06/12/2024. Standardisation vs. Modularisation: What Every Industrial OEM Needs to Know

Many companies choose to standardise the parts and components used in their products in an effort to reduce costs. Standardisation has the clear advantage of decreasing the cash locked-in stock materials and warehousing expenses.

The ‘low-hanging fruit’ is to start with materials and parts at the bottom of the product structure. For example, often, it’s straightforward and low-effort to limit the available bolt diameters and instruct production planning and the factory to use the next, larger size fastener.

The standardisation slowly migrates upwards in the product structure.

For manufacturers in low-volume/high-mix markets, this approach to reducing the stock items before preparing the product structure invariably limits the product configurations. And that is a real problem because customers do not accept standard products, they expect tailor-made solutions.

In these markets, the savings are not worth the risk of lost sales because the customer will not compromise on their specifications.

In this blog, we’ll break down how to standardise and grow revenue in these challenging market dynamic.

What Is Standardisation?

Standardisation is about reducing complexity by narrowing choices.

• Fewer options: Think of car manufacturers limiting customers to predefined configurations like specific paint colours or wheel sizes.
• Streamlined components: Fewer bolt types, standardised pipe diameters, or consistent plating materials across products.

The benefit? Cost savings and operational efficiency. But there’s a catch: standardisation often limits flexibility, which can frustrate customers who need tailored solutions.

What Is Modularisation?

Modularisation provides flexibility while maintaining efficiency.

• Building blocks approach: Instead of offering endless customisation, you build products using reusable, standardised modules.
• Infinite configurations: Customers get tailored solutions without driving up costs because modules are pre-designed to work together seamlessly.

Imagine a LEGO® set. Each block is standardised, but the combinations are endless. This is modularisation in action: standardised building blocks that deliver customisable results.

Modularisation eventually leads to more options for clients, better quality, shorter delivery times, and, often, lower prices. Ironically, the achievable level of standardisation after setting up the modular architecture is higher.

Why Modularisation Beats Standardisation for Industrial OEMs

In low-volume/high-mix markets, modularisation outshines standardisation for several reasons:

1. Tailored Solutions Without Rework
   Standardisation forces customers into predefined boxes. Modularisation, on the other hand, allows them to configure bespoke solutions from standardised modules. Your clients feel heard without overburdening your organisation and supply chain. In other words, you sell fit-for-purpose but you build standard.
2. Speed to Market
   Modular designs cut lead times. Instead of starting from scratch for every order, your team pulls from a library of pre-designed modules. Projects move faster, and delivery becomes more predictable.
3. Lower Engineering Costs
   Each module gets designed once but reused across multiple products. This reuse reduces engineering hours, documentation effort, and testing requirements.
4. Improved Maintenance and Repairs
   Modularisation simplifies aftersales service. Modules can be swapped or upgraded without redesigning entire systems. This lowers repair costs and keeps downtime minimal for your customers.

The Modular5 Approach: Practical, Scalable, Effective

At Modular5, we specialise in helping industrial OEMs shift from project-driven processes to modular product architectures. Here’s how we do it:

• Design Reuse: We analyse your product portfolio and identify opportunities to standardise components into reusable modules.
• Mechatronic Integration: We optimise your systems—mechanical, electrical, and controls—so they function seamlessly in modular configurations.
• Smart Customisation: We ensure your custom options integrate smoothly, offering flexibility without disrupting production.

This approach doesn’t just reduce engineering effort; it transforms your operations into a scalable, efficient machine.

When Standardisation Still Makes Sense

We’re not here to dismiss standardisation altogether. It’s ideal in specific situations:

• For internal processes: Standardising parts or materials can reduce inventory and simplify procurement.
• In stable markets: Standardisation is a perfect approach if your product variety is low.
• Implementing a comprehensive parts and materials library before designing the modules also reduces the number of Stock Keeping Units (SKUs).

But standardisation alone will hurt more than it helps in low-volume, high-mix markets. It doesn’t give your customers the flexibility they expect or the efficiency you need to remain competitive.

By redesigning the product portfolio starting at the module level, companies can standardise more while retaining the clients’ desired configuration flexibility.

Key Takeaways

If you’re torn between standardisation and modularisation, keep this in mind:

• Standardisation simplifies your internal processes but limits customisation for clients.
• Modularisation offers the best of both worlds: efficient operations and tailored solutions for your customers and a solid foundation to standardise.

At Modular5, we advocate starting with modularisation and introducing standardisation where it supports your goals.

Watch, Calculate, Act

Ready to take your operations to the next level? We’ve made it easy for you to start:

In the video below Modular5’s co-founder and Managing Director, Thijs Schepman, summarises the difference between standardisation and modularisation.

To assess the effect of implementing a modular product architecture for your organisation you can download our business case calculator.

You can also book a discovery call directly in our calenders.

Don’t settle for outdated methods. Modularisation is the smarter path for industrial OEMs dealing with high complexity and variety. Contact us today to get started.