Modularity, product variety, production volume, and component sourcing: theorizing beyond generic prescriptions

TLDR

Research in operations management shows that firms can reduce the negative effects of product variety on operational performance by embedding modularity into product family architectures, yet modularity is not a binary property and can take multiple forms. This paper investigates how manufacturing characteristics determine the appropriate type of modularity to embed in product family architectures and how these modularity types relate to component sourcing. Using a qualitative multiple case study of six European product families, the authors derive empirical generalizations and formulate two propositions explaining when and why these generalizations apply to other product families. The study introduces a new type of modularity—combinatorial modularity—and demonstrates that it improves operational performance when product variety is low relative to production volume, while the complexity and geographic proximity of outsourced component families influence the extent to which the variety–performance trade‑off can be mitigated.

Abstract

Abstract Research in operations management suggests that firms can mitigate the negative impact of product variety on operational performance by deliberately pursuing modularity in the design of product family architectures. However, modularity is not a dichotomous property of a product, as different types of modularity can be embedded into a product family architecture. The present paper explores how manufacturing characteristics affect the appropriate type of modularity to be embedded into the product family architecture, and how the types of modularity relate to component sourcing. The study is based on a qualitative research design involving a multiple case study methodology to examine six product families belonging to six European companies. The themes derived through case analyses are synthesized in the form of empirical generalizations. Insights from these empirical generalizations are subsequently developed into two propositions explaining why and under what conditions these empirical generalizations might hold for a product family outside of the original sample. The theoretical results formalize, first of all, a type of modularity (i.e. combinatorial modularity) not currently described in literature. Second, the theoretical propositions suggest that when the desired level of product variety is low (high) relative to total production volume, component swapping modularity (combinatorial modularity) helps to maximize operational performance. Finally, the complexity of component families outsourced to suppliers and the geographical proximity of component family suppliers affect the extent to which the product variety–operational performance trade‐off can be mitigated through modularity.