Overcoming Product and Service Complexities in the HVAC Industry

Discover how HVAC companies are achieving growth in both sales and profits by addressing complex product varieties, customer-driven customization, shorter inquiry-to-delivery lead times, integrating advanced technologies and regulatory challenges through strategic modular architecture.

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Strategic HVAC Architectures: Addressing Complexity, Speed, and Sustainability

The HVAC industry is navigating rapid transformation as new technologies, evolving customer demands, and increasing regulatory pressures reshape the market. At Modular Management, we empower HVAC manufacturers to thrive in this dynamic environment by leveraging modular product architecture, supply chain optimization, and service-driven solutions. Whether you operate in build-to-stock or configure-to-order/engineer-to-order environments, our modular approach helps you reduce complexity, accelerate time-to-market, and achieve sustainable growth. By aligning market, product, supply chain, and service architectures, we provide a holistic solution to tackle today’s most pressing challenges and unlock new opportunities for efficiency and innovation.

Companies often achieve significant reductions in part numbers, leading to lower production costs and simplified operations.
Modular design accelerates product development cycles, allowing companies to bring new and updated products to market faster.
Modular systems enable manufacturers to offer tailored solutions that meet diverse customer needs without extensive redesign.
Needs-based segmentation helps companies align their product offerings and go-to-market strategies with specific market demands, enhancing customer satisfaction and competitive positioning.
Streamlined processes, reduced complexity, and improved alignment with market needs contribute to higher profitability and sustainable growth.

Complexity from Product Variety

Growing customer demand for customized HVAC solutions has resulted in SKU overload, leading to inefficiencies and higher costs. Build-to-stock companies face increased inventory and production challenges, while configure-to-order firms struggle to manage complex customizations. As product portfolios become more complicated, it becomes harder to control costs, maintain flexibility, and deliver efficiently.

Shorter Lead Times

Rapid product innovation is essential for HVAC companies to stay competitive. Build-to-stock firms need to quickly refresh their product lines, while configure-to-order companies must speed up custom development. Slow development cycles or delays in product launches can negatively impact revenue, market position, and customer satisfaction.

Technological Integration and Complexity

Integrating IoT, AI, and smart technologies is becoming increasingly complex. Build-to-stock companies must ensure compatibility across diverse product lines, while configure-to-order firms need to seamlessly incorporate these technologies into custom solutions. Effectively managing this complexity is crucial for delivering innovative, connected products without introducing inefficiencies

Regulatory and Sustainability Pressures

As regulations become stricter, HVAC companies must develop eco-friendly and energy-efficient systems quickly to stay compliant and profitable. Build-to-stock businesses need to update product lines rapidly, while configure-to-order companies must integrate new standards into custom solutions without compromising speed or margins. Delays or failure to comply can lead to penalties and loss of market share.

Modular product architecture makes it easier for companies to target different customer segments by creating flexible platforms that can be customized. This approach helps balance personalization with cost-effectiveness, allowing for quicker product launches and scalability for both standard and custom offerings.

Adaptable Platforms: Creates flexible platforms that cater to various customer needs, reducing the number of SKUs (stock-keeping units) companies need to manage.
Smart Customization: Balances the need for customization with cost savings, enabling quick updates without complicating operations.
Less Complexity: Helps companies minimize SKU overload and improves flexibility for both build-to-stock and configure-to-order models.

Modular product architecture is a game-changer for HVAC companies, helping them become more sustainable, efficient, and flexible. By designing products as independent modules with clear connections, businesses can extend the life of their equipment through refurbishment, simplify upgrades, and align with the principles of a circular economy. This approach reduces waste, lowers costs, and enables companies to quickly adapt to new technologies and changing customer needs.

Easy Upgrades: Makes it simple to update and reuse parts, cutting down on waste and benefiting the environment.
Longer Product Life: Allows for easy disassembly and recycling, helping companies meet their sustainability targets.
Circular Economy Ready: Opens up new revenue opportunities through the recovery and reuse of key components.
Less Complexity: Encourages independent development of modules, speeding up innovation and customization.

Modular Management helps HVAC companies optimize their supply chain—from sourcing to delivery—by aligning modular designs with supply chain processes. This approach reduces lead times, boosts efficiency, and enhances resilience, whether in build-to-stock or configure-to-order models.

Streamlined Logistics: Improves planning, inventory management, and distribution for modular products.
Faster Lead Times: Enhances efficiency throughout the supply chain.
Cost Control: Manages costs at every stage, increasing profitability and resilience.
Quick Market Response: Allows businesses to swiftly meet market demands while maintaining flexibility.

A strong service architecture enhances the entire lifecycle of HVAC products, ensuring excellent service, minimizing downtime, and enabling continuous improvements. Modular design allows HVAC companies to adopt proactive, data-driven service models that lower costs, seamlessly integrate new technologies, and boost customer satisfaction.

Predictive Maintenance: Uses IoT and smart sensors to anticipate maintenance needs, reducing unplanned downtime and emergency repairs.
Focused Upgrades: Modular servicing allows for focused upgrades of individual components, minimizing disruption and costs.
Lifecycle Management: Facilitates easy maintenance, upgrades, or recycling, supporting sustainability and the circular economy.
Improved Customer Experience: Provides real-time monitoring and remote diagnostics for quicker resolutions and greater satisfaction.

Product Architecture

Modular product architecture enables strategic market segmentation through adaptable platforms, reducing SKU complexity.

Creates common platforms tailored for diverse customer segments.

Balances customization with cost-efficiency, allowing rapid product updates.

Reduces SKU proliferation and enhances flexibility in build-to-stock and configure-to-order models.

Market Architecture

Modular product architecture enables concurrent development, where independent modules are developed and integrated simultaneously. This shortens development cycles and speeds up time-to-market.

Enables simultaneous development of independent modules.

Defined interfaces ensure seamless integration without disrupting other systems.

Speeds up product development and reduces time-to-market without full redesigns.

Process Architecture

Modular Management helps HVAC companies optimize their entire supply chain—from sourcing materials to product delivery. By aligning modular designs with supply chain processes, we reduce lead times, improve efficiency, and control costs across all stages.

Optimizes logistics, production planning, inventory, and distribution.

Reduces lead times and improves operational efficiency.

Controls costs from sourcing to final product delivery.

Ensures supply chain resilience in both build-to-stock and build-to-order environments.

Service Architecture

Modular architecture makes it easy to integrate IoT and smart systems into HVAC products. Standardized interfaces ensure smooth incorporation of new technologies, future-proofing your product lines.

Enables seamless integration of IoT and smart systems.

Standardized interfaces minimize disruption to existing systems.

Future-proofs products for ongoing advancements in connectivity.

Solutions to Fulfill Build-to-Stock Operations

Modular Product Architecture

By designing products with interchangeable modules, manufacturers can reduce the number of unique parts and streamline assembly processes, lowering costs and accelerating time-to-market.

Scalable Production Processes

Modular systems enable manufacturers to efficiently scale production to meet demand while offering flexible customization options.

Solutions to Fulfill Build-to-Order Operations

Configurable Modular Systems

Implementing modular design principles allows for the customization of key components while maintaining standardization where possible, reducing lead times and costs.

Digital Configuration Tools

Modular Management's PALMA Composer and PALMA Configurator software streamline the design-to-order process, enabling rapid product configuration, design validation, and production planning. These tools ensure a seamless transition from customer requirements to detailed product specifications, reducing errors and improving efficiency in complex projects.

Build-to-Stock (Catalog-Based) Products

Residential Mini-Splits and Multi-Splits

These products dominate the residential market, providing efficient heating and cooling for individual homes. High demand and frequent updates require manufacturers to balance efficiency with adaptability to meet consumer expectations.

Commercial Packaged Air Conditioners and VRF Systems

Common in commercial buildings, these systems offer scalable solutions for spaces ranging from small offices to large commercial areas. Manufacturers focus on high-volume production, cost efficiency, quick installation, and regulatory compliance.

Packaged Terminal Air Conditioners (PTACs)

Widely used in hotels and multi-unit residential buildings, PTACs are typically manufactured in large batches and sold through distributors with an emphasis on standardization and ease of installation.

Build-to-Order (Configure-to-Order and Engineer-to-Order) Products

Chillers and Large Commercial Systems

Typically found in industrial and large-scale commercial settings, chillers are highly customized to meet specific project requirements. These systems involve detailed engineering and long lead times, prioritizing performance, reliability, and energy efficiency.

Industrial Cooling Towers and Air Handlers

These systems are often designed to order, tailored to the specific needs of manufacturing plants, data centers, and other critical applications. The focus is on customization, operational efficiency, and robust performance.

Air-Tech Solutions

multiple_options Air-Tech specializes in advanced air handling, filtration, and ventilation systems for healthcare, industrial, and cleanroom environments. Its solutions prioritize energy efficiency, modularity, and high-performance filtration to meet strict air quality standards.

Modular Management, through its platform PALMA, offers a range of solutions tailored to support appliance manufacturers in overcoming industry obstacles, driving growth, and staying ahead of the competition.

Modular architecture offers a strategic advantage by accelerating product development, lowering costs, increasing flexibility, enhancing product variety, improving sustainability, and enabling the seamless integration of new technologies. These benefits help companies stay competitive and responsive to market demands.

Accelerated Product Development

Reduce product development time by implementing modular design principles that enable faster prototyping and easier customization.

Cost Reduction

Lower production costs and streamline operations by standardizing components and reducing part numbers.

Increased Flexibility

Quickly adapt to regulatory changes and evolving consumer demands with a flexible, modular product system.

Enhanced Product Assortment

A modular approach expands product lines by combining modules to meet diverse market needs. This strategy enables mass customization, delivering tailored solutions efficiently and cost-effectively.

Sustainability

Design products with modular components that are easier to upgrade, repair, and recycle, supporting sustainability goals.

Integrated New Technologies

Integrate new technologies faster with modular design principles that make it easy to add smart features, IoT, and AI without extensive redesigns

Customer Success

Whirlpool’s Transformation through Modular Product Architecture

Whirlpool, one of the world’s larger appliance manufacturers, partnered with Modular Management to tackle the growing complexity across its vast product portfolio. Facing challenges from global competition and internal inefficiencies, Whirlpool implemented a Modular Product Architecture strategy, starting with microwave ovens and eventually expanding across all product lines. Over an eight-year engagement, this transformation led to a 40% reduction in part numbers, a 25% decrease in product development time, and over $1 billion in added shareholder value. This strategic shift allowed Whirlpool to maintain its market leadership while significantly improving profitability.

Transforming HVAC Industries Worldwide

HVAC companies face pressures to innovate, meet regulatory standards, and deliver customized, connected solutions. Modular Management’s expertise in modular architectures—including market, product, supply chain, and service domains—enables HVAC manufacturers to turn these challenges into growth opportunities. By optimizing product flexibility, accelerating time-to-market, enhancing service capabilities, and driving sustainable practices, we help companies achieve operational efficiency and competitive advantage. Explore how our solutions can transform your HVAC business and help you thrive. Contact us to discover the positive impact of modular architecture on your organization.

Check some of our success stories below.

Customer Success

Bosch: Modularity Program for Heat Pumps

44% reduction in product cost

60% fewer part numbers

40% reduction in inventory

50% reduction in assembly time

40% less floor space

Customer Success

Trane: Modular Product Architecture for Air Handlers

58% reduction in part numbers

15% reduction in overall product cost

10% reduction in the cost of operations

Customer Success

Whirlpool’s Transformation through Modular Product Architecture

Cost and Revenue Impact
With brand strategies driving market volumes and price premiums, the cost side results were significant:

35% reduction in unique parts
25% fewer parts per product
20% reduction in parts costs
40% fewer platforms
10% material cost reductions.

Although harder to identify causality, quantifiable market impacts were also considered remarkable, including significant brand price premiums that even exceeded the cost side results.

Customer Success

Husqvarna’s Modular Product Architecture Transformation

Cut Time To Market by 50%
To overcome challenges like acquisitions, regional product variations, and low-cost competition, Husqvarna needed to rationalize part numbers, lower costs, and globalize product design. Partnering with Modular Management, Husqvarna implemented a modular design strategy for two leading electric string trimmer brands, achieving annual sales of over 500,000 units.

Results Achieved with Modular Design:
50% faster time to market for new SKUs.
25% reduction in manufacturing costs.
50% fewer resources needed to develop new products.
Significant increase in EBIT margin, even amidst fierce competition.
Reduced inventory levels across the supply chain while maintaining low service call rates.

Business Value Delivered:
Developed a profitable entry-level product.
Freed up resources for more new product development.
Successfully entered new markets with unique product variants.

Customer Success

Husqvarna’s Modular Product Architecture Transformation

Business Value Delivered:
Developed a profitable entry-level product.
Freed up resources for more new product development.
Successfully entered new markets with unique product variants.

Customer Success

Husqvarna’s Modular Product Architecture Transformation

Facing rising complexity and fierce competition, Husqvarna partnered with Modular Management to streamline their electric string trimmer product lines. By implementing a modular product architecture, Husqvarna was able to reduce part numbers by 40%, decrease manufacturing costs by up to 25%, and cut time-to-market for new SKUs by 50%. This strategic shift not only improved operational efficiency but also strengthened Husqvarna’s ability to compete in a challenging market, leading to significant gains in EBIT margins and market share.

Customer Success

Johnson Controls Hitachi (JCH): Market Segmentation and Modularity Implementation

The story explores the challenges of creating customer personas, fostering cross-functional collaboration, and utilizing analytics to optimize market representation. Discover how JCH leverages modularity and strategic insights to drive growth in a rapidly evolving market.

Johnson_Controls-Hitachi_Air_Conditioning_Vertica_4c

Transforming Industries Worldwide

Empowering leading industries worldwide – Customers across the globe trust Modular Management to drive growth and innovation

Case Stories

Bosch: Modularity Program for Heat Pumps

In their Modularity Program for Heat Pumps, Bosch achieved a 60% reduction in part numbers, a 44% decrease in product costs, a 40% reduction in inventory, a 50% decrease in assembly time, and required 40% less floor space.

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Trane’s Transformation through Modular Product Architecture for Air Handlers

Trane achieved a 58% reduction in part numbers, a 15% decrease in overall product costs, and a 10% reduction in operational expenses.

Read case study

Johnson Controls Hitachi (JCH): Market Segmentation and Modularity Implementation

Read case study

Wärtsilä's Breakthrough: Modular Engine Speeds Development and Fuel Adaptability

Wärtsilä Achieves 600 Module Variants with 30% Fewer Components through Modular Architecture for the Wärtsilä 25 Engine Family

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Relevant Resources

Resource Center

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Cutting the Cost of Customization in HVAC

If your HVAC business is based on Engineering-to-Order (ETO), you’re constantly designing and validating custom solutions. That level of customization sounds great—until you realize it comes at a massive cost. Learn how switching from Engineer-to-Order (ETO) to Configure-to-Order (CTO) can cut costs and enhance profitability for HVAC manufacturers...

How HVAC Manufacturers Cut Lead Times by 50%

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