MSAP™). A modularization program was formulated that would accomplish MTS strategic goals and provide a business case to support the investment. Complexity costs were evaluated using ValueMap™ quantifying the bottom-line benefits of modularity within the MTS value stream. A program plan addressed the creation, implementation and governance of the various product offerings within consecutive waves.

An optimized Modular Product Architecture was created using Modular Function Deployment (MFD®), and this architecture was populated with the Module Variants and rules needed to configure the full range of products. Module Finance™ supplied a model that balanced the direct and indirect cost implications of each architecture decision and the tools to analyze the profitability of the modular system. To make the modular architecture actionable, MTS inbound, outbound and production value streams were newly envisioned using Module Supply Chain Study. Plans were established for each module along with the system requirements to deliver them.

Module Design™ was used to implement standardized interfaces while managing development streams, priorities and module requirements. With these enabling concepts, the MTS approach to documentation was reimagined with process and tools and applied to the existing CAD/PDM systems. A new end-to-end, integrated Configure-to-Order system was also implemented and production was transformed from time-station assembly to a production line. MTS began to manufacture and maintain a product families with dramatically fewer unique part numbers while greatly decreasing lead times and inventory.

Modular Transformation™ established needed changes for a new way of working to ensure the benefits of modularity would be a lasting and profitable foundation for MTS. Processes in and around the value stream were enhanced with decision metrics and tools to sustain the improved business performance. New roles, such as Chief Architect and Module System Product Manager, were created with the mandate to sustain and leverage the architecture.

CASE

MTS Case Story

MFD by Modular Management
CONSULTANCY

MFD

BY MODULAR MANAGEMENT

Modular Function Deployment

Apply Modular Function Deployment (MFD) to create product architectures that meet customer needs, strategic targets and functional requirements.

MFD enables you to balance stakeholder perspectives and create a product architecture that reduces complexity and accelerates value creation. With MFD and the accompanying information model, end customers can configure their own solutions and you can build a competitive advantage.

And that’s when the fun really starts.

JOURNEY, CREATE PHASE

How to Balance Stakeholder Perspectives?

The objective of Modular Function Deployment® (MFD) is to create a modular product architecture that integrates and balances stakeholder perspectives. With this architecture in place you can enable the mass customization of products and services, reduce complexity and accelerate value creation.

With MFD, stakeholders are represented by one of the following voices: 

  • Voice of Customer
  • Voice of Engineering
  • Voice of Business
  • Voice of Modularity.

Voice of Customer represents the marketing, sales and service functions of the organization as they strive to satisfy customer needs. 

Voice of Engineering represents the engineering and design functions as they strive to develop and choose technical solutions that are combined into products and services.

Voice of Business represents company strategy, operations and finance. These functions work together to guide decision making and make and supply products as specified in the product development process.

The power of the modular product architecture itself is integrated as an additional voice, the Voice of Modularity.

MFD by Modular Management

MFD has five steps to discover, capture, quantify and document the unique perspective of each stakeholder voice. Activities are supported by established methods and tools. The method is iterative and progresses through each step so the modular product architecture can be built and refined. Analysis and a clear governance model balances all stakeholder perspectives to connect your customers, products, services and people.

SUMMARY

MFD

Modular Function Deployment® (MFD) is a method to create product architectures. Combined with PALMA® Strategic Software you can link the architecture to a universal information model that enables the mass customization of products and services and connects your organization.

Why?

  • Reduce complexity
  • Accelerate value creation

How?

Five-step process:

  1. Clarify Customer Needs
  2. Identify Functions and Solutions
  3. Propose Modules and Interfaces
  4. Define Variants and Configurations
  5. Confirm Architecture Feasibility

Tried and Tested

Modular Management has 20 years of experience creating product architectures. We provide technology and consulting so you can reduce complexity and accelerate value creation.

TECHNOLOGY

PALMA®

This is the world-class solution for product management.

Standing for Product Architecture Lifecycle Management, PALMA is cloud-based strategic software for how to create, document and govern modular product architectures. With this unique structured approach and strategic software you can design, document and configure products. 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.

Bosch
INSIGHT

The Quietest Heat Pump

Case

Bosch

Bosch

Bosch Thermotechnology (TT) is a division of the Bosch Group. The company is a leading supplier of building heating products and hot water solutions.

Electric heat pumps are most commonly used in Scandinavia and Northern Europe including the UK. Tranås, Sweden is the location of Bosch TT’s competence center and manufacturing of electric heat pumps (TT-HP). In 2005, the original Swedish company, IVT, was acquired. Today, new heat pump concepts based on various technologies are being developed and manufactured under several different brands, most well-known: Bosch, IVT, Junkers and Buderus. Product brands were deployed regionally and differentiation was primarily limited to look and feel.

In Sweden, IVT branded products are sold through the own wholesalers and other through independent distributors. In other countries like Germany the branded products are sold through independent distributors including specialized dealers and big box stores. Annual revenue is around 100 MEUR. Final assembly of all electric heat pumps occurs in Tranås where components and sub-assemblies are sourced globally. The site employs about 320 people in both manufacturing and product development.

Bosch TT’s heat pump businesses faced a number of challenges, including lower profitability, more low-cost competitors, complex range of product options and large inventories. 

Bosch TT implemented a modularity program supported by Modular Management and achieved dramatic results: 60% fewer part numbers, 40% reduction in inventory, and a stunning improvement in productivity – 50% reduction in assembly time and 66% less floor space. 

The simplified designs generated highest in class energy efficiencies, the quietest heat pump ever built by the company, and five new patents. The product cost was reduced by 44%, which enabled a large increase in profitability and price competitiveness, and this led to double digit market growth once the product hit the market.

Summary

Creators of the Quietest Ever Heat Pump

 

Bosch TT heat pump business faced a number of challenges, including lower profitability, low-cost competitors, a complex range of product options and large inventories. And then Bosch TT implemented a modularity program supported by Modular Management. 

Business Value

The simplified designs generated highest in class energy efficiencies, the quietest heat pump ever built by the company and five new patents. The program also enabled a large increase in profitability and price competitiveness, with double-digit market growth generated once the product hit the market. The division experienced a significant overall improvement in productivity.

KPIs

  • 44% reduction in product cost
  • 60% fewer part numbers
  • 40% reduction in inventory
  • 50% reduction in assembly time
  • 66% less floor space.

The Full Story

In the 1970s, IVT pioneered liquid-to-water technology which integrates a liquid circuit under the ground with a heat pump in the building. This made a giant leap in efficiency that allowed consumers to easily justify a higher price. Being first to market, the company grew with high profitability for many years. As time moved on, competitors introduced similar products and the efficiency of competing technologies was improved.

In order to maintain its market leadership position, Bosch TT-HP expanded its portfolio to include products based on air-to-water and air-to-air technologies. These technologies exchange heat directly with the outside air and require fewer components and simpler installation. They are lower priced and deliver lower levels of efficiency. System components are sourced from suppliers in Asia, and the profit margins were significantly less than Liquid-to-water systems.

With expansion into new markets and at the same time declining home market Sweden overall profitability for the business unit declined. A broader portfolio coupled with the need to offer multiple brands led to a very high complexity.

In 2011, the management team decided to make significant improvements in response to the declining business situation. It would develop its own air-to-water product family in Tranås that would leverage many fewer components and unique part numbers into a similar breadth of products using a Modular Product Architecture, which would replace the two own platforms for air-to-water heat pumps (Optima and Premium Line). They planned for significantly fewer parts and less finished goods inventory. They also need to significantly reduce direct material costs.

Product Marketing & Management

The product family of air-to-water consisted of, the two own platforms complemented by OEM sourcing. The team had little ability to make changes to the products and there was virtually no difference with the products of the competitors. Consequently, the marketing team was focused primarily on the Liquid-to-water product niche.

The team was also challenged with prioritizing between tactical (short term) and strategic (long term) activities. Marketing attention and development resources were often pulled from ongoing NPD projects in reaction to competitive threats and quality problems.

Product Design & Engineering

Since the air-to-water technology was partly OEM-sourced, the technical knowledge in these products was limited. The primary area of this limited knowledge was the out-door unit of the system. A system is comprised of both an indoor and outdoor unit. There was limited control over the design of the remainder of the system. Even if marketing identified an opportunity for a new product, it was very difficult for the team to deliver a new product in the required time frame.

Before the decision was made to develop the new product family, the Tranås site began a transition to the new Bosch product development process called TTM. This provided the development team a clear process, but it added a level in learning necessary, to complete the design.

Product Operations

The indoor unit, in particular, was an operational challenge. Many indoor units had been designed to meet the range of customer needs resulting in a complex range of options and many different part numbers. It was not possible to present incoming components at point-of-use in a good way. A lot of space was required for final testing because there was no way to support the testing of sub-assemblies.

It was also difficult to run small batches of a product variant, even though a business model with multiple brands, required it. This problem was further compounded by the fact that the brand variant was determined at the beginning of the value chain. The result, huge finished goods inventory and obsolescent products in the worst case.

Before creating the Modular Product Architecture for the Air-to-water product family, the management team at Bosch TT-HP formulated plans to turn their company strategy and market objectives into a program plan with a supporting business case.

Revenue Growth

Bosch TT recognized the opportunity to gain market share by offering an Air-to-water system with increased efficiency. No significant efficiency gains had been made with this technology in recent years and a product leadership position would be achieved to whoever accomplished this. They also needed the ability to offer lower priced variants to better defend against new competitors.

Profitability Improvement

The air-to-water product line delivered the second lowest profitability of the three heat pump technologies. Significantly improved profitability would be achieved by having lower complexity. Without a reduction in the number of product variants available for the market, the goal in a part number count reduction was at 50%. Fewer parts mean more reuse of parts and more time to design for lower cost. A 50% reduction of direct material cost was planned across the product family.

A significant reduction of inventory was also planned by the management team. With less variety of parts and higher volumes, the components in stock could be reduced by 30%. Finished goods inventory would also be reduced.

In 2014, the new AirX heat pump product family was introduced to the market as the most efficient air-to-water system in the Nordic market. This was confirmed in by an independent Danish test institute. It was also, at normal speed, the quietest Air-water heat pump ever built by Bosch. The result of being the most effective heat pump in the market resulted in double digit market share growth immediately after the product launch.

The new product family also achieved almost all of the profitability goals including an overall part number count reduction of 60% when compared to the old Air Optima product family. Part number reduction for the outdoor unit have been from 650 to 213 parts, achieving a 67% reduction. Indoor unit part numbers have been reduced with 40% (240 to 145 parts). Consequently, they expect component inventory to be reduced by 40%.

Overall, counting all part numbers for all heat pump products, Bosch TT-HP is now at 19% modularity. They are currently working to launch two new modular platforms, partly based on the first AirX platform. The long term goal is to have all products in a Modular Product Architecture.

The planned product cost (PPC) for the outdoor unit was significant better, 44% better. About 10% of the saving was attributed to a doubling the volume of components giving a larger scale to Bosch TT-HP suppliers. The other 90% of the saving was due to smarter design and new production methods. The original target cost reduction was reached, and the team was very pleased to achieve this kind of reduction and on the same time significantly increasing the performance level of the heat pump.

Product Marketing & Management

Between 2011 and 2014 Bosch TT-HP experienced saturation of the liquid-to-water heat pump market and a shift in product mix to lower margin products, resulting in less sales and profit.

However, the team responded by planning and developing a new and efficient product family to addressed many of these challenges. They invested to increase the market knowledge and develop product roadmaps to fill the existing assortment gaps. They have now acquired the know-how and lots of success to build upon.

During this period, the belief in modularity as the way forward for the heat pump products is actively supported by the marketing team and top management.

Product Development Engineering

A total of five innovations have been patented for the AirX modular heat pump. They team implemented variable speed compressor technology to control and minimize energy use. The team has also change the approach to accomplishing a range of system capacities.

Depending of the heat pump capacity, different sizes of heat exchangers are needed. This normally means a lot of different evaporator variants. In the AirX modular system, a common frame to hold the coil and fin packages was developed with standardized interfaces to the surrounding systems.

Product Operations

The launch of the AirX modular system was coupled with a revolution in the approach to the production system. The system was planned and implemented in parallel with the product development and overall costs have been greatly reduced. Compared to the previous system, the number of operators has been reduced by 75% and the throughput times have been reduced by 90%. Furthermore, the overall floor space has been reduced by 66% (see Figure 1): 70% for the outdoor unit product line and 40% for the indoor unit product line.

Modules are now sourced as sub-assemblies from suppliers based on their strategic intent. Some common modules are sourced for lowest cost and some are sourced locally. By focusing on the assembly of modules, the module variants to be assembled are presented to the line in Kanban systems. This in addition to clean and simple fixtures, has resulted in a dramatic improvement in productivity with shorter change over’s, short assembly time and very high quality.

The production has been further decoupled from the specific brands using extremely late-point differentiation. From the Tranås plant, a generic heat pump is sent to the customer together with a branded design kit. This eliminates the finished goods inventory of branded heat pumps which was a huge problem before. In addition, market volumes can now be better forecasted than before, reducing lead times, inventory and cost.

The fan is key component in the outdoor unit moving air through the heat exchanger. In the past, fans were mounted in the product using many different styles of fabricated brackets. The fan must also be insulated, but this was mostly done as an afterthought in the design. It was placed wherever open space existed.

During the process of creating and optimizing the Modular Product Architecture, the team closely examined the technical solutions interacting with the fan. They discovered that the functions of supporting and insulating the fan could be accomplished with a single set of modules. These modules would have a standardized interface to the fan and to the rest of the structure in the unit. A single design to the module set could be used and scaled for the different sized units.

With this higher level of part commonality, the team determined that they could produce it with techniques reserved for higher volume components. It became a molded part that was constructed of expanded polypropylene (EPP). 30 parts have been reduced to 2 parts and corresponding resulting the complexity cost has been reduced to 1/15.

The same concept was used to hold and insulate the indoor unit’s water tank, saving numerous components, cost and heating energy.

INSIGHT

Lean and Modularity

BY MODULAR MANAGEMENT
TOPIC

How to Find the Winning Synergy?

Go Lean and Modular to Minimize Waste

Minimizing waste is the focus of both lean and modularity. In many ways, they’re the perfect match to accelerate value creation.

Lean

The core idea of lean is to maximize customer value while minimizing waste. This is accomplished through the application of a structured way-of-working that eliminates or minimizes waste. A lean organization understands customer value and focuses key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect, zero-waste value creation process.

Lean thinking changes the focus of management from optimizing separate technologies, assets and vertical departments, to optimizing the flow of products and services through entire value streams. These value streams flow horizontally across technologies, assets and departments to customers.

Modularity

A modular product architecture also addresses waste in a company. This approach to waste comes from an understanding that each part number adds cost along the entire value chain. A modular product architecture define modules that carry market-driven variance with standardized interfaces, and enables the configuration of many different products from a limited number of module variants.

Winning Synergy

Both lean and modularity are often dependent on a cultural change in the company to be successful, and both require a clear strategy. 

Does the product require cost reduction? Is the objective to expand the product range or do we need to reduce time to market for new products? Lean and a modular product architecture can address these strategic questions if they are clear and communicated to key stakeholders.

How to Avoid the Complexity Waste Trap?

Lean and Standardization

Companies often face a situation where their product structure has become complex, after acquisitions and new product offers expansions. There can also be a significant old product legacy, if old products are not phased out to. Market expectations also drive complexity, with companies responding by expanding their offering without understanding the full consequences. 

When profit starts to drop, cost reduction projects kick in and the product structure tends to get a quick fix by standardization. Lean manufacturing is also pointed out as part of the remedy, but this approach may improve efficiency – but not effectiveness.

What can be done according to true lean thinking, for example the Toyota Production System (TPS)? TPS is about being effective, doing the right things first, and then doing them efficiently. And here’s a way to make it happen.

Lean and Modularity

Business often starts with development of products, where market needs provide the cornerstone, and the product structure must be flexible and effective. 

A modular product structure is effective since it starts with customer needs and configurability. It is easy to expand within the platform limitations, reduces internal complexity, requires less resources and is relatively future proof. Other benefits are faster time to market for new products, a wider product offering, reduced lead times, reduced manufacturing costs and higher quality.

How do we recommend implementing lean and modularity?

Step 1, Analyze Waste and Complexity

There are many lean tools a company can use to find and eliminate waste with a product, e.g. 5S and continuous improvement. But it is important to first understand how complex is the product structure and whether it has been expanding over the years without update or rationalization. An overly complex product structure will typically have many part numbers that are difficult to maintain. The reuse of existing parts numbers will be difficult, and it may include the situation where a designer is making a new part rather than trying to reuse an existing part. Quality problems will also be prevalent with purchased or manufactured parts. If the product structure has indications of being very complex, it is a good idea to investigate how big this unnecessary complexity is and then define an action plan how to reduce the complexity.

This internal complexity translates to extra work in most departments of a company. The driver for this extra work is each part number that is created in the design department. Each number represents a part that has to be developed, tested as a prototype, detailed in a drawing, manufactured, procured, transported, stocked in a warehouse, quality checked, picked from the warehouse, transported to assembly, and assembled into the final product, just to mention a few. All these steps mean more time for a product that has many part numbers and a low volume of each compared to a product where there are few part numbers and high volume of each.

Step 2, Build an Effective Product Structure

The entire cost structure is affected when decreasing the internal complexity of the product. Typical results from mechanical industries, both business to business and consumer products are a part number count reduction of 50% and a cost reduction of 10% in the total value chain.

Modular product architectures address internal complexity by enabling a company to configure a range of products by combining different module variants with standardized interfaces. It is important to create an efficient product structure before applying lean directly on the existing product structure. If lean is applied on a bad product structure limited results will be achieved because the negative effects of too many part numbers in the product architecture will still exist. It will not be possible to gain the leverage of increased purchase volumes if too many different part numbers are being used. 

In terms of money this increased purchase volume will generate a substantial reduction of direct material cost (dM), often in the range of a few % up to 10% reduction. What cost reduction project can achieve these savings at the same time as quality is improved?

It is important to understand that neither lean nor modular product architecture is in any conflict with one another. They are both striving in the same direction – minimizing the waste defined as non-value added activities for the customer that will buy the product. modular product architecture and lean are not primarily aiming at the level of individual processes, but target the entire value chain of a company.

Many lean-thinking organizations are doing the wrong things more right. Making things efficient that shouldn’t be done in the first place. Doing a lot of efficient things but not effective things.

Step 3, Implement Lean

Modularity is how to be effective. Lean is how to be efficient. 

This is what Toyota built on with TPS, following the work of Taguchi: ‘Let’s do the right thing first, then make them efficient.’ This encourages you to start with an effective modular product structure and then implement it efficiently throughout your organization.

Modularity and lean create powerful synergies in a company. After more than 20 years of experience of developing modular product architectures with lean implementation, we’ve seen a reduction in client product costs, decreased lead times and reduced tied-up capital. All at the same time as the product offering has expanded. 

On top of cost reductions, there are also important increases of revenue due to offering more customizable products to the market. One common question is which to start with, modularity or lean? Or can both initiatives be run in parallel? Our experience is that it’s best to start with an effective product structure and then apply lean efficiency. This will give you a competitive advantage, with lean putting the turbo on modularity.

Anders Leine
Anders Leine

info@modularmanagement.com

SUMMARY

Lean and Modularity

Modularity and lean create powerful synergies in a company. Both strategies focus on minimizing waste and in many ways they’re the perfect match. 

After more than 20 years of developing modular product architectures with lean implementation, Modular Management has seen a reduction in client product costs, decreased lead times and reduced tied-up capital. And all at the same time as the product offering has expanded.

How to Implement Lean and Modularity?

One natural question is which comes first? One size doesn’t fit all, but experience leads us to recommend a three-step implementation program: 

1) Analyze Waste and Complexity

2) Build an Effective Product Structure

3) Implement Lean and Continuously Improve.

"Modularity is how to be effective. Lean is how to be efficient."

Anders Leine, Modular Management
LINKS

Power of Modular Design

INSIGHT

Design for Agile Line Production

BY MODULAR MANAGEMENT

Agile production and mass customization are powerful concepts that line producers often find hard to realize. But it is possible.

Topic

Agile, Customized and Lean

Agile production and mass customization are powerful concepts that line producers often find hard to realize.

Many struggle to simultaneously: 

  • Ensure lean, operational excellence.
  • Innovate and renew products fast enough to stay at the forefront of global competition.
  • Offer the product variance and uniqueness needed to appeal to many customers.

So, how can you make mass customized products and secure business fundamentals? How can you design for agile line production? Access a new white paper for a few ideas.

Alex Ginsburg

Co-AUTHOR

Magnus Gyllenskepp

CO-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.
LINKS

The Executive Dilemma

The Journey

PALMA® Strategic Software