Modularisation in the auto industry: interlinked multiple hierarchies of product, production and supplier systems

International Journal of Automotive Technology and Management

Volumn 1, Issue 4, 2001, Pages 379-396

  Takeishi, Akira ^a   Fujimoto, Takahiro ^b  

^a HITOTSUBASHI UNIVERSITY   (Japan)

^b UNIVERSITY OF TOKYO   (Japan)

Author keywords

Automotive industry; hierarchies; modularisation; product architecture; production system; supplier system

Indexed keywords

EID: 77956985931     PISSN: 14709511     EISSN: 17415012     Source Type: Journal    
DOI: 10.1504/IJATM.2001.000047     Document Type: Article

References (23)

1. This paper is based on the results of a series of interviews with automakers and component suppliers in Japan and other countries that was carried out from 1999 to 2000 as part of a research project on ‘Modularization and Outsourcing’ in the MIT International Motor Vehicle Program. We also conducted a questionnaire survey of Japanese component suppliers.
2. Fujimoto, T. (1999) The Evolution of a Manufacturing System at Toyota, New York: Oxford University Press.
3. Gopfert, J. and Steinbrecher, M. (1999) ‘Modular product development: managing technical and organizational independencies’, Mimeo.
4. Simon, H.A. (1996 (1969)) The Science of the Artificial. 3rd Edition, Cambridge, MA: MIT Press.
5. It is said, for example, that assembly plants actively outsourcing larger modules to suppliers can gain pay back from their investment even on a relatively small scale of production. However, some interviewees at European and US automakers pointed out that the saving of labour and investment costs would not necessarily be very important advantages of modularisation. Labour costs do not account for a large portion of total production costs in automobile manufacturing. Further, if suppliers’ subassembly plants are adjacent to an automaker’s final assembly plant, there exists a strong chance for the wage gap between the assembler and suppliers to be narrowed. It is also true that investment costs shared by suppliers would be reflected in the prices of their parts. For suppliers whose scale of business is relatively small, it is more likely that they will have to pay higher capital costs than their customers.
6. Clark, K.B. and Fujimoto, T. (1991) Product Development Performance: Strategy, Organization, and Management in the World Auto Industry, Boston, MA: Harvard Business School Press.
7. Cusumano, M.A. and Takeishi, A. (1991) ‘Supplier relations and management: a survey of Japanese, Japanese-transplant, and US auto plants’. Strategic Management Journal, Vol. 12, No. 8, pp.563-588.
8. Nishiguchi, T. (1994) Strategic Industrial Sourcing: The Japanese Advantage, New York, NY: Oxford University Press.
9. Fujimoto, T., Takeishi, A. and Aoshima, Y. (Eds.) (2001) Bijinesu Akitekucha: Seihin, Soshiki, Purosesu no Senryakuteki Sekkei [Business Architecture: Strategic Design of Products, Organizations, and Processes] Tokyo: Yuhikaku.
10. See, for example, Automotive News (June 22, 1998). Lear Corporation is among such suppliers. Originally a seat manufacturer, the company acquired Ford’s seat production division in 1993. Since then the company has branched out into new component areas by buying 12 suppliers, and has grown into a leading supplier whose products cover entire car interiors, including instrument panels, door trims, roof trims, rearview mirrors, carpets, and air conditioners.
11. For details of the questionnaire, see Fujimoto, T., Matsuo, T. and Takeishi, A. (1999) ‘Jidosha Buhin Torihiki Patan no Hatten to Henyo: Wagakuni Ichiji Buhin Meka heno Anketo Chosa Kekka wo Chushin ni [Development and transformation of car component transaction patterns: results from a questionnaire survey with Japanese first-tier suppliers]’, Discussion Paper CIRJE—J—17, Faculty of Economics, University of Tokyo.
12. The factor analysis was done by Ku and is reported in Ku, S. (2000) ‘Nihon Jidosha Sangyo ni Okeru Mojuraka no Doko to Kigyokankei ni Kansuru Kenkyu: Mojuraka ni Taisuru Hihanteki Kento wo Chushinni’ [A study of modularization and inter-firm relationships in the Japanese automobile industry: a critical examination of modularization], Unpublished Master's Thesis, Faculty of Economics, University of Tokyo.
13. Fujimoto, T. and Takeishi, A. (1994) Jidosha Sangyo 21-seiki heno Shinario [The Automobile Industry: A Scenario towards the 21st Century], Tokyo: Seisansei Shuppan.
14. Some automakers have also tried to divide their main lines into some self-contained subblocks. For this new assembly system, see [2].
15. Some European automakers, however, put emphasis on in-house production. For example, Audi, a company of the Volkswagen Group, focuses on in-house production at its Ingolstadt Plant, Germany. It outsourced some subassemblies to outside suppliers, but plans to have them back to in-house operations.
16. Fujimoto, T. (2001) ‘Akitekucha no sangyoron’ [Industry analysis by architecture], in T. Fujimoto, A. Takeishi and Y. Aoshima (Eds.) Bijinesu Akitekucha: Seihin, Soshiki, Purosesu no Senryakuteki Sekkei [Business Architecture: Strategic Design of Products, Organizations, and Processes] Tokyo: Yuhikaku.
17. It is also true that Japanese-style production, which often uses mixed-model assembly lines (in which different models are assembled on the same line), prevents automakers from adopting subassemblies. Suppose you decided to use subassemblies for the production of a certain model, then assembly work on the main line would be quite uneven between different models, making the operation inefficient. Note, however, that this problem will be solved over time.
18. Fujimoto, T. and Sheng, G.D. (2001) ‘Jidosha buhin no akitekuchateki tokusei to torihiki hoshiki no sentaku [Architectural characteristics of auto components and choices of transaction systems]’, in T. Fujimoto, A. Takeishi Y. and Aoshima (Eds.) Bijinesu Akitekucha: Seihin, Soshiki, Purosesu no Senryakuteki Sekkei [Business Architecture: Strategic Design of Products, Organizations, and Processes] Tokyo: Yuhikaku.
19. Since suppliers have extensive knowledge of individual components, their cooperation is indispensable for the development of any modules, even if its subassembly is done in-house by an automaker. There is a unique approach called ‘kyogyo’ in the Japanese auto industry in which a number of suppliers work together to develop sets of components in larger units, under the leadership of an automaker. For examples of design streamlining through ‘kyogyo’, see Nikkei Mechanical, January 1999.
20. The auto industry’s resistance to standardisation has a long history. In 1910, the Society of Automotive Engineers (SAE) proposed the standardisation of parts across the industry. It wanted to make assembly work more efficient by ensuring compatibility between different parts of different automakers. While relatively small-sized automakers supported the proposal, it did not become a reality due to resistance from major assemblers such as Ford and GM. They did not want to lose the strong position they had established (economy of scale) and stuck to their own standards (Langlois, R.N. and Robertson, P.L. (1992) ‘Networks and innovation in a modular system: lessons from the microcomputer and stereo component industries’. Research Policy, Vol. 21, pp.297-313.)
21. Baldwin, C.Y. and Clark, K.B. (2000) Design Rules: The Power of Modularity, Cambridge, MA: MIT Press.
22. Sako, M. and Murray, F. (1999) ‘Modules in design, production, and use: implications for the global automobile industry’, Paper submitted to MIT IMVP Annual Sponsors Meeting, Cambridge, MA.
23. Fine, C.H. (1998) Clockspeed: Winning Industry Control in the Age of Temporary Advantage, Reading, MA: Peruseus Books.