Many companies choose to standardize the parts and components used in their products in an effort to reduce costs. Standardization 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 standardization 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 standardize and grow revenue in these challenging market dynamic.
What Is Standardization?
Standardization is about reducing complexity by narrowing choices.
- Fewer options: Think of car manufacturers limiting customers to predefined configurations like specific paint colors or wheel sizes.
- Streamlined components: Fewer bolt types, standardized pipe diameters, or consistent plating materials across products.
The benefit? Cost savings and operational efficiency. But there’s a catch: standardization often limits flexibility, which can frustrate customers who need tailored solutions.
What Is Modularization?
Modularization provides flexibility while maintaining efficiency.
- Building blocks approach: Instead of offering endless customization, you build products using reusable, standardized 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 standardized, but the combinations are endless. This is modularization in action: standardized building blocks that deliver customizable results.
Modularization eventually leads to more options for clients, better quality, shorter delivery times, and, often, lower prices. Ironically, the achievable level of standardization after setting up the modular architecture is higher.
Why Modularization Beats Standardization for Industrial OEMs
In low-volume/high-mix markets, modularization outshines standardization for several reasons:
- Tailored Solutions Without Rework
Standardization forces customers into predefined boxes. Modularization, on the other hand, allows them to configure bespoke solutions from standardized modules. Your clients feel heard without overburdening your organization and supply chain. In other words, you sell fit-for-purpose but you build standard. - 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. - Lower Engineering Costs
Each module gets designed once but reused across multiple products. This reuse reduces engineering hours, documentation effort, and testing requirements. - Improved Maintenance and Repairs
Modularization 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 specialize in helping industrial OEMs shift from project-driven processes to modular product architectures. Here’s how we do it:
- Design Reuse: We analyze your product portfolio and identify opportunities to standardize components into reusable modules.
- Mechatronic Integration: We optimize your systems—mechanical, electrical, and controls—so they function seamlessly in modular configurations.
- Smart Customization: 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 Standardization Still Makes Sense
We’re not here to dismiss standardization altogether. It’s ideal in specific situations:
- For internal processes: Standardizing parts or materials can reduce inventory and simplify procurement.
- In stable markets: Standardization 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 standardization 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 standardize more while retaining the clients’ desired configuration flexibility.
Key Takeaways
If you’re torn between standardization and modularization, keep this in mind:
- Standardization simplifies your internal processes but limits customization for clients.
- Modularization offers the best of both worlds: efficient operations and tailored solutions for your customers and a solid foundation to standardize.
At MODULAR5, we advocate starting with modularization and introducing standardization 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, summarizes the difference between standardization and modularization.
To assess the effect of implementing a modular product architecture for your organization you can download our business case calculator.
You can also book a discovery call directly in our calenders.
Don’t settle for outdated methods. Modularization is the smarter path for industrial OEMs dealing with high complexity and variety. Contact us today to get started.
