You create successful products tailormade to what your customers want. This tactic used to be very profitable, but pressure on price, margins, and delivery times make the game increasingly difficult.

Many companies serve their customers by adapting their products to various customer needs with an Engineering-to-Order approach, leading to high costs, long delivery times, and ‘first-time’ quality issues. In this ‘low sale volume – high engineering complexity’ playing field, the engineering effort and related resources are typically in the critical path, limiting sales growth.

The customization is appreciated by customers, although the mentioned drawbacks are not welcomed. To mitigate those drawbacks, companies make their products modular. With a modular product, they can configure the product to meet the customer’s needs. One of the main drivers for going modular and creating modular products is to be able to deal with the requirements variance. Going modular is a brilliant step to meet varying customer needs and simultaneously deliver quality products quickly and efficiently. However, it is not the only step.

Figure 1: 8 The Modular V Model^IPL. The vertical size expresses the relative amount of variance.

8 Steps to Deal with Variance

If you want to create a winning product with a modular architecture, a structured approach is critical. We have identified 8 steps related to dealing with requirements variance. Applying these steps helps simplify the creation of the modular architecture, support the modular architecture in dealing with variance, and show the most effective and efficient product creation approach.

Step 1 – Eliminate

A good product meets the customer’s expectations. These expectations are customer values, needs, wants, and nice-to-haves. The challenge in product development is capturing all those factors in well-defined requirements. These requirements should express what the target market customers want and provide input for the engineering process. The variance in those requirements, e.g., the variation in required speeds for a conveyer belt, should be driven by customer needs. When we support our clients in analyzing their existing products, we identify real reasons for variance.

Most of the variance is driven by customer needs, and another part results from design constraints, historical choices, and other internal reasons. In our Product Pyramid (Figure 2), we distinguish between ‘requirements,’ which are customer-driven, and ‘specifications,’ which are the answer to or result of the product’s delivery. In this context, the specifications are the choice of the product developer. Variations in these specifications, which are NOT driven by customer needs, could or should be eliminated!

Figure 2: Product Pyramid

Step 2 – Challenge

Although the general attitude towards your customers should be to fulfill their needs, a part of customer-driven variance might be open for challenge. For example, the maximum speed required for a conveyer belt can range from 2 to 6 meters per second for most customers in a market segment. One customer in this market segment requests an 11 m/s maximum belt speed. What to do? Either this is a valid request, and the product should be designed to meet this need. Or there is no need for this maximum speed, as the use case for this conveyer belt will never exceed a speed of 6 m/s. Finding out the reason for the 11 m/s requirement is an essential part of the product development process. Quite often, you might find out that this requirement has lots of reserves as the client is calculating with the worst-case scenarios.

Part of the requirements variance could be challenged and taken out. This requirement variance reduction also benefits the customer. A product with less variance can potentially have a lower price, higher quality, and shorter delivery time.

Figure 3: Challenging customer-driven variance.

Step 3 – Overspecify

Overspecification is the deliberate step to offer more than a customer asks for. The idea is to limit the number of performance steps (E.g., the maximum speed values of a conveyer belt) to reduce complexity. Overspecification should not limit the offering and potentially exclude customers. For example: if a customer requests a maximum conveyor belt speed of 3,5 m/s, this can be done by offering a product capable of a conveyor belt speed of 4,0 m/s. This speed is higher than needed, and the 3,5 m/s requirement will be met easily. This strategy aims to still offer the whole range of this requirement without having to make all variants in the product. In this approach, you balance the potential extra costs of overspecification (4,0 m/s might require a bigger motor) with the complexity reduction benefits of fewer performance steps.

Overspecification is also part of the Modularization of Step 5 when you want to determine which Modular Variants to create to meet the performance steps. If you do this in Step 5, you have the advantage of knowing the technical solutions that fulfill the performance steps. Overspecification during Step 3 has the benefit of looking at the requirements variation with a pure customer-facing view to make the offering perfectly match the market needs.

Figure 4: Reducing performance steps by overspecification.

Step 4 – Flexify

To ‘flexify’ in this context means: to make it adjustable. Adjustability has drawbacks and benefits. The drawbacks can be increased cost and time spent to adjust during assembly, testing, and product use. The benefits are:

The factory can offer the performance steps without creating different product variants, thus reducing logistical complexity and increasing production volumes.
The end users can adjust the product to their needs.

Adjustability can be reached by different means. One example is displayed in Figure 5; parameter settings in the product’s software is also an example of adjustability. In industrial products, we see a trend of transferring more of the product’s function to the software domain, which opens up the opportunity to put variation in parameter settings. Again, these parameter settings are adjustable by the factory, the end user, or both.

With software parameters, you can limit performance or switch functionality off. This could be an interesting additional tactic: you Overspecify a requirement while offering your customer different performance steps or features. With this approach, you open up the opportunity to standardize your product and production process while you can still differentiate in your offering and sales prices towards your customers.

Figure 5: ‘Flexify’ the variance by making an adaptive or adjustable design.

Step 5 – Modularize

This step is at the core of dealing with variance. Modularization is the process of making an existing product modular or creating a new modular product. Modularization aims to create a set of modules that can meet the requirements variation, have the lowest combined direct and indirect costs, and match the company’s strategic purpose. Making a product modular is a proven strategy to deal with variance and be successful in the competitive arena. However, the process of modularization is a difficult journey. Creating a modular architecture for your product requires insight into the market, product knowledge, and above all: experience with and a high level of expertise in modularization. It is a technical challenge, an organizational challenge, and a cultural challenge. The last one – the company’s culture – is a tough cookie to crack and requires change management skills and endurance of all involved. The good news is: if you succeed in creating a modular product and becoming a ‘modular company,’ you become invincible.

Figure 6: Modularize: creating a modular product.

Step 6 – Configure

Once you have modularized your product, you can configure the Module Variants to build a unique product that will match your customer’s needs. If you have done your modularization well, you could build everything defined in the set of requirements, meet all variations, and configure all combinations.

To enable an effective and efficient configuration process, these conditions should be met:

The design is optimized for combining the Module Variants with as few restrictions as possible.
The questions to customers, which determine which configuration to create, are clear and standardized.
The relations and exceptions between requirements variations and between the different Module Variants are known and preferably coded within rules.

The next level can be implementing a configuration tool to support the sales process and capture the variation rules.

With a modular architecture and configuration methods and tools, you could create an almost limitless number of product variants. That does not mean you always must or should offer and create all those variants. As the supplier of your products, you are the expert on the product, and you know your market and the product variants chosen. This gives you the opportunity to bundle variance combinations to partly or fully pre-defined configurations. The reasons to do this are to make your customers’ buying process easier and, at the same time, simplify your product delivery process.

Figure 7: Configuring your product to meet your customer’s needs.

Step 7 – Parameterize

Some products or parts of products are hard to modularize. For example, a metal silo for bulk goods, where the main construction is made of metal, and all parts are welded together. If the size, shape, reinforcement ribs, access openings, etc., are all varying, you could end up with an excessive amount of Module Variants and hard-to-define welded interfaces. With this challenge, engineering this product could be better than configuring it from modules. Engineering-to-order is labor-intensive and costly, with the potential risk of first-time quality issues. The alternative is to automate the engineering process. This can be done if the function and basic design of all products sold are predictable and only the product dimensions vary due to requirements variations. The benefits of parameterization:

Swift, automated process.
Optimizations for strength and weight can be (automatically) performed by CAD tools.
Precise match with the customer requirements.

A drawback of this method is that the production has to be adjusted for each generated product. If the production method is already ‘per product,’ then there is no change needed for production, and you can enjoy the full benefits of automated engineering.

Figure 8: Automate the engineering process with parameterization.

Step 8 – Engineer to Order

The final step is Engineer-to-Order and should be avoided, if possible, by the preceding steps. Engineering-to-Order is expensive, increases the delivery time and quality risks, and claims the scares engineering resources. On the other side, Engineering-to-Order has unlimited potential to meet customer requirements.

For some product-market combinations, it is inevitable to have Engineering-to-Order as part of the repertoire. Companies tend to revert to a full project approach, treating each order as an Engineering-to-Order project. Reusing engineering solutions from previous projects will make the process more effective than ‘reinventing the wheel.’ The reuse works well as long as the number of projects and the size of engineering teams are small. If you apply this strategy for multiple projects over multiple years with large engineering teams, you lose track of your best solutions.

If you sell projects where you create similar products, you could apply this approach:

Take steps 1 – 6 and Modularize and Configure the stable part of the product.
What cannot be solved by modularization, you might be able to Parameterize.
What is left and too complex to solve by all mentioned steps: Engineer-to-Order.

We call the intelligent combination of steps: Smart Customization. Smart Customization is the optimal combination of strategies to meet your customer’s needs while reaching maximum efficiency.

Figure 9: Engineering-to-Order as the final option to deal with variance.

Getting started

If you want to implement modular design principles in your organization, it can be hard to determine where to begin. This model gives you an excellent overview of the different steps of the process. If you are interested in using the Modular V Model^IPL in your organization, we’ll be happy to get you started.

Although the steps of the model are logical, implementation can be challenging. We are here to help. Feel free to contact IPL Advies with questions concerning modularization and Smart Customization.

At your service: Frank Rood

+31 6 4020 8628 or rood@ipl.nl

8 Steps to Deal with Product Variance