The impact of product architecture on global operations network design

The purpose of this paper is to explore how integral and modular product architectures influence the design properties of the global operations network.

The authors perform a multiple-case study of three global manufacturing companies, using interviews, seminars and structured questionnaires to identify ideal design properties.

The authors find that the choice of integral vs modular product architecture lead to significant differences in the preferred design properties of global operations networks concerning number of key technologies in-house, number of capable plants, focus at assembly plants, distance between assembly plant and market, and number of key supplier sites. Two of these were identified through this research, i.e. the number of capable plants and number of key supplier sites. The authors make a distinction between component and assembly plants, which adds detail to the understanding of the impact of product architecture on global operations. In addition, they develop five propositions that can be tested in further survey research.

This study is restricted to three large manufacturing companies with global operations. However, the authors investigated both integral and modular products at these three companies and their associated global operations network. Still, further case or survey research involving a broader set of companies is warranted.

The key aspects for integral products are to have many key technologies in-house, concentration of production at a few capable plants, and economies-of-scale at assembly plants, while long distances between assembly plants and markets as well as few key supplier sites are acceptable. For modular products, the key aspects are many capable plants, economies-of-scope at assembly plants, short distance between assembly plants and markets, and many key supplier sites, while key technologies do not necessarily have to reside in-house – these can be accessed via key suppliers.

This paper is, to the authors’ knowledge, the first study on the explicit impact of product architecture on global operations networks, especially considering the internal manufacturing network.