Modularity, outsourcing, and inter-firm learning Juliana Hsuan Mikkola Copenhagen Business School Department of Industrial Economics and Strategy DRUID Howitzvej 60 2000 Frederiksberg Denmark Tel: +45 3815 2941 Fax: +45 3815 2540 Email: [email protected]

Abstract for the DRUID Summer Conference 2000 June 15-17, 2000 Rebild, Denmark

Modularity refers to the scheme by which interfaces share among components in a given product architecture are specified and standardized to allow for greater reusability and commonality sharing of components among product families. One of the characteristics of modular products is the standard interfaces shared among components, sub-systems, and systems. When interfaces shared among the components or modules within a system become standardized, outsourcing decisions can be made accordingly with respect to a firm’s long-term strategic planning of its new product development, manufacturing, and supply chain management activities. Interface management of product architectures defines and selects suppliers with whom the components are outsourced from, and how a firm should organize its knowledge stock, investment, and resource allocation issues. However, delegating complete design and manufacturing responsibility to suppliers with first generation product architectures without well-defined system specifications leads to poor performance of the overall system. The case of a modular windshield wipers controller outsourced by Chrysler Jeeps shows that the extent to successful outsourcing is dependent upon the degree of supplier-buyer cooperation in solving technical problems, especially in designing first generation product architectures, leading to increased inter-firm learning. The case also shows that the failure of one technological solution was the catalyst for increased supplier-buyer interdependence, more interactive problem solving and mutual learning, and hence the subsequent financial benefits gained from the new technological approach.

Key words: Modularity; New product development: Outsourcing; Inter-firm learning; Supplier-buyer interdependence

Acknowledgement: I would like to thank Mikkel Andreas Thomassen for his enthusiastic discussions and comments of this paper.

1.

Introduction

Globalization, deregulation, more demanding customers, the advances in information and transportation technology contribute to the complexity of designing and managing supply chains (van Hoek et al., 1999), and the management of new product development (NPD) activities. Firms are paying more attention to the relationship shared with their suppliers (Mudambi and Helper, 1998; Sako and Helper, 1998). Some firms form partnerships and alliances with suppliers as a strategy for competitive advantage (Chiesa and Manzini, 1998; Gulati, 1998; Baily et al., 1998; Parker and Hartley, 1997; Kamath and Liker, 1994; Dyer and Ouchi, 1993; Contractor and Lorange, 1988), while others tackle this challenge by involving their suppliers early in the product development phase (Baldwin and Clark, 1997; Bozdogan et al., 1998; Dowlatshahi, 1998; Clark and Fujimoto, 1991; Clark, 1989; Dobler and Burt, 1996; Hsuan, 1999). There is increasing evidence that makers of complex systems are delegating more responsibility (both in design and in manufacturing) to the suppliers (Baldwin and Clark, 1997; Clark, 1989; Clark and Fujimoto, 1991). The increasing number of new technologies (e.g., intelligent transportation systems, electronic engine management systems, fuel cells, etc.) is giving some suppliers increasing role in designing not only discrete parts but whole systems (Womack et al., 1990). This coincides with the trend of multinational high-tech firms to reduce the number of suppliers in order to facilitate more effective purchasing and supplier management. For instance, in the early 1980s Xerox reduced its supply base from 5,000 to 400 suppliers, a 92 percent reduction. Chrysler, too, reduced its supplier base from 2,500 in the late 1980s to a lean, longterm nucleus of 300 (Dobler and Burt, 1996:214). These drastic reduction of supplier base means that the assemblers have to find innovative ways to cooperate with suppliers, to carefully make outsourcing decisions, and to manage the knowledge stock of core capabilities. A growing number of high-tech firms (e.g., consumer electronics, automotive electronics, and elevator manufacturing firms) have embraced new approaches to the management of their NPD, manufacturing, and supply chain management activities. In order to shorten NPD lead time, to introduce multiple product model quickly with new product variants at reduced costs, and to introduce many successive versions of

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the same product line with increased performance levels, these firms are pursuing modular product architecture development. In a modular design strategy (as opposed to integral design strategy), decomposability of the components1 and interface compatibility issues must be seriously considered.

Consequently, the degree of

modularity inherent in a product is highly depended upon the number of components and respective interfaces2. When interfaces of decomposed system become welldefined, outsourcing decisions can be made accordingly with respect to a firm’s longterm strategic planning.

If outsourcing delegates more responsibility towards

suppliers, how do firms enhance learning, not only within its own organization but also with its suppliers?

What are some impacts of product architecture design

decisions have over the characteristics of the outsourced parts? This paper focuses on the issues of product architecture designs, the characteristics and composition of the outsourced components, and how such designs impact supplier-buyer interdependence and inter-firm learning in the automotive industry. Decisions regarding to component outsourcing are derived from product architecture modularity, which in turn has tremendous impact on the degree of supplier-buyer interdependence and subsequent amount of inter-firm learning. organized as follows.

The paper is

Firstly, a literature review on modularity and product

architecture is briefly reviewed. Secondly, component outsourcing in new product development in the automobile industry is described. Next, the extent of supplierbuyer interdependence created from product architecture designs and inter-firm learning is discussed. Finally, a case study of Chrysler Jeeps windshield wipers controller is analyzed to demonstrate the relationship between modularity, outsourcing and inter-firm learning.

1 A component is defined as a physically distinct portion of the product that embodies a core design concept (Clark, 1985) and performs a well-defined function (Henderson and Clark, 1990). 2

Interfaces are linkages shared among components, modules, subsystems of a given product architecture. Interface specifications define the protocol for the fundamental interactions across all components and interfaces comprising a technological system.

2

2.

Modularity

Modularity refers to the scheme by which interfaces shared among components in a given product architecture are specified and standardized to allow for greater reusability and commonality sharing of components among product families. According to Clark (1997), modularity is the building of a complex product or process for smaller subsystems that can be designed independently yet function together as a whole. Sanchez and Mahoney (1996) state that modularity creates a high degree of independence or a ‘loose coupling’ between component designs by standardizing component interface specification. Other terms related to modularity include modular innovation (Christensen and Rosenbloom, 1995; Henderson and Clark, 1990; Hsuan, 1999a), modular system (Baldwin and Clark, 1997; Langlois and Robertson, 1992), modular components and modular product design (Schaefer, 1999; Sanchez and Mahoney, 1996; Sanchez, 1994), modular product architecture (Sanchez and Mahoney, 1996; Lundqvist et al., 1996; Ulrich and Eppinger, 1995), and remodularization (Lundqvist et al., 1996).

For instance, Langlois and Robertson

(1992) define modular system as a network of sub-products, which form a product that can be treated as an entity, that consumers can arrange into various combinations according to their personal preference. Similarly, Sanchez (1996) highlights how modular product architectures can permit the leveraging of a great number of product variations by mixing-and-matching different combinations of functional components. Although mixing-and-matching of components is one of the advantages enabled by modularization, its complexities are also dependent on the degree of standardization and customization of the components vis-à-vis respective linkages embedded in product architectures.

Mixing-and-matching of components tends to be more

prominent at the end of the value chain (e.g., Swatch watches, Sony Walkman). Whereas modular innovation in the form of unique components inserted in product architectures for differentiating a product from that of the competitors’ is more critical at the early stages of the value chain (e.g., IWIPE, anti-lock brake systems, air bags, etc.). Changes in product technology and functionality of modular innovations are not as visible and obvious as modularization in the form of mixing-and-matching. In this paper modularity is defined as the scheme by which interfaces shared among

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components in a given product architecture are specified and standardized to allow for greater reusability and commonality sharing of components among product families.

2.1. Product architecture Product architecture is the arrangement of the functional elements of a product into several physical building blocks, including the mapping from functional elements to physical components, and the specification of the interfaces among interacting physical components. Its purpose is to define the basic physical building blocks of the product in terms of both what they do and what their interfaces are with the rest of the device (Ulrich, 1995; Ulrich and Eppinger, 1995).

Product architecture is often

established during the product development process. This takes place during the system-level design phase of the process after the basic technological working principles have been established, but before the design of component and subsystems has begun. Product architectures can vary from modular to integral.

Modular product

architectures are used as flexible platforms for leveraging a large number of product variations (Gilmore and Pine, 1997; Meyer et al., 1997; Robertson and Ulrich, 1998; Sanchez, 1996; Sanchez 1999), enabling a firm to gain cost savings through economies of scale from component commonality, inventory, logistics, as well as to introduce technologically improved products more rapidly. Some of the reasons for product change include upgrade, add-ons, adaptation, wear, consumption, flexibility in use, and reuse (Ulrich and Eppinger, 1995). Modular architectures enable firms to minimize the physical changes required to achieve a functional change. Product variants often are achieved through modular product architectures where changes in one component do not lead to changes in other components. Outsourcing decisions are make concurrently with the design of modular product architectures. Specialization of knowledge is gained through division of labor. Conversely, in integral product architectures, one-to-one mapping between functional elements and physical components of a product is non-existent, and interfaces shared between the components are coupled (Ulrich, 1995). Changes to one component cannot be made without making changes to other components. Integral architecture designs enhance knowledge sharing and interactive learning as team members rely on 4

each other’s expertise in designing the architecture.

With integral product

architectures, firms may be able to customize their products to satisfy each customer’s particular needs. Costs of customized components tends to be higher due to the integral nature of product architectures where an improvement in functional performance can not be achieved without making changes to other components. This can be prohibitively costly for complex systems such as computers, automobiles, telephones, elevators, etc.

Hence, making the outsourcing of integral product

architectures not a viable alternative. As the interfaces of the customized components become standardized, its costs are significantly reduced as changes to product architecture can be localized and made without incurring costly changes to other components, making outsourcing possible.

3.

Components outsourcing

When a new project has been given the green light to start the development, its activities and processes can be analyzed in three stages: planning, design and production.

The planning phase activities are often related to the definition of

functional specification of the new product such as general product definition, lead time requirements, definition of interface specifications, platform/architecture design specifications, and outsourcing decisions. The design and production stages are often referred to as the detailed engineering phase where bill of materials and blue prints are generated, prototypes are built and tested, manufacturing processes and equipment are selected and qualified, and so on, as shown in Figure 1. A system producer basically faces two alternatives to manage the development of its components: in-house development or outsourcing3. An outsourced component can be a supplier proprietary part, a detail-controlled part, or a black-box part depending on the proprietary sensitivity of the component and the degree of supplier involvement in design and manufacturing.

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Outsourcing in car industry terminology means buying a part from another company rather than making it yourself (Womack et al., 1990:158).

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PLANNING

t nt t n star me p e p nc tio velo co nera e d ge ct oje ion pr lect Planning activities: se

• general product definition • lead time requirements • interface specifications • platform/architecture design specifications • outsourcing decisions

DESIGN

sta

r

e td

sig

n pr

ot

yp ot

n e 0DE Build(s) pe t y ilo t o e-p ot r r p p

tests Design activities: • blueprint generation • detailed component specification • BOM generation • module level tests • system level tests Purchasing activities: • sourcing of unique parts • qualification of suppliers

FUNCTIONAL SPECIFICATION

PRODUCTION

lo pi

t

on cti u od pr

tests Manufacturing activities: • planning of manufacturing processes • design of manufacturing processes • selection of equipment • qualification of new equipment • tooling • materials planning • packaging design • floor layout • quality control • test engineering

DETAILED ENGINEERING

Figure 1. New Product Development Activities Supplier proprietary parts – Supplier proprietary parts are those parts that are developed entirely by parts supplier as standard products (Clark, 1989), and are considered standard products taken by the supplier from concept to production, and sold to assemblers through catalogue (Clark and Fujimoto, 1991). To assemblers, these parts can be off-the-shelf parts (e.g., resistors, diodes, integrated circuits, etc.) or discrete parts (e.g., microprocessors, vacuum fluorescent displays, etc.). There is almost no supplier-buyer interdependence with off-the-shelf parts as assemblers can easily find substitutes for these parts. For discrete parts, assembler becomes depended on supplier for availability, upgrades, and system integration. Virtually no inter-firm learning is gained with supplier proprietary parts. Detail-controlled parts4 - Detail-controlled parts are those parts which are developed entirely by assemblers from functional specification to detailed engineering (Clark, 1989).

Specialized suppliers are selected through inquires and bids to take the

responsibility for process engineering and production based on blueprints provided by car makers. These types of parts are advantageous when a car maker wants to preserve detailed technological capabilities in a particular component area, tightly control component design quality, and preserve bargaining power with respect to 4

In Japan, detail-controlled part is referred to as ‘design-supplied’ part (Asanuma, 1985).

6

supplier parts prices. However, detail work for numerous components can distract inhouse engineering organization form its total vehicle focus, not mentioning the assembler’s risks of losing competitiveness relative to supplier engineering units that are more focused on specific component technologies (Clark and Fujimoto, 1991). With these components, assembler is depended upon the assembler to deliver the part built to exact specifications.

After supplier selection from the bidding process,

assembler learns about supplier’s manufacturing, purchasing, and distribution practices. Typically an engineer (from the supplier) is assigned to handle design-formanufacturability, prototyping, and testing issues, and serves as a liaison between supplier and assembler.

This way supplier learns about assembler’s product

development process and technological advancements. Black-box components5 - Black box parts are those parts whose functional specification is done by assemblers while detailed engineering is done by parts suppliers (Clark, 1989). The development work of black box parts is split between assembler and supplier. Typically, assembler’s responsibilities include generating costs/performance requirements, exterior shapes, interface details, and other basic design information based on the total vehicle planning and layout. Black box parts enable assemblers to utilize supplier’s engineering expertise and manpower while maintaining control of basic design and total vehicle integrity. To the supplier, the accumulation of engineering expertise becomes its competitive edge. Prototype and production part exchange is a source for facilitating knowledge exchange between these two functions (Clark and Fujimoto, 1991). Added value can be attained when supplier and assembler are willing to collaborate in solving technical problems, especially in resolving interface compatibility constraint problems. The higher the technical complexity of a black box part, the more necessary it is for the supplier to become involved in the assembler’s engineering activities.

This supplier-buyer

involvement leads to stronger interdependence and inter-firm learning. Typical information flows with parts suppliers are illustrated in Figure 2, adapted from Clark and Fujimoto (1991:141). Clark and Fujimoto’s model focus on car manufacturers’ relationship with first-tier suppliers.

Platform and architecture

planning takes place at the vehicle concept stage. In this case, vehicle concept can be 5

In Japan, black-box part is referred to as ‘design-approved’ part (Asanuma, 1985).

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replaced by ‘product concept’ including product architecture design. In fact, the same model also describes the information flows between the first-tier manufacturers with their suppliers. 1. Supplier Proprietary Parts

Vehicle Concept

Component Choice

1. Black Box Parts

Component Concept

Vehicle Concept Suggested Alternatives

Specification Layout

Specification Layout

Detailed Prototype Parts

Vehicle Test Approval

Production Process

Detailed Prototype Parts

Production Process

Complete Vehicle

Component

Complete Vehicle

Component

Assembler

Production Supplier

Assembler

Production Supplier

1. Detail-Controlled Parts (functional parts)

1. Detail-Controlled Parts (body parts)

Vehicle Concept

Vehicle Concept

Specification Layout

Specification Layout Prototype Parts

Detail Design

Detail Design Prototype Parts

Production Process

Production Process

Installation Process

Complete Vehicle

Component

Complete Vehicle

Component

Assembler

Production Supplier

Assembler

Production Supplier

M ain Inform ation A sset C reated

M ain Inform ation Flow s

Figure 2. Typical information flows with parts suppliers.

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4.

Supplier-buyer interdependence

Supplier-buyer interdependence denotes the degree of supplier involvement in product development leading to capabilities benchmarking, trust development, and creation of inter-firm knowledge. Although firms must share knowledge with each other to ensure compatibility of components, knowledge sharing also increases the competitive pressure among these firms to be innovative (Garud and Kumaraswamy, 1995). Black box parts are good mechanisms for promoting knowledge sharing and inter-firm learning in product architecture designs, for suppliers, manufacturers as well as customers. Design of black box parts often encompasses some degree of innovation in the form of discrete or new-to-the-firm (NTF) components.

NTF

components typically have higher technological risks through inducing changes at interfaces shared with other components, thus altering product architecture’s configuration. Often the risks are well justified by the technical superiority of these components, significantly improving the overall performance of the product. The use of NTF components is strategic in nature because the integration of NTF components into a product architecture is often hard to be imitated by competitors (i.e., modular innovation6), thus creating competitive advantages for the firm, at least in the shortrun.

But too many NTF components hamper innovation due to the increasing

complexity in interface compatibility issues with other components in the system. The impact of black box parts in supplier-manufacturer-buyer linkage is illustrated in Figure 3.

6

Henderson and Clark (1990) define modular innovation as “an innovation that changes only the relationships between core design concepts of a technology. It is an innovation that changes a core design concept without changing the product’s architecture.”

Similarly, Christensen and

Rosenbloom (1995) describe it as “the introduction of new component technology inserted within an essentially unchanged product architecture.”

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Inter-firm learning

SUPPLIERS SUPPLIERS

Inter-firm learning

BUYER BUYER

MANUFACTURER supplier-buyer interdependence

supplier-buyer interdependence

BB

X(2)

X(1)

A(1)

Y(1)

A(2)

BB

B(2)

Y(2)

Family 1

A(3) B(2)

Z(1)

BB

A(4)

C(2)

D(3)

BB

...

...

D(2)

Family 2

Family n

C(1)

U(1) INNOVATION

U(1)

D(1)

C(3)

PRODUCT ARCHITECTURE

Substitutability ≈ n family variations MODULAR INNOVATION

Figure 3. Black box (BB) part development and supplier-manufacturer-buyer linkage.

The product architecture of a black box (BB) can be decomposed into sub-modules and components.

The degree of modularity of a given product architecture is

depended upon the components and respective interfaces. The architecture of BB is comprised of standard [e.g., A(n), B(n), C(n), and D(n)] and NTF components7 [e.g., U(n)], which can be developed in-house or outsourced. The outsourced component can be either supplier proprietary, detail-controlled, or a black box part. Similarly, supplier decides the best combination of components [e.g., X(n), Y(n), and Z(n)] to produce the outsourced component [e.g., U(n)]. Although innovations within a blackbox design are not obvious to the eyes of the buyer, the visible values are clearly indicated by the degree of substitutability of these modules. That is, the value of a black box is increased significantly as it can be inserted in families of products without changing the core concept and respective architectures. The substitutability factor can be represented by the number of n families of products enabled by a BB.

7

The number of NTF components or a given product architecture represents the amount of outsourced components.

10

For example, black-box BB with innovation U(1) is a modular innovation that can be inserted in buyer’s product architecture with n family of products.

5.

Case illustration of Chrysler’s windshield wipers controller8

Since late 1980s, Chrysler has replaced its adversarial bidding system with one in which the company designates suppliers for a component and then uses target costing9 to determine with suppliers the component prices and how to achieve them. Moreover, most parts are outsourced form one supplier for the life of the product (Womack and Jones, 1994), as the case of Jeep Grand Cherokee’s windshield wipers controllers (WIPER). The front-intermittent windshield wipers system for Chrysler Jeeps (Grand Cherokee, Cherokee, and Wrangler families) is comprised of a motor, wiper arms, blades, wipers switch, and the wipers controller module (referred to as WIPER controller). Triggered by the wiper switch, the WIPER sends the following commands to the motor controlling the windshield wipers: high speed, low speed, intermittent, mist, and wash. Jeep Grand Cherokee was first introduced in U.S. in 1993 as a high-end utility vehicle. The commercial success of this new family of Jeeps was uncertain, as it had a numerous new concepts and innovations that were not present in former Jeeps. Moreover, a majority of the development responsibilities of these innovations was outsourced10. As in this case, the tasks and responsibility for the design and manufacturing of WIPER was outsourced to a Fortune-100 world class manufacturer, resulting in two technological solutions11: solid-state WIPER and silent-relay WIPER.

8

All the information presented in this study are the results of the author’s direct involvement in product design, pre-production, and sourcing tasks of the WIPER as the design team leader. The interpretation of the case is solely the responsibility of the author.

9

Target costing is a technique for managing a company’s future profits by determining the life cycle costs at which a company must produce a proposed product with specified functionality and quality if the product is to be profitable at its anticipated selling price (Cooper and Slagmulder, 1999).

10

In the U.S. and Canada, it was estimated that the market for original equipment components (value of production) in 1989 was at US$90 billion, with Chrysler accounting for 9.3% of The Big Three (Lamming, 1993, p. 51).

11

The case is analyzed from the manufacturer’s perspective. For Chrysler, the WIPER is a black box part to be integrated with the windshield wipers system.

11

5.1. The solid-state WIPER The controller used by Jeep families applied relay-based technology which made ‘clicking noises’ when switching from one state to another (e.g., ON and OFF), a very annoying feature to some customers. The manufacturer was asked to develop a WIPER controller that eliminated the ‘clicking sound.’

One plausible technical

solution was to create a solid-state module, using only transistors and other electrical components, hence ‘soundless.’

With this approach, 19 NTF components were

needed, of which 16 and 3 were detail-controlled and supplier proprietary parts respectively. There were no black-box parts. Moreover, the application of solid-state technology was a well-known knowledge among electrical engineers. Consequently the development of solid-state WIPER could be carried out independent of the suppliers and customers. Tight budget, limited development and manufacturing lead times in addition to working with Chrysler for the first time, manufacturer’s design team faced many challenges with the NPD tasks of WIPER. Test runs on the first solid-state WIPER controller prototypes proved to be almost catastrophic. Careless assumption about some specifications of the system was one of the mistakes. Being a new line of Jeeps, the interfaces among different modules, sub-systems were not quite the same as the current Jeeps, one being the differing electrical characteristics of the new wiper switch and windshield angle. Another mistake was attributed by the lack of active marketing involvement in design decisions, and WIPER was treated the same way as a standard component.

These mistakes warranted the concept of solid-state WIPER totally

useless. So, the design team went back to the drawing board, and started the redesign of WIPER from scratch. The product architecture of solid-state WIPER is shown in Figure 4.

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Battery Voltage

Washer Pump

WIPER CIRCUITRY

Power Supply

Oscillator

Short Ckt. Protection

Charge Pump Driver Circuitry

Wash Timer and Enabling Ckt.

Pulse Switch

Intermittent

Low Speed High Speed

Motor

Figure 4. Product architecture of solid-state WIPER.

5.2. The silent-relay WIPER Even though the solid-state-WIPER was abandoned, it provided both the manufacturer’s design team and Chrysler with an unforgettable and valuable learning experience. A much better understanding of the windshield wipers system as a whole in terms of its functionality and interfaces with other elements of the vehicle was gained. Most importantly, a great deal of WIPER controller’s specifications for the Grand Cherokee Jeep was set. This step was possible through an increased supplierbuyer involvement in NPD at solving technical and interface management problems. Face-to-face meetings, joint problem solving, daily phone calls, etc. became a norm. During this second round of development effort, the design team was able to focus on the design and other concurrent processes with more confidence and determination. This is when the process of modular product architecture design and modular innovation took place. During this stage of the development, the design team came up with a solution to modify a portion of the design by replacing it with a ‘silent relay.’ One of the advantages of relay-based technology for this application is that it would increase the 13

robustness of the WIPER controller module. Such ‘silent relay’ would have the properties of standard off-the-shelf relays, but would have significantly lower switching-noise level. The only problem was there were no such devices in the market that the design team was aware of. All the relays sold at the market, at the time, were considered too ‘noisy.’ Thanks to the efficiency of the sourcing team and close coordination with the design team, major relay suppliers in the world got to know about the new relay’s technical requirements, and started to innovate and deliver first-run prototypes that would meet the specifications of the ‘silent relay.’ During the period of less than one year, some 15 prototypes of relays were tested and evaluated. At the end, a Japanese firm was chosen as the sole supplier because it was able to offer the best performing ‘silent relays’ with the most competitive price. The product architecture of silent-relay WIPER is shown in Figure 5. Compared with Figure 4, we see that the silent-relay circuitry replaces oscillator, charge pump, short circuit protection, and driver circuitry of the solid-state WIPER.

Battery Voltage

Washer Pump

WIPER CIRCUITRY

Power Supply

Silent Relay Wash Pulse Switch

Timer and Enabling Ckt.

Intermittent

Low Speed High Speed

Motor

Figure 5. Product architecture of silent-relay WIPER.

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The ‘silent relay’ proved to be the key factor for allowing modularization and modular innovation to take place. With it, not only Jeep Grand Cherokee’s WIPER controller became ‘noise-free,’ it could also be used with other Jeep families. This meant that one common WIPER module could be mounted on any Jeep line without any degradation in functionality and performance, accounting for differing electrical and mechanical properties of different wiper switches. The new modular architecture had 16 detail-controlled parts and one black box part, the ‘silent relay.’ The silent-relay WIPER would entitle the manufacturer to deliver a high-performing module that is highly appreciated by Chrysler, not mentioning the savings gained from availability and economies of scale of components, universal tooling, and common assembly and manufacturing processes.

A comparison of new-to-the-firm (NTF) component

composition for both solid-state and silent-relay WIPERs is shown below.

6.

Solid-State WIPER

Silent-Relay WIPER

Detail-controlled parts: 16 Black-box parts: 0 Supplier-proprietary parts: 3 Total NTF parts: 19

Detail-controlled parts: 16 Black-box parts: 1 Supplier-proprietary parts: 0 Total NTF parts: 17

Conclusion and discussions for future research

This paper roughly discussed modularity in product architecture design and how it impacts outsourcing decisions and inter-firm learning. The underlying assumption is that modular product architecture allows the decomposition of a complex system or process into smaller sub-systems. It was argued that when the interfaces shared among the components, modules, and sub-systems become standardized, outsourcing decisions can be made accordingly. Depending on the technological complexity and sensitivity of outsourced parts, assembler can delegate the functional specification as well as detailed engineering responsibilities to the suppliers in the form of supplierproprietary part, detail-controlled part, and black box part. The outsourcing of these parts dictates the relationship and interdependence shared with suppliers, hence the differing amount of inter-firm learning gained from different product architecture approaches. In other words, the interface management of product architectures has an enormous impact on to which suppliers a component is outsourced to, how a firm 15

should organize its knowledge stock, and how investment and resource allocation should be dealt with. In order to make sound decisions firms should take a systemic approach to understanding how components, modules, and sub-systems and respective interfaces are interact with each other. The importance of taking a supply chain view in analyzing the role of product architectures in knowledge sharing and inter-firm learning was also emphasized. Even the division of tasks such as in the form of outsourcing, firms need to cooperate with suppliers, customers and even rivals to ensure they have complementary resources, skills, knowledge, and components for long-term survival. Because the components or the modules delivered by manufacturer must have perfect fit with the system dictated by the customer, it is crucial for the manufacturer to have in-depth understanding about the system as a whole and its constraints. As the case study of Chrysler Jeep revealed that different product architecture designs lead to different types of outsourced components. The failure of solid-state WIPER was the impetus for the subsequent creation of the modular product architecture of silent-relay WIPER. Some of the outcome of this cooperation included the increased number of product variants per Jeep family, performance superiority, a better understanding of the windshield system, cost savings, stronger supplier-buyer interdependence, and inter-firm learning. As the majority of products sold in the market place involve many suppliers with distinctive knowledge and expertise, the design of product architectures should also take into consideration how it impacts the organizational design of NPD tasks vis-àvis manufacturing design and inter- versus intra-firm learning and knowledge management. Moreover, it has been debated that outsourcing of non-core technical activities are enabled by the standardization of these non-core components with respect to the core technology.

Can decisions regarding to product architecture

designs provide us insights to strategic decisions regarding outsourcing, manufacturing, and supply chain management? If so, how should firms design its organization to match such strategies with respect to its suppliers and customers? Other areas of great interest for research include, for example, the impacts of product architecture design choices (e.g., multiplexing and de-integration of components) with respect to postponement and mass customization strategies.

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