Chapter markets. Further reduction in complexity can be

Chapter 3 Variety Reduction through Modular

In this chapter,
the requirements, for a company, to achieve variant-oriented product design are
discussed. This involves understanding complexity and variety induced costs in
an organization. Following this is a brief introduction to various product
structure models, including modular design, which help in reducing complexity.
The chapter ends with a representation of Dieffenbacher modularization

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3.1 Complexity

Constantly changing business and market conditions pose a number
of new challenges for a company. A transition from a seller’s market to a
buyer’s market has convinced many companies to pay more attention to customer
needs. Although, this approach helps in acquiring new customers and retaining
existing ones, the variety of products and processes increase significantly.
Moreover, rapidly evolving technology has made engineering more complex and
demanding which in turn increases the variety of components and functions. This
diversity, collectively known as complexity, affects the entire enterprise. The
number of locations and size of an enterprise also contributes to the

 A more competitive market enforces
companies to strive for higher efficiency, quality and reduced cost. But high
complexity negatively affects these requirements. Figure x shows an overview of the impact of complexity on a business.
Therefore, to structure their products and to balance the opposing forces of
customization and standardization, more and more companies depend on modularity.

The benefits of reducing complexity are not limited to a
particular industry. For example, the automation department of Dieffenbacher’s composite division designs
and develops customized end-of-arm-tools for handling advance composites. A
standardized tool design process, using pre-configured construction modules, would
not only save research and design time but also help in standardizing the
production and assembly process. This should help in reducing costs and open up
new markets. Further reduction in complexity can be achieved by applying a
similar model to standardize the robot configuration process where standard
robots with pre-defined peripherals are used to achieve customer requirements.

3.2 Variety
Induced Costs

As discussed earlier, complexity leads to additional costs
called variety induced costs. They can be divided into two categories. The
first category is directly related to the amount of variety. Every time a new
product or component is introduced, this type of cost is incurred. This includes,
for example, cost for design, R and marketing efforts. The second
category has an indirect relation to the level of variety. This cost is not
generated after introduction of every new variant but comes up after a certain
level of complexity is reached. Cost of additional manufacturing equipment and
the related resources is a good example of this type of cost. Therefore, for
smaller increases in diversity, initially no significant increase in costs can
be observed. Only when a certain limit has been reached will new investments
become necessary. These generally include fixed costs like investment on
buildings, machines and computer systems.

Increase in production of non-standard or “exotic” product
variants leads to another problem in terms of cost. Their prices are often
calculated below their incurred costs. These losses are compensated by an
increase in overhead costs which lead to increase in cost of standard products.
This leads to a competitive disadvantage. Figure y gives
an overview of the cost distribution between standards and exotics.

3.3 Product
Structure Models

Various product structure types are available in literature.
Their definitions often differ greatly. This section discusses some of the most
commonly used product structuring models that can be used to control diversity
in an organization. (See Figure z)

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