01/11/2024. How the Modular5® framework is self-funding

What if the change your company makes could pay for itself? The Modular5® framework enables it.

We use the best parts of lean manufacturing, Six Sigma, the theory of constraints, and other operational excellence systems to make your operations run more smoothly. The money you save will fund the cost of setting up a modular product design. This self-sustaining method helps your business become more efficient, make more money, and grow over the long run.

When production numbers are low, and products are complex, the old ways of doing things don’t work when the company grows to a certain size. Processes get sluggish, and people waste time in ineffective meetings discussing topics irrelevant to the clients.

With the Modular5 framework, companies can switch from a custom-made, engineering-heavy model to one where products are “assembled from pre-defined modules.” This lowers variation and opens up opportunities for cost savings all along the value chain.

Step One – Use modular operations to make more money.

Operational excellence is the first step on the trip. Businesses can cut costs and improve quality by using tried-and-true methods such as Lean, Six Sigma, and the theory of constraints. Focusing on making things more efficient sets the stage for future growth that can be paid for without outside cash.

Why do we need Lean, Six Sigma, and the Theory of Constraints?

At Modular5®, we don’t stick to one method or system; we focus on removing ‘waste’. In the context of operational excellence, waste is any activity that does not add value for the customer.

Value-added work, by the lean manufacturing definition, must fulfil all of the three rules:

1. The activity is performed ‘first-time-right.’
2. The product changes in form, fit, or function.
3. The customer is willing to pay for it.

Any activity that doesn’t fit in the value-added work is waste in the operational excellence context. That doesn’t mean the work is unimportant or you can ignore it.

There are two types of waste:

1. Non-value-adding work. This is indispensable work that does not fulfil all the requirements for value-adding. Typical examples are management, finance, and human resources.
   The strategy for non-value-added work is to minimise it.
2. Waste. These activities do not fulfil all the requirements for value-adding and can be eliminated.

Armed with this philosophy, we tap into the most appropriate approach to drive productivity, such as:

• Lean gets rid of waste in processes by cutting down on steps and wait times that aren’t needed.
• Six Sigma cuts down on variation and mistakes, which leads to continuous growth.
• The Theory of Constraints finds slowdowns and makes work move better around them.

When you combine these methods, production times are shortened, mistakes are reduced, and costs are lowered.

The money saved is put back into setting up a modular product design, which speeds up growth in a flywheel effect, turning faster and faster with each rotation.

Step two – Turning Complexity into Opportunity by modularisation

Getting your product options to be the same is what the Modular5 framework is all about. Companies are switching from making one-of-a-kind items to putting together items from “standardised building blocks.” Every part of the business will gain from this change, from sales to engineering to production.

How decoupling changes operations

1. Increased Series Size:
   Items don’t have to be made especially for each sale anymore. With standard units, series sizes can go from one to dozens, allowing economies of scale to work.
2. Lower engineering costs:
   Design and documentation data is reused, which cuts planning and development time by a huge amount.
3. Sales Efficiency:
   Simplifying your product offering by clearly linking functional requirements to the modules. makes it easier for customers to choose, which speeds up the sales process and brings in more money.
4. Learning Effect:
   Repeatedly doing something helps you learn to do it better, which increases productivity and lowers costs over time.
5. Lower maintenance costs:
   Using standardised parts makes repair and maintenance easier, which improves control of the whole lifecycle

A modular product portfolio is the foundation for the next growth phase. The modules are smaller and less complex mechatronic systems managed and improved by smaller teams.

Case Study: The Success Story of a Shipbuilder

In the real world, the Modular5 system helped a company that builds ships make giant steps forward. During the three years, they saw some real effects, such as:

• There are 90% fewer quality problems, meaning less repair costs and efforts and fewer customer complaints.
• A 40% drop in the hours needed to make each product.
• The gross margin went from 3% to 26%, showing that this strategy is profitable.

Quality defects per 1,000 production hours

Construction hours per ship

Margin per ship
From 3 to 26% in three years.

This change did not happen quickly. To do this, a conscious move towards standards to use modules in multiple projects had to be made, combined with focused operational excellence efforts. However, the long-term benefits were well worth the work, leading to a more stable business with resources to grow.

Why modular companies do well in complex, low-volume markets

Modularisation has benefits that go beyond making output more efficient. They affect every part of the company and make it more flexible. Pros in product modularisation can help your business grow in these ways:

1. Faster Sales Cycles: Customers don’t have to think about the technical solution; they order functions and performance. The performance is predictable and guaranteed when products are configured from standardised building blocks. The risk for clients is eliminated, leading to significantly faster decisions and higher conversion rates.
2. Less variation means less time spent on planning and building the project, which means lower planning costs.
3. Simplified Product Management: Design and documents can be used by multiple teams, which speeds up product management.
4. Increased Operational Productivity: As workers get better at putting units together, performance increases even more.
5. Better Lifecycle Management: Standard parts make maintenance easier and reduce repair costs and downtime.

Combining mechanical, electrical, and computer systems can make production more seamless and use low-volume/high-mix manufacturing. This reduces production costs and makes customers happier by delivering high-quality goods on time.

What’s the Bottom Line?

The Modular5 system lets businesses change in a way that “self-funds.” To increase earnings, start with operational excellence. Then, put the money you saved into modular product architecture and watch the flywheel spin faster with each turn.

With standardisation, you can:

• Make product creation more efficient by using the same information more than once.
• Make production processes better by cutting down on variation.
• Make maintenance and repairs easy to improve product lifecycle management.
• Come up with new ideas by using mechatronic solutions that work well with production systems.

Final Points 🎯

1. Transformation doesn’t have to cost a lot of money. Begin with operational success and use the savings to fund improvements.
2. Standardisation makes things more flexible. A modular architecture makes your products easier to use and boosts performance across all areas.
3. Operational excellence leads to profits, and continuous improvement frees up money that can be used to fuel growth.
4. The process of modularisation speeds things up. As the spinning effect takes hold, costs drop, and profits rise.

Click here for more information on using modular design to boost sales, lower planning costs, and boost factory output.

We offer custom engineering solutions for tangible goods and can help you change your business. Contact us immediately to learn how the Modular5 system can help your business grow.

Schedule a discovery call with us and find out more about Modular5®!

Transformation is not only possible with the Modular5 structure, it’s very profitable.