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CASE

Esdscha 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 hotting 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.

CONSULTANCY

Governance and Modular Transformation

BY SUSANNE FLYCKT SANDSTRÖM
JOURNEY, GOVERN PHASE

How to Transform Your Organization?

Susanne Flyckt Sandström, President of Modular Management Sweden, looks at how to transform your organization and realize the full value of modularity. 

By focusing on key success factors  such as roles and responsibilities, decision models, core processes and information management  you can align your organization, reduce complexity and accelerate value creation.

Susanne, How do You Look at Governance?

For me, governance is crucial to realize and sustain value.

The challenge with modularity is not only to create the product architecture, but to live modularity and that starts at the top. Top management already understands the importance of governance, but needs to adapt leadership skills, decision models and communication in order to connect the organization.

We know that companies that focus on governance early on in the modular journey will be more successful. If you don’t, the sad thing is that even with the best product architecture in the world, you may well lose control and see complexity start to increase once more – and then your investment will be eroded.

What are the Main Challenges?

It’s quite easy to see the value of going modular and to imagine what the product architecture will look like. You also often know which people and resources you need. 

A trickier question is: “How can I get my management team knowing and living the modular way?” 

This includes how knowledge can be spread throughout your organization in terms of roles and responsibilities and decision making – as well as softer areas like collaboration, communication, ways of working, new domains of responsibility and lost domains where individuals feel like they’ve been dethroned.

It’s a lot about empowerment and alignment.

YOUR ORGANIZATION, ALIGNED

What’s Your Personal Experience of Doing This?

I’ve led many organizations through transformation journeys and change programs. 

It’s more about doing what you need to do, rather than saying what you need to do. It’s more legwork than management meetings; but you also need to have a governance model in place before being able to walk the talk.

You also need to have patience, and in big organizations you need to say and communicate things thousands of times before you can start to see change happening. I think it’s crucial to start thinking at the very beginning about how you can make this journey with the organization directly; and not just by putting together a small group of people to create a theoretical model.

How Can Structured Governance Reduce Complexity?

If you’ve taken the decision to go more modular, you need to build a governance model. 

If you don’t, or try to fit your existing model to this way of working, all the creation and implementation effort and impact will be diluted. This means you’ll see complexity starting to increase again, and you won’t be able to realize the value that you know is in the product architecture.

At Modular Management we offer a structured method for Governance and Modular Transformation. It involves assessment and improvement in key focus areas.

GOVERNANCE ASSESSMENT, EXAMPLE

What Opportunities Does This Represent?

Structured governance enables you to realize and sustain value creation, but it also creates a culture of cooperation in the company, necessitating cross-functional teams and creating a common language for all units. 

Lots of people will meet new colleagues, which in itself speeds up the creation of the architecture, and people start to communicate with each other in a new and structured manner. This really generates a lot of positive energy inside and outside of your organization.

For example, in a situation where you’ve bought and merged companies, there are probably many different entities that don’t ever meet or work together. A well-governed modular product architecture is an excellent arena for connecting a company. You start to think about how innovation and new features from engineering will impact sales; how production will impact R&D; and so on. This is very, very positive, not least because it’s driven by your strategy and the needs of end customers.

Contact me via the button below if you’re curious to find out more.

QUOTE

If you’ve taken the decision to go more modular, you need to build a governance model. If you don’t, or try to fit your existing model to this way of working, all the creation and implementation phase effort and impact will be diluted.

Susanne Flyckt Sandström,
President, Modular Management Sweden

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.

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

Market
CONSULTANCY

Market Segmentation and Product Planning

BY MODULAR MANAGEMENT
JOURNEY, CREATE PHASE

Will Your Products Deliver?

Market segmentation enables you to build customer needs into your products in five steps: market segmentation, market specification, product family definitions, product family roadmap and product specifications.

From Customer Needs to Product Benefits

Will Your Products Deliver?

Market segmentation enables you to uncover market insights and deploy products accordingly. You capture the voice of the customer and apply it directly to new product development, thereby defining the actions necessary to achieve market strategy. 

The end of silo thinking is close, since market segmentation connects product management with product development. The results include reduced complexity, thoughtful trade-offs and a structured way to discuss market requirements. Instead of who shouts loudest, let your team focus on which products should deliver which benefits to which customers.

Start Outside-in

Which Customers Benefit from the Product Experience?

Customers purchase products to perform certain tasks. Each customer has expectations for what a product should do and what they will gain from the experience. A customer benefit is a short statement that describes what customers gain, and the set of benefits for the whole experience is the basis of market segmentation.

Customer benefits give you a lens to better see the market, with categories related to:

  • money 
  • time 
  • health 
  • security 
  • physical effort 
  • mental effort 
  • comfort 
  • recognition 
  • prestige.

Products deliver benefits in one – or all – of these categories. The overall scope of market segmentation is determined by the list of customer benefits and the associated product experience.

Needs-based Market Segments

Customer benefits are a valuable way to describe differences between customers, and markets can then be segmented into groups that rate the importance of the benefits in a similar way. Customers within each needs-based segment seek similar products and can exist all around the world. They have the same kinds of problems, pain points and expectations for what a product should do.

Varying levels of importance for each customer benefit across market segments establishes ideal levels of benefit for products targeted at each segment. Irrespective of whether your company targets one or all market segments, the ultimate goals for products are established by the customers. These are the benchmarks for measuring the performance of your and your competitors’ products.

The method for generating needs-based market segments starts with a hypothesis of the segments using the knowledge of the company’s market and product experts. The hypothesis is validated and refined with customer interviews per segment, and the process works equally well for experienced marketeers and companies without any type of market segmentation experience.

Customer Canvas

The levels of importance for each market segment and customer benefit combine to form the customer canvas. The canvas shows the total range of benefits needed within the market, and how each segment is looking for a unique combination of benefits. The canvas enables you to measure and analyze the performance of different products and providers/brands.

Market strategy is put into action with the customer canvas. It shows how to gain competitive advantage and tell the story of what your company wants to accomplish in the market. By connecting this market story to a product story, you can describe how products are developed and changed to support strategy.

Each of the customer benefits are linked to measurable product properties that quantify the delivery of the benefit. Goal values are specified for product properties in order to realize the planned levels of customer benefit to specific market segments. Through this cascade and linkage, levels of benefit in the market story are connected to product strategy and product requirements. 

Key Activities

Find Opportunities to Create Value with New Products

Customer canvas is the basis for analyzing products and determining how well they fulfill the expectations of customers. The comparison of customer benefit performance among segments, the company’s products and competitor’s products identifies the potential for new products. Gaps to customer expectations are opportunities for improvement, and where you exceed customer expectations you’ll find opportunities for cost reduction, and similarities with competitor’s products are opportunities for differentiation.

Benchmarking competitive products can now focus on objective metrics including the product properties that are linked to the value delivered by the product. The overall summary of the competitive product performance is expressed in terms of customer benefit delivery. 

New product concepts are presented using the market story, describing how the concept will impact the benefit delivery and the ability to compete within specific segments. Future market trends are also described in terms of how they will impact the customer canvas. If customer expectations increase over time, gaps increase or open up with the current family of products.

Manage a Product Family Portfolio

Product families are also managed with the help of the customer canvas. Each product in a family is targeted at one or more market segments, and the strength of the match-up is evaluated by gaps and competitive differentiation. Products in the family should also be differentiated from one another to support differences in cost, price and brand. Alternatively, all products within a brand should deliver similar levels of benefit, distinctly different from other brands within the same product family.

When all market segments rate the importance of a customer benefit at a similar level, products within the family should not differentiate on the level of this benefit. This is an opportunity to maintain commonalities between products in the family.

The total benefit delivered by a product is the sum of the performance within each customer benefit, or the area under the curve. Relative price differences between products in the family are matched to the differences in the amount of benefit delivered.

Focus on the Voice of the Customer

Customer benefits are the primary categories for focusing market research efforts and collecting customer feedback. Market segments are the company’s perception of the benefit levels customers seek from the products, and they are examined and refined over time. Voice of customer is collected and analyzed within the categories of customer benefit to answer key questions about how the products are performing in the market:

  • Are customers receiving the benefit they expect?
  • Do they get more benefit from competitive products?
  • How do the levels of benefit vary across brands or product price points?
  • What are the specific product experiences that are critical to deliver the benefit?
  • Which future levels of benefit are needed?

Quantify Market Changes

Changes in customer needs, competition and technology are characterized by their impact to the delivered and desired levels of customer benefit. Customer needs determine the desired levels, and the changes are directly captured on the canvas. New competition and new technology are quantified based on their impact to objective product metrics. The evaluation is clear to all stakeholders when the new performance levels of the metrics are linked to new levels of benefit delivery.

Improve Your Marketing

Go-to-market activities are organized around market segments. Marketing material communicates why a product is well suited for the target market segment and within a family of products, differences are communicated so that a customer can choose exactly the right product. This material also helps customers translate product specifications into what it means for their product experience and what level of benefit they will gain from the product.

Needs-based market segments are also mapped to other types of segmentation, including demographics, behaviors and attitudes. This mapping enables direct marketing campaigns to target specific groups in specific locations linked to specific products and customer benefit levels.

CASE, JOHNSON CONTROLS HITACHI

From Market Segments to Product Planning

A modular product architecture identifies and strategically assigns product functions to building blocks which are combined to form the complete product. These building blocks are modules when the interfaces between them are standardized. With stable and standardized interfaces, market-driven variants of modules can be developed and freely exchanged to provide a vast range of products using far fewer unique part numbers. The resulting product architecture enables economies of scope, with a large family of products, and economies of scale, reduced business complexity.  

A market segmentation model clearly defines the range of products that are included in the product family. Upstream marketing activities tell the market story in terms of products that deliver specific levels of customer benefit. This information is critical to decide which modules have many variants and which modules are common. The product story then specifies the complete range of performance that must be provided within family.

Market segmentation enables you to understand why, where and how much variance is needed in the product family. Developing the model before designing products reduces the time it takes to decide the scope of modular design and supports what you and your company want to achieve in the market. With market segmentation you can build customer needs into product planning and accelerate value creation.

AUTHOR

With market segmentation, clients can develop insights they've never had before.

Geert van Bommel
CASE

Johnson Controls Hitachi

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.

Dynapac Construction Equipment
CASE STORY

Dynapac Construction Equipment

Inspiration for Hardware Design

Photo: Blekinge Läns Tidning

DYNAPAC CONSTRUCTION EQUIPMENT

Summary

Dynapac’s Paving Equipment businesses faced a number of challenges, including lower profitability, increasing product variety, growing geographic reach, scale inefficiencies, decentralized product development and strong new emerging markets in Asia. 

The company then implemented a modularity program that delivered significant results: 

  • 6% reduction in direct material cost
  • 30% reduction in total part numbers
  • 15% fewer parts per product
  • 30% reduction in assembly time.

Dynapac established central product ownership; increased standard features, options and use of common parts; significantly reduced time to market for local product variants and faster quoting; and launched company-wide implementation of new technology for electronic vehicle controls.

Overall, the modular product architecture enabled global product platforms that boosted market share, not least in emerging regions. 

Dynapac Tree

Dynapac’s Product Family Tree for Rollers

CASE

Dynapac Story

Dynapac’s paving equipment faced a number of challenges, including lower profitability, increasing product variety, growing geographic reach, scale inefficiencies, decentralized product development, new emerging markets in Asia.

By 2005, the building of roads in China and other developing countries was the single, most significant market opportunity for Dynapac to grow sales of their products. Although local manufacturers could produce the same types of equipment, products from Dynapac and the other global competitors were more durable, produced a better road surface, and were more efficient. The lower cost of operation justified the purchase of the more expensive machines up to a price point that was slightly less than what could be supported in developed countries.

The challenge for Dynapac and its competitors was to produce products for these developing regions at the right price and performance level. To make a profit, they needed to manufacturer locally including the assembly of final products and the sourcing of components. Besides meeting cost targets, local operations were important for addressing local construction applications that required customization of the existing line of products. 

This was not an easy proposition for Dynapac whose operations were already split between several independently-operating companies. Overall profitability had been on a downward trend as costs continued to increase, and they had little ability to raise global prices. Additional operations in these newly developing countries meant more independent product entities that would be challenged with scale and efficiency. 

Dynapac was also struggling to maintain their technology leadership position in the global market. New technologies in the area of electronic controls were ready to be implementation in both the compaction and paving products, but the company struggled to find the time and resources to make it happen. Other corporate issues including compliance to 2010 emission standards were also demanding the attention of the limited set of resources.

Product Marketing & Management

Dynapac did not have a centralized understanding of the customers within all of the different markets and applications. Each of the regional groups that independently managed their local products and configurations had their own understandings. Without a global process or repository for these insights, it was difficult and time consuming to tackle company-wide product updates.

With the large volume of ideas for product improvements and unique applications in the various regions, each of the independent groups had a long queue of ideas for new product development. The development of these ideas, however, was intermixed with the delivery of custom product configurations to customers. Consequently, the primary source for new product variants within the various families was though customer projects. These new product variants would eventually be document and managed as part of the local product family.

Product Design & Engineering

The company was also organized with different design departments for each product line and regional resources to coordinate the quoting and manufacturing of custom configurations. Each department was skilled and experienced at independently running large, complex development projects. As a result, there was little sharing of resources and designs between these offices and across the various product lines. The same skills and responsibilities were repeated across each of the different group.

Dynapac was struggling to coordinate the whole company for large initiatives including the implementation of electronic vehicle controls (fly-by-wire). New technologies would normally develop within one of the independent product groups where they would eventually be integrated into a specific product during a larger vehicle development program. After completing the program, including the specific challenges for the initial vehicle, other product groups could work to integrate the technology into their products. Because of the independence of the groups and the singularity of product designs little efficiency was achieved with subsequent implementations.

Product Operations

Although they produced vehicle systems like automobiles, the requirements of the production systems were very different. The operations team at Dynapac was challenged with significant product variety and low volume of individual parts. They produced less than a thousand units of any one product variant in a given year. The team had started to look into Lean as a way to eliminate waste, improve efficiency and reduce costs, but they generated only limited success.

The actions to improve efficiency and reduce cost would have to be their own unique solutions. “We had a lot of parts with low volume, and the product cost was increasing,” says Bo Svensson, Project Manager at Dynapac. This led to low cost-efficiency, long lead-times and affected the company’s overall competitiveness and profitability.

To effectively follow the market opportunity into emerging regions, the management team at Dynapac decided to find a different approach to managing and delivering their products. The decentralized approach was generating decreasing levels of profitability as it was scaled-up to support increasing product variety and geographic reach. They needed new products quickly and a way to efficiently and affordably add new technologies to maintain their leadership position.

They sought to globalize product platforms to gain efficiency and simultaneously increase the overall assortment and local coverage. After some investigation, Dynapac concluded that the underlying structure for these platforms needed to be based on a Modular Architecture. “We had investigated different solutions”, says Svensson. “But we also knew that Scania (one of the world’s largest truck, bus and motor manufacturers) was using modularization as a leading system. That was the main reason we went to Modular Management.”

To achieve widespread product and organizational changes, Dynapac initiated a number of projects that began soon after one another. The stagger of projects helped them to take advantage of the learnings from one project just ahead of another. The first project was for tandem asphalt rollers in the 7 to 13 ton range. Larger rollers were followed by smaller sizes.

Revenue Growth

By combining the significant market opportunity in emerging regions of the world and a systematic approach to their product operations, Dynapac expected to increase gross profits by 17%. Modular Architecture would enable the development of a world product platform that could efficiently deliver the range of product needed to satisfy customers in both developing and in developed countries.

The Modular Architecture approach would also enable up to a 50% reduction in time to market for new product variants. This meant more time and resources to modernize the various vehicle platforms and to develop lower priced variants for emerging markets. By isolating key systems and features within modules, an updated version can be added without disrupting the design of the rest of the vehicle. 

By offering a larger range of standard features and options and by reusing the majority of modules in custom products, Dynapac expected to reduce the average time to quote a custom product configuration by 50%. This will get product to customer quicker and it will free-up resources to work on new product development.

Profitability Improvement

Dynapac predicted that increased revenue alone was not enough to meet their profitability targets. Therefore, they also looked for ways to improve the efficiency of their operations and reduce costs. By analyzing both direct and indirect costs, they found opportunities to reduce their total cost basis by 9%. The largest portion, 5%, was coming from efficiency gains in the value added operations. An additional 3% were indirect cost reductions that would come by working with fewer suppliers. The final 1% is a reduction in capital costs coming from better utilization of tooling.

“It was a very deep pre-study,” says Svensson. “The results showed we should make more money. We could save a lot on indirect costs … reduce the number of parts … and be more effective in updating machines.”

For tandem asphalt rollers, the world product platform approach with Modular Architecture would reduce the number of unique part numbers by 40%, and the higher volumes of components would reduce material costs by 5%. Individual vehicle systems could also become more efficiency using 30% fewer parts and requiring 25% less assembly time.

 

By 2007, Dynapac had transformed the first of the tandem asphalt rollers and was well on their way to completing the rest of the product category. They now had a global platform and family approach that has greatly improved their efficiency and reduced product costs. Products are managed on a global scale in order to reuse designs and to use common components, but they have the flexibility to adapt to local applications. Dynapac has been able to effectively address the market opportunity in emerging countries with the right product at the right price. 

They are creating more new products with the same product development resources. Future products are designed in parallel from the same platform reusing many of the same modules. In fact, the primary design efforts have been shifted from developing completely new products to developing of new modules. Additionally, new CAD/CAM support systems, product configurations, marketing materials and manuals are all based on the Modular Architecture and are making a more efficient organization.

“If you’re interested in or thinking about using modular systems, then Modular Management is the right company,” says Svensson. “We see they have the right knowledge to put the modular systems into place. Their consultants worked in a professional way; they have a lot of experience. They were very, very good.”

Product Marketing & Management

Dynapac greatly increased the number of standard features and options offered to their asphalt rolling customers. These product variants are configured directly from the global platform without the need to make local engineering changes. They are using a configuration software tool to coordinate selling and manufacturing of the vehicle systems which is helping to reduce order-to-delivery time. 

To begin the development of the Modular Architecture, Dynapac completed 75 in-depth interviews with customers around the world. The knowledge gained in the analysis of the interview data allowed them to define and map-out the scope of regions, application and customer needs that would be targeted with the global product family. 

Product Development & Engineering

The engineering and design organization at Dynapac changed drastically during the process of developing a Modular Architecture for their roller products. A single development organization now handles the roller product family in one, centralized location. In the past, responsibility was spread out over several product organizations where they would adapt the product design to local applications. This organization has also enabled a tighter coupling with the marketing team improving planning and prioritization of development activities.

The new centralized product family had a large impact on the number of parts needed to support all of the different product variants. The number of unique parts for the product line was reduced by 30% and will continue to decrease. Also in 2007, the parts per product were reduced by 15% and expected to decrease even further.

Determining the product architecture before any detailed design work allowed the team to accommodate and plan for major technology introductions across multiple product families. For electronic vehicle controls, Dynapac isolated the impact of the technology change to a few modules with well-defined, standardized interfaces. At the same time, they were able to take into consideration other vehicle platforms when making major design decisions. Modules not affected by the technology change could be simultaneously developed, and everything could be integrated together later in the project.

Product Operations

Dynapac operations were greatly improved with the implementation of the Modular Product Architecture. Operations became much more uniform around the world, and the teams could share experiences and improvement initiatives. Modules were now being built and tested upfront before they were assembled into the vehicle, and the overall assembly time was reduced by 30%.  They are also attacking problems and issues in smaller, more manageable chunks.

Dynapac also involved their suppliers early in the design process. Several key modules including the engine, cab, hydraulic and electrical subsystems were setup to take full advantage of the architecture. By reusing modules across the different sizes or rollers and across the world, they were able to reduce material cost by 6%.

 

During the development of the Modular Architecture, the team at Dynapac spent a lot of time understanding customer needs and how they align with the physical properties and performance of their products. One of the big discoveries they made was how important the human interaction with the vehicle was to the safety and efficiency of the machine.

Through the analysis of the relationships between customer value and product functionality within the Modular Architecture, Dynapac discovered that driver visibility was a key attribute of the product. This discovery reprioritized many of their design efforts to deliver a higher level of performance for this property. They paid special attention to the size and placement of the windows and the location of the cab relative to the working components.

city air
CASE STORY

Trane Commercial Air Handlers

Inspiration for Hardware Design

TRANE COMMERCIAL AIR HANDLERS

Summary

Trane Commercial Air Handlers were facing a number of challenges, including rising costs, requirements for more energy efficient products, older product families, challenges to product leadership with competitor’s new features and options, proliferation of parts, and high product and systems complexity. Operational improvements through lean and process automation were effective yet insufficient, and the company, as a long-term market leader, was finding it hard to sustain price premiums and market share.

In this situation, Trane embarked on a modularity program that delivered dramatic results: 

  • 58% reduction of part numbers
  • 15% reduction in overall product cost
  • 10% reduction in the cost of operations
  • 7% reduction in direct material costs
  • 50% reduction in development time.

The new line of air handlers also became the most energy efficient on the market, achieved lower levels of humidity compared to competitor products and reduced energy consumption by up to 30%. Customers were offered lower acquisition costs, more product variety (50% increase) and lower operating costs, and Trane successfully defended its market-leading position with modular designs.

Trane Performance Climate Changer Air Handler

Story

Commercial heating, ventilation and cooling (HVAC) products have a lifetime of around 20 years, and the technology has evolved slowly but steadily over the years. Large and complex HVAC systems are specified for individual customers through a direct sales network, approved by engineering, built to order and installed by a system integrator.

In 2007, rising energy costs and conservation initiatives were driving demand for more energy-efficient products and for retrofit and refurbishment of existing, less-efficient systems. Trane was the market share leader in North America and was working to grow in other regions by leveraging their reputation for reliability, flexibility, and product innovation.

Market dynamics caused many of the commercial HVAC products to become commodity-like with pressure on even the complex ones to reduce price and cost. The average age of Trane Commercial Systems Air Handler products was relatively old by industry standards and many new features and options were being introduced by competitors. They needed to make significant investments to update the product portfolio with value-added features that would help them to stay ahead of the competition. 

Trane had always been a strong company with good profitability and long-term organic growth averaging 7-8%, but they were looking for ways to continue fine-tuning their operations. In the years preceding this case, the product teams had been deploying Lean techniques and component rationalization. These initiatives saved money, but in many situations Trane discovered that additional improvements were limited without changes to the existing product design.

One team in Commercial Systems uncovered that hundreds of different motors were being supported by the engineering and operations system. As the team examined the issue, working motor-by-motor, they always found good technical reasons why each motor was used. In the end, very few motors could be eliminated.

Product Marketing & Management

When the modular climate changer product family was introduced in the 1990’s, it quickly became the leading air handling product in the market. Not only was it the performance leader, but it could be configured to meet the needs of very specific applications. This was accomplished through a series of functional building blocks that could be manufactured separately and assembled into a complete system. This product strategy paired well with Trane’s technical, relationship-based selling methods, and for many years the building contractors and HVAC engineers preferred to work with Trane.

As demand for the product grew, Trane invested in an automated order engineering process that helped create the engineering drawings needed to manufacture and assemble each individual system. This decreased the time and errors when the engineering team to release an order. Eventually, they also invested into automated production systems that could use the data from the order engineering process to produce accurate components even though they may have never been built before. 

In the years leading up to 2007, it was becoming apparent to the marketing team that the Modular Climate Changer product family was reaching the end of its product lifecycle. Competitive products introduced in the market had more of the features that were in demand by building managers and occupants. Opportunities for reducing costs were also greatly diminished, and Trane was faced with a large new product development effort to reinstate their product leadership position. 

Product Design & Engineering

The customer-facing modularity of the product was a continual source of activity and challenge. The ongoing product engineering team had strong capabilities to deliver and maintain the current family of products. They were occupied with customer orders and the maintenance of the current air handler product family. Components such as coils and filters were constantly adapted to deliver exactly what was agreed to by the sales team and customer. 

According to Trane’s Product Engineering Director, Jim Wendschlag, “Trane’s central station air handling units expand a wide range of unit sizes and offer a multitude of features and options to meet the different needs of many building types in many climates. This product flexibility over time led to the proliferation of thousands and thousands of parts and high product and systems complexity and associated costs.” 

Improvement efforts for years were focused on the optimization of the order engineering process and the automation of the documentation needed to build the large range of product configurations. Product design data such as bill-of-materials fell into a lower priority and were kept in spread sheets rather than vaulting, MRP or PLM systems. 

As with many continuation engineering teams, they had little time for new product development, and the growing list of product updates sought by the marketing team required the broader involvement of Trane engineering resources. Large new product development projects typically required the commitment of resources for 36 months before any new product entered the market. For many years the air handler project waited to make it to the top of the list of investment priorities. 

Product Operations

A skilled and ambitious operations team championed many investments that improved the efficiency of providing the large range of product configurations. In addition to the removal of waste by deploying the principles of Lean, they looked to process automation to off-set the product complexity that was carried through to the manufacturing plant.  

Many improvements were made through the years but the problems of product complexity remained. Flow through the plant was often halted because a special operation needed to be done on one system. In 2007, the air handler product family comprised of the M-series indoor and T-series outdoor systems were built on separate manufacturing lines. Near the top of the list of improvements for many years was the rationalization of these two manufacturing lines. The two systems shared many components, but the merging of the casings required changes to the design of the products.

The leadership team at Trane Commercial Systems was faced with the challenge of how to invest into a new family of air handler products. They wanted to maintain and grow market share by re-establishing their product leadership position.

With a long-standing focus on cost reductions and maintaining levels of efficiency to support the wide range of product configurations, Trane sought to develop a family of products with a new set of innovative features. The family would be delivered from a Modular Architecture that could be efficiently updated during the product lifecycle. They also wanted to preserve and enhance the investments that had been made in streamlining and automating the manufacturing plant. 

Revenue Growth

Implementing the modular architecture for the air handler product family promised to reduce the time for new product development by adding more detailed up-front planning and the ability to simultaneous develop and launch a variety of different modules at different times. The goal was a 25% reduction in time for major changes and 33% for smaller updates. They also planned to reduce the order-to-delivery time. For large products delivery time was expected to be reduced by 50%, and smaller products were to be reduced by 63%.

Trane also sought to increase their ability to maintain their leadership throughout the lifecycle of the product. The underlying speed of development would help, but they also needed the ability to introduce minor features without impacting the majority of the product design. By creating a standardized interface, for example between the air handler and the control system, it would be easier to introduce new features and integrate the controls with new and existing systems.

Profitability Improvement

Along with faster development of new products and features, Trane planned to achieve a reduced level of investment to make changes and updates to the product family. This would allow them to make more frequent, smaller changes and to continuously improve product operations and profitability. A 10% reduction in the cost of operations was projected, and the cost of materials would be reduced by 7% through more efficient designs, higher volumes and planned purchasing. Trane also intended to integrate the separate indoor and outdoor versions of the product into the same architecture and to share interfaces to the casing.

The cost of providing such a wide range of product configurations remained high even with process automation. Trane looked to Modular Architecture for a way to maintain the customer-perceived flexibility of the current product family while lowering overall costs. As a working goal, they established a key performance indicator that said 80% of orders would be 100% configured from standard modules while the remaining 20% would use 95% standard modules. 

An example of a higher level of product assembly is the external casing that encloses all of the internal components and allows air to enter and exit at specific locations. While developing the Modular Architecture, the team at Trane discovered that the casing is a key technical solution for an air handler. It embodies many of the properties of the product and impacts many of the different ways customers perceive the value of the product. 

This realization established new priorities in the design of the product to maximize the effectiveness of the casing.  In fact, large capital investments were made to fully automate the forming of the sheet metal and the installation of insulating foam. The casing now contains interfaces to most other modules and the specific casing variant is chosen once the configuration of the rest of the product is completed. A unified casing is designed and manufactured for each product combination. The automated equipment takes care of the manufacturing complexity. 

The development of the modular architecture also allowed Trane to address nagging customer complaints about the availability of replaceable air filters. The discipline learned and momentum gained in creating standardized interfaces throughout the product allowed them to tackle the challenge of integrating standard filters. As a result, filters are selected as off-the-shelf components, reducing the time and money for customers to procure a replacement. 

An example of a higher level of product assembly is the external casing that encloses all of the internal components and allows air to enter and exit at specific locations. While developing the modular architecture, the team at Trane discovered that the casing is a key technical solution for an air handler. It embodies many of the properties of the product and impacts many of the different ways customers perceive the value of the product. 

This realization established new priorities in the design of the product to maximize the effectiveness of the casing.  In fact, large capital investments were made to fully automate the forming of the sheet metal and the installation of insulating foam. The casing now contains interfaces to most other modules and the specific casing variant is chosen once the configuration of the rest of the product is completed. A unified casing is designed and manufactured for each product combination. The automated equipment takes care of the manufacturing complexity. 

The development of the Modular Architecture also allowed Trane to address nagging customer complaints about the availability of replaceable air filters. The discipline learned and momentum gained in creating standardized interfaces throughout the product allowed them to tackle the challenge of integrating standard filters. As a result, filters are selected as off-the-shelf components greatly reducing the time and money for customer to procure a replacement. 

Product Marketing & Management

At the time of launch, the new Trane Performance Climate Changer Air Handler (see Figure 2) was the most energy-efficient air handler in the market. It provided overall better comfort for the conditioned spaces and obtained lower levels of humidity. Energy consumption and the corresponding emissions were reduced by up to 30%. Customers saw a lower initial cost and additional savings during long-term operation. 

Trane changed the basis of sales discussion and competition to focus on the value of an overall higher performing system. Many of these facets of performance were new ones that were not previously exploited within the market and were discovered during the process of developing the Modular Architecture. The new product family maintained the leadership position that was once held by the legacy Modular Climate Changer. 

By including both the indoor and outdoor product families within a single Modular Architecture, Trane improved their efficiency beyond what they could have done with each individually. The number of physical sizes available to customers was increased from 18 to 26, and they increased the number of new and available product options. The automated order engineering process became less critical to the delivery efficiency of the product because most orders became pre-determined configurations within the architecture.

In the words of Jim Wendschlag, “This new approach, together with innovative engineering systems design, is providing us with opportunities for significant direct and indirect labor efficiencies and a much faster product change through the product life cycle.”

Product Development Engineering

The time to develop the first in the family of new air handlers was decreased from 36 to 18 months including the upfront time to develop the modular architecture. Even with portions of the new and old product in the market, this trend was expected to continue because the vast majority of the new products were now being configured from a pre-defined set of module variants. Along with a larger set of completed designs, these variants had pre-determined operational plans that would reduce the engineering team’s involvement in fixing manufacturing and sourcing issues. 

The team saw a 58% reduction in the number of parts needed to be created and managed in order to deliver the new air handler product family. This was in addition to the underlying efficiency gained by combining the two separate families. From Jim Wendschlag perspective, “We were helped to develop a new approach to modular design focused on part count and complexity reduction while adding to the product flexibility for the customer.”

Product Operations

The time to develop the first in the family of new air handlers was decreased from 36 to 18 months including the upfront time to develop the modular architecture. Even with portions of the new and old product in the market, this trend was expected to continue because the vast majority of the new products were now being configured from a pre-defined set of module variants. Along with a larger set of completed designs, these variants had pre-determined operational plans that would reduce the engineering team’s involvement in fixing manufacturing and sourcing issues. 

The team saw a 58% reduction in the number of parts needed to be created and managed in order to deliver the new air handler product family. This was in addition to the underlying efficiency gained by combining the two separate families. From Jim Wendschlag perspective, “Modular Management … helped us develop a new approach to modular design focused on part count and complexity reduction while adding to the product flexibility for the customer.”

Trane Commercial Air Handlers were facing a number of challenges, including rising costs, requirements for more energy efficient products, older product families, challenges to product leadership with competitor’s new features and options, proliferation of parts, and high product and systems complexity. Operational improvements through Lean and process automation alone were insufficient. This long-term product leader no longer commanded a price premium and was losing market share.

To solve these issues, Trane embarked on a modularity program. The results included 58% fewer part numbers, 15% reduction in product cost, 10% reduction in operations costs, 7% less direct material costs and a 50% reduction in development time. The new line of air handlers also became the most energy efficient on the market, achieved lower levels of humidity compared to competitor products and reduced energy consumption by up to 30%. Customer saw lower acquisition costs, more product variety (50% increase) and lower operating costs. 

Trane was able to successful defend and strengthen  its market leading position via modular design.

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PALMA® Software is a cloud-based solution to create, document and govern modular product architectures. This strategic software enables companies to take control of their product architecture, govern customization and secure business goals.

PALMA is built on an in-memory NewSQL database and integrated web server. A high level of performance is required for rich and proprietary product information models, and we use the latest web technology to enable top performance for the end user. PALMA is a SaaS solution.

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Companies across the globe have worked with Modular Management to create and apply market-driven modular product platforms, in industries as varied as home appliances, industrial products, telecom, and construction equipment.

By implementing this approach, clients have achieved dramatic improvements in business performance through increased speed and efficiency, while simultaneously expanding the breadth of products offered to the market.

Using proven methods and PALMA®, a unique product architecture lifecycle management software, we partner with client resources to deploy a set of innovative tools and structured processes. Together we uncover and exploit the economic potential of product architecture that lies within markets, products, technologies, operations and support systems.

Modular Management was founded 1996 in Stockholm.

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