Wednesday, September 4, 2013

The Impacts of Modular Assembly on Supply Chain Management

When I was reading the article "Learning From Tata’s Nano (Hagel and Brown, Bloomberg BusinessWeek, February 27, 2008)", the concept of "Modular Assembly" grabbed my attention, so I conducted a little research and found a pretty quantitative analysis paper on modular assembly written by 2 faculty members from Washington University in Saint Louis.  It analyzed the benefits of modular assembly to supply chain in manufacturing industries, with a special focus on automobile companies just like Tata.

The essay gave out examples of modular assembly used in Boeing, Volkswagen, Nissan, and other companies, explaining and analyzing the combined results brought by this innovation approach. According to the authors, "In a traditional assembly system, individual component suppliers manage
their own inventories while in the modular assembly system a single supplier controls the
inventories of a number of component sets." The benefits include cost reduction, reliable quality , reduced assembly time (especially lead time in the final stage, which is critical to the total assembly efficiency), and improved logistics and inventory management. However, the assembly system might be worse off since the suppliers might incur a higher cost in this approach.

When I finished reading the paper (of course I skipped all the formulas), I had 2 question in mind: how does this approach differ from industry to industry? And which industry might benefit the most out of this approach?

Thanks for reading.


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