J. Eng. Technol. Manage.

28 (2011) 168–183

Contents lists available at ScienceDirect

Journal of Engineering and

Technology Management
journal homepage: www.elsevier.com/locate/jengtecman

Critical success factors in managing modular production

design: Six company case studies in Hong Kong, China,
and Singapore
Antonio K.W. Lau *
Division of Social Science, The Hong Kong University of Science & Technology, Hong Kong, China

A R T I C L E I N F O A B S T R A C T

Article history: Many researchers have explored the advantages of modular product
Available online 1 April 2011 design, its design methods and its effects on product performance.
Modular design is, for example, required for product platform, mass
JEL classification: customization and postponement in order to achieve greater product
O32 variety and differentiation. However, a few empirical studies
M11 explicitly examine how to coordinate modular product design in a
O53
managerial way. This paper addresses it by conducting multiple case
L60
studies with six companies which have successfully adopted modular
Keywords: product design for five years. Seven critical factors are explored in the
Case study
management of modular product design. These are pre-defined
Modular design
product advantage, selectively used design rules, module definition,
Product development
Product design in Hong Kong, China, and system integration, technological newness, internal communication,
Singapore and supplier and customer involvement. While most of the literature
studies the technical dimension of modular design within a firm, this
study focuses on the managerial side across the supply chain. It gives
new insights on how to manage modular product design and
proposes future research opportunities.
ß 2011 Elsevier B.V. All rights reserved.

Introduction

Manufacturers have witnessed such an intensification of competition in the product market in

recent years that they have had to find new ways to enhance their product development capabilities.
Modular product design has been widely understood to improve the capability of increasing the range

* Correspondence address: City University of Hong Kong, Tai Chee Avenue, Kowloon Tong, Hong Kong, China.
Tel.: +852 9833 7326; fax: +852 2788 8423.
E-mail addresses: solkwa@ust.hk, antoio_lau2000@hotmail.com (Antonio K.W. Lau).

0923-4748/$ – see front matter ß 2011 Elsevier B.V. All rights reserved.
doi:10.1016/j.jengtecman.2011.03.004
 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183 169

and number of product innovations without heavily sacrificing development time and cost (Salvador,
2007; Garud et al., 2003; Ulrich and Eppinger, 2000; Tseng and Jiao, 1996; Baldwin and Clark, 1997;
Pine, 1997).
Many companies adopt modular product design in creating product variety, mass customization and
product families and platforms (Robertson and Ulrich, 1998; Meyer, 1997). Extensive literature has
highlighted the technical side of modular product design (Kamrani and Salhieh, 2002; Du et al., 2001;
Baldwin and Clark, 2000), but there is a lot less research into the managerial side of modular product
design readily available (Persson and Ahlstrom, 2006; Sullivan, 2003; Nobelius and Sundgren, 2002).
The managerial side of modular product design is very important. Fine (2003) argues that any
decision about modular product design has to strategically consider process and supply chain
coordination in order to improve supply chain performance. Nobelius and Sundgren (2002) argue that
the modular product design method is greatly related to the strategic coordination across
organizations and functional units. Gerwin (2004) suggests that modular product design reduces
the requirement of coordination and the ability of coordination among strategic partners during
product development, this requires further study. Persson and Ahlstrom (2006) argue that in adopting
modular design it is difficult to balance the diverse functional requirements of engineering,
production and marketing on product modules, and to coordinate people from different professional
backgrounds. It is even costly to change established modular design parameters as this involves long
development lead time and cost (Halman et al., 2003).
Sullivan (2003) argues that, in a multi-firm, multi-team product development project, modular
design requires standardization of work content that helps assimilation of work norms across the
module teams and the synchronization of work flows across teams to meet the targeted schedule. An
extensive literature has also shown that, without making a conscious effort on the coordination of
modular product design, manufacturers may face longer production time (Sheu and Wacker, 1997),
sub-optimized product performance (Nobelius and Sundgren, 2002), extra time for testing and system
integration (Fleming and Sorenson, 2001), poor product innovation (Galvin and Morkel, 2001) and
higher development costs and time (Brusoni and Prencipe, 2001). However, a few attempts have been
made to examine how to coordinate modular product design across suppliers, customers and internal
functional units on an empirical basis.
This paper aims to fill this gap by exploring critical success factors of coordinating modular product
design through multiple case studies. It reviews the literature on modular product design, supporting
the development of research questions. The research methodology and critical factors are discussed
through multiple case analyses. Implications and conclusion are finally provided.

Literature review

Modular product design

Modular product design implies a product design approach where a product is assembled from a
set of smaller modules that can be designed independently but function together as a whole (Baldwin
and Clark, 2000; Sanchez and Mahoney, 1996). Modular product design tends to minimize the
interdependency/interaction of each product component through comprehensively specifying the
interfaces and functions of each module (Ulrich and Eppinger, 2000).
Designing modular products reduces the complexity of a product system by dividing it into sets of
independent modules (Baldwin and Clark, 2000). Thus, designing a complex product is similar to
designing and building a set of less complex modules which provide flexibility of design and testing. In
addition, when product modules are fully specified, separated and standardized, they allow a range of
component variations to be substituted into the product architecture (Sanchez and Mahoney, 1996).
Adding a few new product modules or mixing and matching existing modules, rather than wholly
developing new products, can create new products. It fundamentally helps manufacturers to launch
new products by either offering more product variants to customers, or providing large product
modules for customers to assemble new products on their own within limited inventory and
production costs (Pine, 1997). Table 1 summarizes the benefits and drawbacks of modular design as
identified from the available literature.
170 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183

Table 1
Benefits and drawbacks of modular product designs.

Description

Benefits Economies of scale in large volumes of module production.

Increasing product variety by substitution of variant components.
Reusing common components in a range of products to reduce cost and speed up product development.
Decoupling development tasks and enabling concurrent component development to shorten
product development time.
Specializing component development by sub-teams which leads to autonomous design and
development of innovative components.
Localizing quality problems at component level, which eases maintenance and service.
Ease of product service and customer service.
Improving system reliability due to high production volume and experience curve.
Preventing changes from disrupting a new product model and allowing changes to be
incorporated into the next model.
Reusing the returned modules to reduce production costs and protect the environment.
Enabling postponement of differentiating new products.
Enabling mass customization.

Drawbacks Reducing product differentiation due to high product similarity.

Easy for competitors to copy designs and learn the product system.
No optimized product performance, mass or size.
Expensive over-designed or under-designed product components.

The product development literature describes the benefits and drawbacks of modular product
design. However, except for some case studies and descriptive literature, empirical research on how to
coordinate modular product design internally and externally is very rare (Lau et al., 2009; Persson and
Ahlstrom, 2006). Sako (2002) argues that there is lack of empirical evidence on how to coordinate
modular product design with designers, producers and consumers. Modular product design is, to a
great extent, related to the strategic coordination across organizations (Nobelius and Sundgren, 2002)
and even across industries (Shibata, 2009), but again this view is not adequately explored.
In addition, a majority of empirical literature focuses on one or a few large firms, e.g. HP and Sony,
or automobile manufacturers. It is questionable whether modular product design can only help large
manufacturers to develop complex product systems and proprietary technical standards (Garud et al.,
2003). But it may not be useful for small manufacturers, who usually develop simple products and
follow industry standards (Ledwith, 2000). Other existing empirical studies focus on one industry at a
time, i.e. the electronics, automobile or home appliance industries (Nobeoka and Cusumano, 1997;
Meyer and Roberts, 1986; Worren et al., 2002). But it is also interesting to study modular design across
industries (Sako, 2002).
This paper therefore studies the coordination of modular product design through multiple case
studies, in which the case firms consist of large and small manufacturers in different industries. The
principal research question, with a supplementary question, is as follows:

1. What critical factors are of most concern to manufacturers when managing modular product design
across suppliers, customers and internal parties?
2. How do manufacturers manage their modular products with suppliers, customer and internal parties?

Research approach

Given the principal research question, a case study is an appropriate research strategy to answer
‘what’ and ‘how’ questions (Yin, 1994). Six manufacturers – audio consumer electronics, assembly and
packaging equipment, computer disc, plastic dolls, plastic stationery and plastic flower manufacturers
– were selected. The six cases differ in either company size or type of industry. This study argues that
existing literature, which mainly studies modular product design of complex products in large firms,
may overlook the contributions of this design approach to simple products in small firms. By studying
modular design across industries, this study can explore whether industry type affects the critical
factors that appear in our study.
 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183 171

Table 2
Research design.
Research boundaries All the firms were located in Hong Kong, made and sourced product components and
materials in Pearl River Delta, China, and sold their products to American customers.
Therefore, the firms faced similar market dynamics and production environments.
The firms also included local and multinational manufacturers to reduce the risk of being
affected by cultural differences.
Unit of analysis A manufacturer whose products use modular design.
Rational for It was used to see whether the results of the cases were consistent with the other cases and
multiple case studies for the purpose of similar and contrasting result comparison (Yin, 1994).
For example, two manufacturers developed complex products (i.e. audio electronic and
assembly and packaging equipment); four manufacturers developed simple products
(i.e. computer disc, plastic stationery, plastic dolls and plastic flowers).
Three manufacturers developed electronics products (i.e. audio electronic, assembly and
packaging equipment and computer discs); three developed plastic products (plastic dolls,
stationery and flowers).
Validity tests
Construct validity Multiple sources of evidence: documentation of their product drafts, approximately two 2-h
structured interviews for each firm.
Internal validity Pattern matching: Exploration of the relationships between modular product design and
coordination practices within firms and comparisons with literature.
External validity Replication logic from multiple case studies.
Reliability A case study protocol and database were developed. These included the purpose of the
research, interview notes, corporate documents, completed structured questionnaires, and
general descriptions of the product structure.

Case selection

Theoretical selection of cases is indispensable to rigorous research (Eisenhartdt, 1989). To select

the cases we adopted Yin’s (1994) methodology. First, the study established the research boundary
according to the research question. As noted in Table 2, the case companies were selected after
ensuring they were of interest in this area and persons knowledgeable about the case were accessible.
The companies were limited to those from two leading industries (electronics and plastics) in the HK/
PRD region, as these industries face highly dynamic technological and market environments (HKTDC,
1999, 2000) requiring flexible modular product design and development (Fine, 2003; Pine, 1997). The
case firms were selected as they had over five years’ internal R&D experience successfully developing
and producing modular products and so were highly related to the research topic. The companies’ key
customers were from Western countries, their key suppliers were from the HK/PRD region, and the
majority of their new product development (NPD) activities were in Hong Kong. They had similar
external market and production environments, allowing us to focus on the effect of modular product
design on supply chain management.
To select the cases, company representatives were asked to identify their development projects. A
recently completed project or an ongoing major product line was selected for analysis. The cases were
selected if their outcomes met the expected profit margins and achieved the customer requirements
during product delivery. It is noted that PM is a strategic decision (Sanchez, 1995, 1999) and its effect
takes years to emerge. For example, product modules tend to be reused for new development projects
(Meyer and Lehnerd, 1997; Ulrich and Tung, 1991). The effect of PM in new product development could
be more than a single project and so the findings of the study could involve decisions or activities above
the project level. The representatives were mainly project managers and senior engineering managers
who managed the whole development process from conceptual design to product launch. Their main
duties were to facilitate communication and coordination, resource allocation, decision making and
negotiation with multiple functional units and related external parties (Meredith and Mantel, 2003), and
so they should be very knowledgeable about modular product design and supply chain management.

Data collection

Data were collected from three sources which included structural interviews as shown in
Appendix A, documentation of the product drafts and confirmation of the research findings. As noted
172 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183

above, the key personnel would be interviewed twice with follow-ups depending on the complexity of
the case (Table 2). For example, in the case of the audio electronics maker, this study conducted five
interviews with five follow-ups by email or personal interview. The interviews were guided by the
structured questionnaire (Appendix A). Due to the complex meaning of product modularity, the
interviewer first introduced the definition of modularity to the interviewee. With the help of the
interviewer, the interviewee was required to verify their definition of product modules and
architecture and select an appropriate case for study. The interviewer then discussed the product
design and supply chain management of the case. Interviews continued at each company until the
information became repetitive (Eisenhartdt, 1989) and some patterns were matched (Yin, 1994). At
each company other data, such as marketing and promotional materials and publicly available
information, was also collected. After documentation, the research findings were sent by email to the
case companies for confirmation. The representatives from each firm commented on the findings by
email or phone. The study’s research design is described in Table 2.
Table 2 shows the validity tests of the six case studies. Construct validity was ensured by multiple
sources of evidence. Not only did this study conduct several two-hour face-to-face interviews with
firm representatives, but it also collected public and confidential documents concerning the
prototypes of the products. Internal validity was ensured by matching the six case studies. External
validity was ensured by replicating the six case studies with a structured questionnaire (the questions
in this questionnaire are reproduced in Appendix A). Reliability was also ensured when each case
study was documented.

Six case company descriptions

This section describes the coordination practices of the six case firms with their suppliers,
customers and internal units. Table 3 shows the descriptions of the case firms.

The audio electronic manufacturer

The audio electronic manufacturer is a world-class audio system manufacturer, with over 200
employees in Hong Kong and more than 1000 employees in China and over 200,000 worldwide. The
company has 11 product families servicing 4 market segments in over 8 countries. Its product variant
exceeds 1700 per year. It implemented a modular product design approach for its product platform
strategy that aimed to increase product variety in a fast-changing industry.
For the modular product design process, the firm adopted a heavy-weight project team and stage-gate
approaches in which cross-functional teams decided the product architecture, product families, module
design and modular architecture on a yearly basis. After the product modules and modular architecture
had been designed in-house, product modules were outsourced to the module suppliers to develop and
manufacture. They established formal coordination mechanisms, including corporate intranet,
knowledge management system, ERP system, regularly cross-functional team meetings and seminars.
The company reported that it coordinated the suppliers to tackle new development and
manufacturing processes when these processes were executed by the suppliers. The company looked
for suppliers in a geographically closed area, i.e. within a 10-mile radius of the case study firm. The
engineering manager noted that as the firm was close to the suppliers, the firm could frequently visit
the suppliers to discuss any product development issues. The firm also shared inventory and
production information with them in real time by using information systems. However, except for
formal marketing research methods (i.e. surveys, test marketing, customer focus groups), customers
were not coordinated early in the product development processes because, according to the senior
engineer, the customers did not know the product technologies.

The assembly and packaging equipment manufacturer

The assembly and packaging equipment manufacturer is one of the leading manufacturers in
assembly and packaging equipments for the global semiconductor industry, and has over 700
employees in Hong Kong, 700 in Singapore and 8000 in China respectively. Its product development
 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183
Table 3
Descriptions of the case firms.

Case firms Audio electronics Assembly and packaging Computer disc Plastic doll Plastic stationery Plastic flower
manufacturer equipment manufacturer manufacturer manufacturer manufacturer manufacturer

Origin Netherlands Hong Kong Hong Kong America Hong Kong Hong Kong
Industry Electronics Electronics Office accessories Toys Office accessories Plastic flowers
Company size
Hong Kong 200 700 25 200 100 5
China Over 1000 4000 1200 250 2500 200
Production processes Assembly Assembly, Line Line Assembly Line Assembly
Strategic focuses Innovation Innovation, customer service Low price, customer Product variety, Low price, customer Product variety and
relationships, product quality relationships, customization low price
customer service time-to-delivery
Main products Audio systems Assembly and packaging Portable computer discs Plastic dolls Plastic folders Plastic flowers
equipment
Representative Project manager, Engineering managers, Project manager, Project manager Chief executive Owner
interviewed engineering manager, system integration manager engineering manager, officer
purchasing manager purchasing manager
No. of interviews 10 8 6 2 2 3
and follow-ups

173
174 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183

functions are located in Hong Kong and Singapore. The firm has two main product lines (i.e. wire
bonder and lead frame) servicing markets around the world, especially the China market.
The firm adopted modular product design because its new products were too complex to be
managed by a single engineer. The products had over 10,000 components integrating the technologies
of mechanics, electronics, robotics, thermodynamics and computer control and programming. Thus, it
usually modularized a new product so that one product team could be divided into multiple sub-
teams, dealing with different product modules separately and concurrently. This significantly reduced
the product development time. The firm also adopted a modular approach for functional redundancy,
reusability and testing and control of each module quality. A senior engineering manager stated that,
for example, to improve the reliability of the equipment, they modularized a power drive and
redundantly installed two drives into the equipment. If one drive failed, the other drive would replace
it automatically.
In the product development process, the firm followed product platform strategy but focused on
how to modularize the product with regard to technological difficulties and cost effectiveness. In the
product design process, a lightweight approach was used with project teams. Senior engineering
managers stated that a project team leader, who formally coordinated and administrated a team, had
to work with functional managers to assign respective employees to be involved in the project. The
functional managers could maintain considerable authority and control over the employees. This
approach fostered and developed deep technical specialization and expertise for each module. To
easily communicate with internal staff, they grouped the R&D staff in the same building in Hong Kong.
They also frequently traveled to China for face-to-face communication with local staff. For every
project, they met the internal staff in Singapore by video conferencing.
Suppliers were not involved in the product development as the firm was vertically integrated to
ensure product quality and reliability. The senior engineer stated that, as the materials were
standardized, the suppliers were not invited to join the product development team, even though the
suppliers had expressed their willingness to participate in the team. The engineer stated that supplier
involvement could only lengthen the development time due to extensive coordination efforts. It was
also risky to leak valuable technological know-how to the suppliers.
American customers, who are proficient in the latest semiconductor technologies, were involved in
the conceptual design stage to ensure that the performance of product functions satisfied them. Due to
the fast-changing technologies in the industry, the chief technology officer stated that they had to
understand and learn the needs of the customers. This knowledge helped the firm to provide better
products for its customers, and could be applied in the China market.

The computer disc manufacturer

The computer disc manufacturer is an OEM/ODM manufacturer with 25 employees in Hong Kong
and 1200 in China. The company has half of its sales volume generated by a specific customer. It has
product development functions in Hong Kong and China and adopted modular product design in order
to follow the industry standard and meet the customer’s manufacturing and design requirements.
The firm had no formal coordination mechanism in the product design process. The engineering
manager stated that the project team was small and only assigned one engineering manager, who
used his relationship skills to manage several employees and acted as a coordinator to manage
internal functions in product development.
Since all the specifications of the product module were made in-house with well-established
technologies, customer and supplier coordination in the product development stages was not
encouraged. The firm depended on informal relationships between managers and suppliers to get the
lowest cost for materials. Inventory or production information sharing with suppliers and customers
was rare because the materials were standardized and their supply was available in the marketplace.

The plastic doll manufacturer

The plastic doll manufacturer is a world-class multinational toy manufacturer, which has over 200
and 250 employees in Hong Kong and China respectively. It has product development functions in the
 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183 175

U.S. and Hong Kong and has implemented modular product design for its platform approach so that it
can make a large variety of plastic dolls in a very short period of time.
During the product development processes, internal coordination followed heavy-weight project
team and stage-gate approaches that the project leader had full authority on the product platform and
family in its cross-functional team. After the product modules and modular architecture had been
designed in-house, product modules were outsourced to the suppliers to manufacture. The project
team was subdivided into smaller functional teams to manage particular product modules. As there
were a few product modules, the teams worked closely together.
After the product specification was established by the firm, suppliers were coordinated in the
manufacturing processes to ensure product quality. As the technologies used in the plastic doll
development project were standardized, the project manager stated that the suppliers were not
required to coordinate in the early product design stage. Apart from formal marketing tools (i.e.
surveys, focus groups), the manager said that they had no plans to work with customers in new
product development. Company policy stated that only its designers, artists, model makers and
engineers performed product design activities. Retailers were not invited to become involved early in
the development stage but shared forecasted sales, production and inventory information.

The plastic stationery manufacturer

The plastic stationery manufacturer is an OEM/OBM manufacturer with over 100 employees in
Hong Kong and more than 2500 employees in China respectively. Over half of the firm’s sales volume is
generated by a few OEM customers. The rest is generated by its own-brand plastic stationery. The firm
has implemented a modular product design approach for standardization and product variety which is
used to sustain its business in a low-margin conventional market.
The chief executive officer noted that the company had no formal coordination mechanism to
develop the product because its product development team only had a few employees and the product
architecture was simple, e.g. clamps, plastic and paper covers. Suppliers and customers were not
involved early in the product development process as product modules were made in-house and only
raw materials were supplied. The firm did not work closely with its suppliers in developing the
product and asked suppliers to reduce the material costs.

The plastic flower manufacturer

The plastic flower manufacturer is a traditional plastic flower manufacturer which has over five
and 200 employees in Hong Kong and China respectively, and has product development functions in
Hong Kong and China. It has adopted modular design that separates plastic flowers into a large range
of independent modules (e.g. leaf, flower frame, flower stem, flower utensils, flowerpot and garden
utensils) with simple interfaces (e.g. each leaf has a hole to connect to a flower frame). Thus, the firm
can mix and match a large variety of available modules to create new products. It could rapidly
customize new products by creating a few modules based on customer’s interests.
An executive officer stated that it did not use a formal team as only a few personnel were involved
in new product development. The officer designed different modules and modular architecture with
other internal parties during informal meetings. The working relationships were very good as most of
them have worked together for over 10 years. Suppliers were involved in product development if new
plastic materials were needed. The working relationships with major suppliers (i.e. adhesive
materials, plastic materials) were long-term and they had worked together for over 10 years.
Customers were frequently involved in the whole product development process. The customer
helped to design and partition product modules to reduce production costs and develop new
products.

Case analysis and critical success factors

According to our case studies, seven critical factors for the coordination of modular product design
are identified (Table 4).
 176
Table 4

A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183

Summary of case analysis.

Cases Audio electronics Assembly and packaging Computer discs Plastic dolls Plastic stationery Plastic flowers
equipment

Product characteristics Innovative product Innovative and value-added Functional single Innovative Functional Innovative product
platform product platform product product platform product
Pre-defined product Product variety Product variety, standardization International Quality and Standardization Product variety
advantage standards, development time and product and customization
product quality variety
Module definition Yes No No No No No
Selectively used Yes Yes No No No No
design rule
System integration A formal department A formal department No No No No
Internal communication Formal team, subdivision, Formal team, subdivision Informal team Formal team, No intention No intention
additional communication subdivision
channels
Technological newness Radical innovation High technology Standard technology Standard Standard Standard technology
technology technology
Supplier and customer Supplier early involvement Order/inventory information Order/inventory Coordinated in No intention Information
coordination in modular design stage sharing during production stage information sharing engineering sharing, coordinated
during production development stage in modular design
stage stage
Order/inventory Extensive know-how sharing, Not likely Order/inventory No intention Early customer
information sharing early customer involvement information involvement in
during product delivery in design stage sharing during design stage
product delivery
 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183 177

Pre-defined product advantage

By comparing all cases, the product advantage of modular design is product variety. It is
understandable that modular design improves product variety by mixing and matching a small
amount of modules. As the product modules are standardized and interchangeable, manufacturers can
improve conformance quality and delivery lead time. As discussed with the case firms, this is
particularly important for low-tech manufacturers, i.e. the plastic flower and stationery
manufacturers.
The product advantages also include customization and standardization. For example, the
assembly and packaging equipment manufacturer modularized the power supply of its bonding
machine so that its technical support can swap a failed power supply with a new one quickly, even if
the cost of the modular power supply is higher. This modularized power supply is a standard module
for both low-end and premium goods. Low-end goods have one power supply, whereas premium
goods have two or more power supplies. As the power supply to the bonding machine is a frequently
failing component, this arrangement significantly improves product reliability. It also gains flexibility
to scale the goods up and down for customization and product variety. Similarly, the plastic flower
manufacturer adopted modular design for customization, and the plastic stationery manufacturer for
standardization.

Module definition

By comparing the modular design with large and small manufacturers, this study found that large
manufacturers develop a formal system to manage its physical modules and expand it to the
functional requirement specification, schematics and construction specification. The engineering
manager of the audio electronic manufacturer stated that when they modularized schematics and
product specifications, it improved the efficiency of reusing modular product design. However, small
manufacturers mainly define modules as physical modules with CAD/CAM drawings and leave the
other design specifications intangible and kept only by the product engineers. As there is no system for
maintaining the intangible knowledge in-house, small manufacturers take the risk of losing valuable
engineering knowledge when the product engineers leave. This study suggests that the manufacturers
expand the module definition to incorporate the intangible knowledge in their existing product
development mechanisms as can be seen in Fig. 1.
Furthermore, as the module designs tend to be reused in future products, a clear and explicitly
formulated scope of the product module is necessary. For an effective modular product design, it is
essential that the scope is not changed too much later on, because of the high impact of such a change.
As can be seen in Audio electronics manufacturer, they make clear mission statements for each
[()TD$FIG]
modular product and its modules, i.e. production description, functional goal, primary usage,

Fig. 1. Tangible and intangible modules for new product development.

178 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183

secondary usage assumptions and constraints and owners of each module. The firm then continuously
re-examines the mission statement of innovative modular product and its modules because new
module development always has higher uncertainty. It requires long-lasting and substantial effort for
the firm to change existing product design approach to modular product design with customers of
modular product design and teams responsible for the evolution/maintenance and creation of module
design and modular architecture. Additional resources would be needed because modular
architecture and module design may be continuously reused in the future and other product lines.
It requires switching organization culture from thinking for the short term to also including the long
term, defining and making explicit ownership of the modular architecture creation, maintenance and
usage in the organization in annual budgeting practices and translated into multi-year financial
impacts.

Selective use of design rules

This study found that large and small organizations do not use design rules diligently. Small case
firms modularize their products by experience as their products are relatively simple. A senior
engineer of the computer disc manufacturer stated that design rules or other mathematical analyses
were not adopted for modular product design as the product functions were well established and the
number of physical components was few. Use of design rules might extend the development time. The
plastic stationery and flower manufacturers agreed with this.
For large firms, the audio electronics and assembly and packaging equipment manufacturers stated
that they rarely used design rules proposed by literature. Designers said that existing design rules
were mathematical and difficult to understand. Extensive use of design rules might extend
development time. A senior engineer at the audio electronics manufacturer commented that they did
not really understand the design rules and they might be too difficult to implement. There were many
design rules available in the market but they had no time to study them all. A senior engineer at the
assembly and packaging equipment manufacturer said that they had no time to understand the
mathematical background of the rules and to apply them in their products. He also said that as product
variety was increasing but product life cycle was shortening, it could be ineffective to construct a
design rule system requiring their engineers to learn the mathematical rules, while frequently
modeling the products and updating the design data due to design changes. Instead, they modularized
the products based on their own technical experience and budgeted cost constraints.
This study found that existing design rules were not welcomed by the case study firms and tended
to be difficult to implement in practice. However, the existing literature argues that design rules can
help reduce the product development time and problems in the later process (Baldwin and Clark,
2000). It seems that manufacturers tend to selectively adopt the design rules and combine them with
their experience for modular design. It may be the fact that design process is difficult to be
documented formally and comprehensively (Pahl and Beitz, 1988). When product life cycle is
decreasing and technologies are rapidly changing, reuse of existing modules is limited and the
technical knowledge accumulated to adopt design rule to partition and integrate modules is
insufficient (Shibata, 2009; Clymer and Asaba, 2008). It is also possible that there is lack of appropriate
tools that are easy to use and maintain for manufacturers. As the cases selected are successful
examples in the case firms, this study suggests the use of design rules be highly selective at least for
the short term benefits.

System integration

System integration is a key design process for modular design, where the extant literature has
discussed it in great detail (Brusoni and Prencipe, 2001). In practice, only the audio electronics and
assembly and packaging equipment manufacturers have a formal department that manages the
system integration issue. By comparing the product characteristics, it may be due to the fact that these
two manufactures deal with complex product development, while the others use simpler product
development. Both manufacturers also noted that the formal department was set up to handle the
complex interactions of electronics, mechanical parts and software design. The department included a
 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183 179

few system integration managers who were experienced engineers with product knowledge and they
helped integrate several teams working on separate modules.
With the other manufacturers the system integration issue was handled by the product managers.
The computer disc and plastic stationery manufacturers noted that, as their product did not involve
complex interaction among components, the formal department approach would not be cost effective.
A project manager is sufficient. In either case, firms tend to have a set of middle management, which
has operational skills and understands corporate strategy, to handle system integration activities.
They maintain, renew and create modules and integrate these modules in modular product
architecture. The middle management also deepens technological knowledge in each module so as to
develop modular innovation.
While comparing the size of firms, it seems that large firms have a special team for system integration
but small firms leave middle management to handle system issues. As the selected cases of both large
and small firms are perceived to be successful, this study suggests that it can be explained with the theory
of product complexity (Baldwin and Clark, 2000) that modular design should be adopted in making
complex products by ‘‘limiting the scope of interaction between elements or tasks, thereby reducing the
amount and range of cycling that occurs in a design or production process’’ (p. 90). It also argues that
‘‘when the complexity of one of the elements crosses a certain threshold, that complexity can be isolated
by defining a separate abstraction that has a simple interface [i.e. a module].
The abstraction hides the complexity of the element; the interface indicates how the element
interacts with the larger system’’ (p. 64). By grouping strongly interacting elements together and
separating weakly interacting ones, modular product design delineates the interactions between
different components of the product system. In this study, the large firms such as assembly and
packaging equipment make complex products that require many engineers (Table 3) being separated
as several sub-teams which design their assigned modules individually. Thus, the communications
among those sub-teams become an issue. However, the small firms such as plastic flowers and
computer discs make simpler products that require fewer engineers without sub-division. It is
convenient to communicate among the engineers in the firms. Thus, the study suggests that, for a
complex product, a formal system integration department is necessary; for a simple product, a
product manager may be sufficient.

Technological newness

The development of a new module/component significantly affects the coordination of modular

product development. The audio electronics manufacturer built additional communication channels to
coordinate internal parties for the innovative modular product development. The assembly and
packaging equipment and plastic doll manufacturers had tight internal integration to optimize product
performance. In contrast, the computer disc, plastic stationery and plastic flower manufacturers did not
have formal teams to integrate functional units as the products were already functional.
The audio electronics manufacturer co-developed the new module with the module supplier, who
was involved early in product design, business meetings and design workshops. The assembly and
packaging equipment and computer disc manufacturers were much less coordinated with their
suppliers because the supplied materials were of a conventional type available in the open
marketplace. If the product module or its components were technologically innovative, the customers
were coordinated early in the design stage (e.g. the assembly and packaging equipment
manufacturer). Conversely, if the product was functional, the customer was not coordinated (e.g.
the plastic flower and stationery manufacturers).
In all the cases, our study suggests that new module development requires substantial effort in
coordination across the supply chain during the development stages. This result supports the view that
supplier, customer and internal coordination are required to create innovative products (Lau et al., 2007).

Internal communication

Large manufactures (i.e. the audio electronics, assembly and packing equipment, and plastic doll
manufacturers) develop formal internal communication channels on modular product development,
180 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183

whereas the smaller manufacturers adopt informal coordination practices on modular product
development. For example, the audio electronics manufacturer documented that additional
information channels (i.e. intranet, knowledge management and ERP-enabled systems) had to be
developed to communicate across module development teams. Thus, when the module development
teams independently developed their specific modules, the common goals of the teams could be kept
in line through these channels. It is important to note that module teams can only be partially
independent to develop their modules. Continuous communication and meetings noting milestones of
NPD processes have to be done to inform of any change of different internal module designs. If the
product module is newly developed, the interactions of the module with other existing modules are
difficult to confirm, and frequent communication and face-to-face meetings are required in the
creation of new modules.
Furthermore, the owner of the plastic flower manufacturer stated that, as their organization was
small in size, informal but extensive coordination within the development team was sufficient in the
design stage. It is important to develop joint responsibility based on a team/project performance, not
individual or functional unit performance, joint commitment that modules are designed by module
teams but everyone in the team contributes ideas, data and documents and close communication of
design information among manufacturing, R&D and manufacturing personnel. Although some
researchers argue that modular product design may diminish the need for extensive internal
integration (Baldwin and Clark, 2000; Sanchez, 1999), this study found that, in all cases, extensive
communication within the development team is essential for both small and large firms during
modular product design and development. It is particularly important for the large firms that separate
a product design team into several module development teams aligning with the modular product
structure to develop several ways such as intranet to enable communication across the teams.

Supplier and customer involvement

Supplier and customer involvement depends on the technical content of the products developed
and their own technical capabilities. In most cases, when the firms deal with standardized materials
and modules from their suppliers, they do not coordinate the suppliers in the product development
processes. Rather, the firms provide product specification for the suppliers and ask for a cost reduction.
However, if the suppliers need to take up some development activities, the firms tend to frequently
coordinate with the suppliers in the early development stages (i.e. the audio electronics, plastic doll
and plastic flower manufacturers). This helps capitalize on the suppliers’ competence.
More importantly, as modules are usually developed for use in a series of products on a long-term
basis, manufacturers are required to ensure that the suppliers are technically competent and tend to
develop long-term partnerships with them (i.e. the audio electronics manufacturer). It is possible that
the firm share its product development roadmaps with the module suppliers so that the suppliers can
prepare for new module development, which usually involves long development and production lead
time. This result coheres with existing literature that core module suppliers tend to adapt their
product development processes and get early involved in the manufacturer’s product development
system (Sullivan, 2003), in which the suppliers can learn explicit and component knowledge (Chen,
2005).
In other words, manufacturers may not involve non-competent or short-term focused suppliers in
product development in order to prevent any knowledge leakage and locate the suppliers in a price-
competitive market. It helps to prevent forward integration by module suppliers or backward
integration by customers, as modular product design may open the product market for a large range of
suppliers and customers who cannot compete with the manufacturers in product level but may beat
them in module level, e.g. Intel’s CPU against IBM PC (Baldwin and Clark, 2000).
On the other hand, the firm tends to share production plans and inventory mix/level information
with the customers through information technology, having them access to marketing and
technological information related to their products only. Customers are not coordinated if they
are not technologically competent in product development (i.e. the audio electronics and plastic doll
manufacturers). Instead, the non-competent customers may be asked to articulate their needs to the
firm or to select existing product modules that they like to pay for. This helps the firm identify
 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183 181

technological problems without interference with the customers and provides the customers with
total solutions in the quickest possible way. The firm can thus provide the product functions/modules
that customers want to pay for and nothing more. Extra functions/modules increase production costs
but cannot be counted on the price tag.
If the product is not technically complex, customers may not work with the manufacturers in
product development (i.e. the plastic stationery and computer disc manufacturers). In some cases,
manufacturers only coordinate with their customers in detailed product architecture and design
layouts for the purpose of developing customized products (i.e. the plastic flower manufacturer) and
learning from the customers (i.e. the assembly and packaging equipment manufacturer). These
findings are consistent with both small and large manufacturers, as well as current technology
management literature.

Discussion and conclusion

To sustain business, manufacturers are asked to coordinate their supply chain members as a
competitive strategy against global competitors. However, effective supply chain coordination is rare
and can be affected by many factors. This study identifies seven critical success factors to be
considered when coordinating modular product design irrespective of their industry types and
company sizes. Comparing the critical factors to the industry type, this study found that there is no
significant difference between electronics and plastics industries in terms of the seven critical factors
(Table 4). When facing modular product design, both small and large firms also need to deal with the
factors.
For professional managers, this paper shows that product modularity is related to supply chain
coordination in both large and small manufacturers. Managers should be aware of these factors
altogether in order to coordinate the supply chain members for different types of product
development projects. For example, manufacturers should strategically define the product advantage
of modular product design and each module. Either physical components or intangible knowledge
should be modularized to improve reusability. This is particularly important for modular product
design as the product modules may be reused in future product development projects (Meyer, 1997)
and the development of modular product architecture is usually costly and time consuming (Garud
et al., 2003). For complex product development, system integration should be formal; and with simple
products, informal. In addition, the manufacturers should coordinate technically competent suppliers
to develop innovative products. The technically competent customers should be invited to work
closely in the product development processes to develop better customized products and to acquire
the customers’ technical knowledge.
For future research, this study leaves an opportunity for interdisciplinary research in modularized
intangible design knowledge and supply chain coordination. This is shown in the critical factors of
module definition and selectively used design rules. Through multiple interviews with corporate
decision makers in the six case firms, the concept of supply chain coordination in information/
knowledge sharing across supply chain partners is little understood, except by the audio electronics
manufacturer. In fact, the other manufacturers worry about the risk of knowledge being leaked or
imitated across the supply chain. They therefore avoid any exchange of knowledge among the supply
chain partners, which may eventually affect their product innovation and competitive advantage.
Additionally, small manufacturers are not equipped with knowledge management systems for
modularizing the intangible technological knowledge with suppliers and customers. Large or small
manufacturers have insufficient knowledge about the use of design rules and complain about the
difficulty of adopting the established design rules in literature. In other words, managers strongly
require easy-to-use design rules, guidelines, skills and applied knowledge for managing their
distinctive capability of technological knowledge in the coordinated supply chain. However, as all of
the selected cases did not use design rules, this study was limited to examine the long-term effects of
the use of design rules in the studied industries.
Further research should involve the variables of technological complexity, product complexity and
internal organization of work. Some signs relating to the factors of product development team size and
product newness are also identified. However, as this study examines modular design in diverse types
182 A.K.W. Lau / Journal of Engineering and Technology Management 28 (2011) 168–183

of products (e.g. toys, electronics, office accessories, plastics), it is not appropriate to compare them in
terms of product complexity. Further studies should select cases with similar types of products for
studying product complexity.
Dealing with multidisciplinary and complex organizational phenomena requires empirical data to
prove the relationship-building model. Another extension of this study is to test the relationship
model through quantitative research so as to generalize the research findings.

Appendix A. The structured interview questionnaire

Based on your modular product development:

Part A: Company background information

A1. How long has your company been established in Hong Kong?
A2. How many full-time employees are hired by your company (Local Plant and Remote Plant)?
A3. What is (are) the principle product(s) of your company, no. of product types, production volume?
A4. What are your winning order factors of the project?
Part A: Product development management
A1. What are your objectives, your duties and target markets?
A2. How are you involved in the product development? E.g. Concept design (concept starts) Product planning
Product/process engineering Pilot production/Ramp
A3. How do you describe your product architecture and why you do so?
Part B: Supply chain management
B1. Do you need to manage your supply chain? How do you manage the internal flows of information, materials and
financials?
B2. What type of activities do you cooperate with customer and supplier if you need to contact them and how?
Which factors concern your department the most? Supplier and Customer
B4. What information technology does your company use and plans to use? How do you comment on these
technologies? Supply chain related and supply chain non-related
B5. How do you manage your supply chain? How does your supply chain flow from supplier to customer?
B6. What type of activities that your company uses to cooperate with customer? Which factors concern your
company the most?
B7. What are the benefits/difficulties of integration with the customer?
B8. What type of activities does your company use to cooperate with the supplier? Which factors concern your
company the most?
B9. What are the benefits/difficulties of integration with suppliers (module and integral parts supplier)?
B10. In terms of this product, how did you work with other departments and supply customer from product design to
commercialization? E.g. Concept design (concept starts) Product planning Product/process engineering Pilot
production/Ramp
B11. What information technology does your company use and plans to use? How do you comment on these
technologies?
Part C: Operational and relative product performance
B1. How does your company evaluate the product performance?
B2. What are your department strategies and policies related to production of the product?

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