Why do German manufacturers offer more often modular solutions?

Modularity allows a product to be made fit for purpose from a limited number of standardised components called modules. The engineering challenge is to cover the maximum number of use cases with the minimum number of modules. Developers achieve this by ensuring from the outset that each module will be able to cover the range of performance required by all use cases, and that interfaces between modules are compatible.

Volkswagen pioneered modularity in the 1970s, defining a wide range of modules that can be found in several vehicle models in the same segment: engines, batteries, brakes, seat structures and adjustments, headlight lamps, electronic vehicle architecture, etc.

The economic benefits of modularity are significant: reduced manufacturing costs due to the series size effect, better purchasing conditions from suppliers, better amortisation of fixed development costs, tooling, and machine costs.

The indirect benefits are also tremendous: possibility of experience effects allowing detailed improvement of the product and manufacturing process, reduction of quality defects, ease of training of production teams, reduction of development time if an existing module is reused, reduction in the number of spare parts, simplification of technical and maintenance documentation, reassurance of customers on the reliability of the products, statistical predictability of the component’s performance in use, possibility of offering a wide and varied range of configurations etc.

Many other German manufacturers have opted for a modular supply policy: Kärcher, the leading manufacturer of high-pressure cleaners, always uses the same compressor accessories (nozzles, guns, hoses, etc.) regardless of the type of compressor. Whatever the output pressure of the water jet, Kärcher uses the same type of nozzle and hose. The interfaces of accessories are standardised, allowing the equipment to be customised like a Lego set.

In France, the emphasis has traditionally been on customisation and case-by-case. The first generation EPR nuclear reactor is a typical case: it had a catalogue of 13,309 different valves. The rate of rework due to non-quality on the Flamanville site was 200%. The second generation of EPR has addressed the topic, and shrunk the number of valves to 571. The rework rate has been reduced to 45% on the Hinkley Point British construction site.

I had the opportunity to compare the product strategy of two railway equipment manufacturers of similar size, one French and one German. Thanks to the modularity approach, and a discipline of standardisation, the German competitor had a reduced product range, but covering all market needs thanks to option modules. The average series size was 3 times that of its French competitor, giving it a 15% industrial cost advantage. I have observed such differences in several railway equipment markets.

What explains this structural preference of German manufacturers for modular design solutions? I have a few explanations based on my experience in both worlds:

German industrial companies are highly integrated in their operations. Decisions are matured in a more collegial manner, and result in compromises that take into account the constraints and priorities of several functions. 47% of professional and managerial staff in Germany were first trained as apprentices, before completing their training to become technicians or master craftsmen. Many German engineers and managers started out as professional workers. There is no question of saying “the housekeeping will follow” , the voice of the production teams counts as much as that of sales or the design office. The resulting compromises lead to a gradual evolution of the product range, based on experience and risk management.

French designers take more pride in designing tailor-made products, which respond to the specific demand linked to a precise call for tender. The ingenious resolution of problems under constraint that arise during the project is valued, whereas the German engineer will endeavour to foresee from the outset all cases of use, even borderline cases, and to deal with the unexpected. Across the Rhine, in-depth expertise and precision are paramount.

Perhaps the language plays a role: German common nouns are combined to form new words: data security in German is called “Datensicherheit”, a combination of “Daten” (data) and “Sicherheit” (security). Prefixes and case declensions are added at the end. The combinability of these basic words is almost infinite. The design of the ranges reflects the linguistic structure: standard modules joined together, supplemented by pre- and postfixes.

Yet three considerations lead me to believe that there is no fatality, and that it is a matter of management decision:

There are notable exceptions: the railway manufacturer Alstom Transport has a standardised metro platform, called Metropolis, which is one of the most competitive on the market. And Renault, with Dacia, has been able to reuse proven standard car components to lower costs while providing superior reliability, and become more competitive than Volkswagen in the entry-level segment.

The acceleration of digitalisation in industry, whether in design, manufacturing, or maintenance processes, will tend to lower the manufacturing break-even point of industrial products, and erode the economic benefits of a modular offering.

When the company brings together teams of French and German engineers, the complementary nature of the approaches can become an asset to be exploited, once the period of cultural adjustment has been overcome.

The fact remains that modularity will continue to provide a wealth of marketing benefits in the future: clarity, reassurance about the technical risks associated with innovation, the freedom for the customer to put together the solution that meets his needs easily, by assembly and additions, and the assurance that spare parts will remain available for a long time.