On the basis of the case study, explain what is flexible manufacturing and how is it being used worldwide? Use your answer to explain one example of flexible manufacturing in the market.
Flexible manufacturing is primarily associated with the use of similar technology on different designs. Flexible manufacturing can be related to a modular design, modular manufacturing and maintenance; this concept requires a standardized format of production system which can be multi-skilled to create different products using the same concept, technology or equipments. Only the primary owner and the supplying partner are said to be engaged in a particular set of products which are created as part of the flexible manufacturing and there are various steps taken in order to support shared processes like assembling and finishing. These steps together are also called as ‘tropicalization’, and are usually done by the same set of resources or in the same geography.
Although, the concept is quite developed now and there are lot of organizations that have plans to implement this in future, after appropriate testing. Fiat is currently a great example of flexible manufacturing and they have recently planned to introduce the concept as until 2004 there was no common factor in their products however in the coming decade and by 2014 the company has plans to create only three shared platforms which would be used in order to produce all models that the launch. It is also important to mention that not only Fiat but their American partner Chrysler would also be using two out of these three platforms in order to manufacture cars for the US market, thus providing a great flexibility to the manufacturing, design and maintenance.
b) Describe the modular design system? How does it help to counter the competition in automobile industry? Explain your answer using the example of Volkswagen as stated in the case study.
The modular design system is the most common type of flexible manufacturing, where the platform for development of a car is identical between different models. In this concept, the production line remains the same however manufacturers can use it to make very different models from the same geographic production house. An example of this type of setting can be the movement of wheelbase to generate more space than a hatchback in order to create a spacious sedan. Considering the fact that, in parts, technology and infrastructure can be used in order to produce different models of cars, this concept helps to save a lot of money and therefore not only enhances the competition between car manufacturers but also raises the profitability (Reed 2010).
In order to gain sustainable competitive advantage Volkswagen decided to create their own modular design system so that they are able to slash their production costs by almost 20% and therefore improve their market reach. Not only the prices, using a common platform and technology in their various models will also equip them in order to save 30% production time (Reed 2010). The company plans to create models that can be shared between hatchbacks, sedans and SUVs. Volkswagen has become an industry leader in this concept and plans to develop 10 million cars a year by saving the time and costs through this, which will help the company to directly compete with rivals who are still in their initial stage of developing modular designs.
What factors induce a company to build a modular design system? Explain the factors that lure the companies to enter the market of modular design production and which are the companies that have taken the decision to get majorly involved in this kind of production.
With the help of modular design system it is very easy to create parts that can be shared between multiple models. As an example, this year Fiat will be launching one of its models named as ‘world car’, which will have 80% parts that remain the same across geographies including Europe, United States and Asia, which means that the production cost will be very low and shared resources will be able to manage the production of multiple models(Reed 2010). With the use of modular designs, it becomes extremely easy to see use the same parts among various models due to which the production costs of setting up different plans for different parts, gets saved and this accounts to almost 20% of the total production price for any car manufacturing company.
Along with the cost, time is another major factor that makes a difference and the company using the concept of modular designs can save a great amount of time accounting to almost 30% of the total production time, due to the usage of same technology and parts like axles, engines and infotainment systems across various models. Also, considering the fact that most of the models in this way will end up getting made using common parts, it will be very easy for the manufacturing company to provide maintenance as the parts availability will not be an issue and the same can be shared among the models.
What are the most common disadvantages of modular design processes and badge engineering? How is the industry affected by the same in the last two decades and what is the impact of the same on the companies that have recently chosen this as strategy?
Although, the cost and time savings due to the application of modular design processes the companies plan to gain competitive advantage and increase their market share, there are various disadvantages which are also associated with this concept. Firstly, there is a huge impact of this concept on the quality and the companies may end up creating unsuccessful models that may require a recall, giving a great loss to the company, as if there is a problem in one car it will be the same in all other models. Secondly, this concept is similar to the previous concept of badge engineering which was implemented by General Motors in the 80s and had a huge adverse impact on the company's image.
Hence, with the implementation of modular designs, the branding of the organization gets impacted majorly as there is a common perception related to such products that the coherence and integrity is at stake. Lastly, the customer base of any such product changes majorly due to the change in quality and methodology, and therefore unexpected results can be obtained from the market where the customers who are usually choosing a given product might deviate to other manufacturers who are providing unique parts even when they are priced higher. General Motors, Toyota, Skoda and Chrysler are few companies who have already seen the harsh side of this concept and there have been few major rise and fall in the economy of these companies due to the application of this concept (Reed 2010).
Camuffo, A 2009, 'Globalization, Outsourcing and Modularity in the Auto Industry', CA Foscari University of Venice, Italy, Venice.
REED, John. 2010. Carmaking: A drive to Lego land. [online]. [Accessed 20 January 2012]. Available from World Wide Web:
Salerno, MS & Dias, AVC 2002, 'Product Design Modularity, Modular Production, Modular Organization: The evolution of modular concepts', Actes du GERPISA Vo.30 No.4, pp. 61-73.