Kit Car Changes SCM

According to Bloomberg, Toyota recently announced to start a modularity strategy called Toyota New Global Architecture (TNGA) in 2015. A modularity strategy to develop a car is a significant trend in a car industry. Furthermore, it is said that this trend changes a supply chain and keiretsu.

Volkswagen (VW) first introduced a modularity strategy, Modulen Quer Baukasten (MQB), 6 years ago. This strategy was a smash hit that is called the single most important change of the past 25 years. The modularity strategy allows VW to avoid an increase of development and production costs even though VW produces different types of cars for each market such Europe and China. A modularity strategy is that a carmaker develops a new car by putting together predesigned modules. A carmaker shares these predesigned modules in all of its cars. Surprisingly VW’s different brands, luxury Audi and popular Skoda, use the same module in their cars. These cars are called Kit Car like you build your customized PC from a CPU, a motherboard and a power supply.

Because of highly sharing parts, this new strategy requires a parts supplier of VW to supply 35 million parts, about 6 times before the strategy, during 6 or 7 years life cycle of a module. This mass production enables VW to reduce costs like Ikea in an article “How Ikea Designs Its Sexy Price Tags”.

Meanwhile, this strategy is expected to induce reducing suppliers. Before this strategy, it was difficult to born a global supplier because a carmaker used different types of parts to produce a car that suits to needs of each market. However, the modularity strategy probably changes a supply chain into more global one because VW demands the same module parts in the worldwide such as Europe, China and the US.

Personally I think that a modularity strategy matches to an electrical vehicle because it can reduce mechanical interface such as gears and a drive shaft.

[1] Toyota Airbag Cuts Create Opening for Overseas Suppliers, Jun. 10, 2013, Bloomberg, http://www.bloomberg.com/news/2013-06-09/toyota-airbag-cuts-create-opening-for-overseas-suppliers.html
[2] Insight - Has Volkswagen discovered the Holy Grail of carmakers?, Feb. 11, 2013, Reuters, http://uk.reuters.com/article/2013/02/11/uk-autos-volkswagen-future-idUKBRE91A04O20130211
[3] The beginning of a new era: Volkswagen introduces the Modular Transverse Matrix (MQB), Feb. 1, 2012, Volkswagen, http://www.volkswagenag.com/content/vwcorp/info_center/en/themes/2012/02/MQB.html