Modularization and the impact on supply relationships

Abstract

PurposeThis paper aims to examine the role of product architecture in supply chain design. Specifically, it seeks to resolve confusion over the impact of modularisation on supplier relationship management. On the one hand, the introduction of modularisation suggests that buyer and supplier firms should move towards greater collaboration in order to co‐develop products and reduce interface constraints. On the other hand, the standardisation of interfaces suggests that buyer firms could introduce a “black box” approach to component design, holding suppliers at arm's‐length and reducing dependence. These conflicting views form the focus of the research: under what conditions does modularity lead to increasing collaboration?Design/methodology/approachThe data are drawn from UK manufacturing firms across eight industry sectors using a sample from the Conquest Business Media database. Three hypotheses are tested through a three‐step hierarchical regression analysis.FindingsThe findings provide support for the notion that product modularization will lead to greater levels of buyer‐supplier collaboration, but that this relationship is mediated by relationship‐specific assets and information sharing.Originality/valueThe paper supports the argument that modularised components require collaborative sourcing practices in order to co‐develop products and reduce interface constraints. This suggests that outsourcing requires a high level of integration, creating dependencies between firms representing considerable investment in equipment and sharing through proprietary information systems. As interest in build‐to‐order supply chains and flexible product architecture grows; this emphasizes the importance of specifying the exact nature of relationship processes without stifling product innovation.