The impact of modular platforms on automobile manufacturing networks

Abstract

This paper explores the impact on automobile manufacturing networks of adopting modular platforms to replace the standard platforms used to date. Analysis of European manufacturers’ production networks shows that the use of modular architecture improves coordination by increasing manufacturing mobility and thriftiness ability. The changes resulting from this new modular approach also allow manufacturing capacity to be reorganised and overcapacity to be partially eliminated. From the point of view of production systems, the adaptation of manufacturing processes and facilities to this new architecture should aim to increase flexibility by integrating production around a single platform, allowing for different dimensions and for a larger number of models to be produced in a single plant.

Keywords:

• Product architecture approach
• modular platforms
• manufacturing networks
• operational flexibility
• economies of scale
• economies of scope
• automobile sector

Notes

1. Examples of the modularity concept are the ‘modular consortium’ and the ‘industrial condominium’ in the Brazilian industry. The ‘modular consortium’ is an approach to production with radical outsourcing of some traditional automaker activities. It consists of separating the product into sub-assemblies (modules) which are delegated to and entirely provided by a specific module supplier. The module supplier is responsible for assembling its module directly on the automaker’s assembly line. In an ‘industrial condominium’, the assembler completely controls the supplier’s location. The assembler negotiates the accrued benefits with local governments, obtains the land and the infrastructure, designs its production system based on the product’s ‘modules’, and defines its own internal operations and subcontracted operations. Any modules outsourced should be produced near the condominium or in the surrounding area (Salerno and Dias 2002; Pandremenos et al. 2009; Sacomano and Pires 2010).

2. In this research, ‘segment’ refers to the European Commission classification of automobiles based on size: mini cars (segment A), small cars (B), medium cars (C), large cars (D), executive cars (E), luxury cars (F), and multi-purpose and sports utility cars (G).

3. The resource-base theory suggests that a firm’s internal capabilities are key for its strategy as they are the source of competitive advantage (Grant 1991). A firm’s capabilities are to renew, augment, and adapt its core competencies over time and thus reflect the firm’s latent competencies (Teece, Pisano, and Shuen 1992). From the network-level perspective, Porter (1986) proposed that firms with geographically dispersed sites derive a competitive advantage from two key dimensions: configuration and coordination. The former refers to ‘the location in the world where each activity in the value chain takes place, including in how many places’, and the latter refers to how ‘like or linked activities are coordinated with each other’. Hence, configuration may be thought of as the structure of multi-plant networks, and coordination as the infrastructural processes related to linking activities between plants. Since configuration and coordination dimensions are only available to multi-plant networks, unique capabilities arise (Bartlett and Ghoshal 1989). The present research focuses on the capabilities that are directly related to possession of an international production network.

4. A typical automobile assembly plant contains three shops. The body shop has the most complex manufacturing flow and is located at the beginning of the process. In it, the raw materials pass initially through a stamping process, then the welders assemble the stamped parts to create the body in white which then moves on to the paint shop. The last step is the final assembly shop, where the painted body is merged with the remaining parts to make a marketable product. These parts range in importance from vital (e.g. the engine system) to decorative (e.g. the hubcaps) (Patchong, Lemoine, and Kern 2003).

5. These projects (referenced in the University of Vigo as CO/0163/2011 and CO/0036/14) are supported by advanced services suppliers in the automobile industry (engineering companies, innovation consultancies and technological centres) and managed by the Research and Development area of the University of Vigo.

6. Examples of those technical reports are: ‘EMP2. The New Vehicle Platform by PSA Peugeot Citroën’, http://www.psa-peugeot-citroen.com/sites/default/files/content_files/press-kit_emp2_en.pdf. ‘The beginning of a new era: Volkswagen introduces the Modular Transverse Matrix (MQB)’, http://www.volkswagenag.com/content/vwcorp/content/en/misc/document-folder.generate.html.

7. Note that production volumes vary over time and depend on aspects such as price and market conditions. In the case of modular platforms it is difficult to determine production volumes because they are still being adopted. Therefore, the data provided by interviewees about the production volumes under modular platform are estimated. In order to show real production volumes and give arguments to support our hypothesis, by way of example we consider the VW group and its modular platform (MQB) and the standard platforms (PQ25, PQ35 and PQ46). This real data are shown in this section.

8. We have resorted to a non-parametric test that does not require a specific sample size or normality in the sample.

9. Capital expenditure: the funds used by firms to acquire or upgrade physical assets such as industrial buildings or equipment, and often to undertake new projects or investments.