Minimize Waste Using Lean and Modular Product Architecture
Minimizing waste is the focus of both lean and modularity. In many ways, they’re the perfect match to accelerate value creation.
What is Lean?
The core idea of lean is to maximize customer value while minimizing waste. This is accomplished through the application of a structured way-of-working that eliminates or minimizes waste. A lean organization understands customer value and focuses key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect, zero-waste value creation process.
Lean thinking changes the focus of management from optimizing separate technologies, assets and vertical departments, to optimizing the flow of products and services through entire value streams. These value streams flow horizontally across technologies, assets and departments to customers.
What is Modularity?
A modular product architecture also addresses waste in a company. This approach to waste comes from an understanding that each part number adds cost along the entire value chain. A modular product architecture define modules that carry market-driven variance with standardized interfaces, and enables the configuration of many different products from a limited number of module variants.
Both lean and modularity are often dependent on a cultural change in the company to be successful, and both require a clear strategy.
Does the product require cost reduction? Is the objective to expand the product range or do we need to reduce time to market for new products? Lean and a modular product architecture can address these strategic questions if they are clear and communicated to key stakeholders.
How to Avoid the Complexity Waste Trap?
Lean and Standardization
Companies often face a situation where their product structure has become complex, after acquisitions and new product offers expansions. There can also be a significant old product legacy, if old products are not phased out. Market expectations also drive complexity, with companies responding by expanding their offering without understanding the full consequences.
When profit starts to drop, cost reduction projects kick in and the product structure tends to get a quick fix by standardization. Lean manufacturing is also pointed out as part of the remedy, but this approach may improve efficiency – but not effectiveness.
What can be done according to true lean thinking, for example the Toyota Production System (TPS)? TPS is about being effective, doing the right things first, and then doing them efficiently. And here’s a way to make it happen.
Lean and Modularity
Business often starts with development of products, where market needs provide the cornerstone, and the product structure must be flexible and effective.
A modular product structure is effective since it starts with customer needs and configurability. It is easy to expand within the platform limitations, reduces internal complexity, requires less resources and is relatively future proof. Other benefits are faster time to market for new products, a wider product offering, reduced lead times, reduced manufacturing costs and higher quality.
How do we recommend implementing lean and modularity?
3 Steps Implementing Lean and Modularity
Step 1. Analyze Waste and Complexity
There are many lean tools a company can use to find and eliminate waste with a product, e.g. 5S and continuous improvement. But it is important to first understand how complex is the product structure and whether it has been expanding over the years without update or rationalization. An overly complex product structure will typically have many part numbers that are difficult to maintain. The reuse of existing parts numbers will be difficult, and it may include the situation where a designer is making a new part rather than trying to reuse an existing part. Quality problems will also be prevalent with purchased or manufactured parts. If the product structure has indications of being very complex, it is a good idea to investigate how big this unnecessary complexity is and then define an action plan how to reduce the complexity.
This internal complexity translates to extra work in most departments of a company. The driver for this extra work is each part number that is created in the design department. Each number represents a part that has to be developed, tested as a prototype, detailed in a drawing, manufactured, procured, transported, stocked in a warehouse, quality checked, picked from the warehouse, transported to assembly, and assembled into the final product, just to mention a few. All these steps mean more time for a product that has many part numbers and a low volume of each compared to a product where there are few part numbers and high volume of each. For further reading on the topic we recomedn this blog on cost of complexity.
Step 2. Build an Effective Product Structure
The entire cost structure is affected when decreasing the internal complexity of the product. Typical results from mechanical industries, both business to business and consumer products are a part number count reduction of 50% and a cost reduction of 10% in the total value chain.
Modular product architectures address internal complexity by enabling a company to configure a range of products by combining different module variants with standardized interfaces. It is important to create an efficient product structure before applying lean directly on the existing product structure. If lean is applied on a bad product structure limited results will be achieved because the negative effects of too many part numbers in the product architecture will still exist. It will not be possible to gain the leverage of increased purchase volumes if too many different part numbers are being used.
In terms of money this increased purchase volume will generate a substantial reduction of direct material cost (dM), often in the range of a few % up to 10% reduction. What cost reduction project can achieve these savings at the same time as quality is improved?
It is important to understand that neither lean nor modular product architecture is in any conflict with one another. They are both striving in the same direction – minimizing the waste defined as non-value added activities for the customer that will buy the product. Modular product architecture and lean are not primarily aiming at the level of individual processes, but target the entire value chain of a company.
Many lean-thinking organizations are doing the wrong things more right. Making things efficient that shouldn’t be done in the first place. Doing a lot of efficient things but not effective things.
Step 3. Implement Lean
Modularity is how to be effective. Lean is how to be efficient.
This is what Toyota built on with TPS, following the work of Taguchi: ‘Let’s do the right thing first, then make them efficient.’ This encourages you to start with an effective modular product structure and then implement it efficiently throughout your organization.
Modularity and lean create powerful synergies in a company. After more than 20 years of experience of developing modular product architectures with lean implementation, we’ve seen a reduction in client product costs, decreased lead times and reduced tied-up capital. All at the same time as the product offering has expanded.
On top of cost reductions, there are also important increases of revenue due to offering more customizable products to the market. One common question is which to start with, modularity or lean? Or can both initiatives be run in parallel? Our experience is that it’s best to start with an effective product structure and then apply lean efficiency. This will give you a competitive advantage, with lean putting the turbo on modularity.