Product Platforms: A Winning Strategy

Insight and Analysis by Matthew Sheridan

Part 1: Market Drivers and Company Goals

In today’s global-market, manufacturing companies often strive to create customer-specific and market-driven products. Offering one product with one configuration might have helped scale manufacturing and deployment 100 years ago. To stay competitive, manufacturers now need to offer customers greater choice and enable the delivery of more targeted products to key market segments.

Product diversity is a requirement, but achieving diversity with scale – delivering variety with efficiency – that is the key to success. This strategy can be a powerful growth driver, but typically comes with increased product complexity. To manage this complexity, companies need a product-platform approach.

A product-platform approach can enable companies to take advantage of the following opportunities:

  • Control product costs (design, development and manufacturing costs) by standardizing required components
  • Capitalize on new market opportunities with price premiums for tailored and custom products
  • Synchronize product configurators used by sales with engineering-defined options so the right product is configured for the right market

While manufacturers can agree on the value of a product platform approach, there are various ways to realize that value. In many organizations platforms are managed in a complex system of spreadsheets, documents and homegrown systems. The array of spreadsheets and documents can become difficult to manage and lead to inefficiency and losses in platform benefit. Too often, products are introduced late into the market or fail to even meet customer requirements. The outcome may be a low level of customer satisfaction with a new product introduction, or perhaps worse, leaving that market opportunity to be realized by a competitor. The consequences of a poorly managed product family can have critical implications to a company’s growth and profitability.

To fully realize the market opportunity and take advantage of the best design and engineering a company has created, a consistent approach to managing core product platform information is required. This means discrete manufacturers must be able to connect the required product configurations for each geographical market with the correct engineering bills of material (BOM) and CAD geometry, ensuring that manufacturing – wherever it happens to take place – is producing the right product for the right market.

Part 2: Research Highlights the Benefits of a Platform Approach

Evidence to support this consistent platform approach along with examples of the resulting benefits can be found in the recent Frost & Sullivan research study, Strategic Analysis of Platform Strategies of Major Heavy-duty Truck Manufacturers1. According to the study, the make-up and course of the heavy-duty truck market has changed dramatically over the last 10 years. Frost & Sullivan researchers expect that over 50 percent of the top 12 global OEMs will increase the number of platforms by 2018, resulting in an average of one in every three trucks built with a platform approach.

By Frost & Sullivan’s definition, a global truck platform is, “a single set of common design, engineering, and manufacturing elements shared between different products/brands/marquee within the same organization or between organizations.”

The Frost & Sullivan research shows that “Markets considered as an afterthought a few decades ago are now dictating the course of global commercial vehicle demand and the industry’s growth”. As these growth strategies emerge, a consistent global platform approach has become a major requirement for any OEM.

Further evidence that the approach the Heavy Truck industry is taking is the right one (i.e. promoting global product development and growth), can be found in a recent release by IBISWorld2. The release states that the global heavy duty truck industry has “managed to post average annual growth in the five years since 2007, and that growth is expected to continue through 2017.”

When analyzing the heavy-truck industry, Frost & Sullivan discovered that global platform development and execution may appear to be a unique strategy from the triad OEMs (United States, European Union and Japan) to penetrate growth markets, reduce manufacturing costs and complexity in domestic and global markets, and enhance margins. Yet, they go on to highlight that this strategy is also being pursued by Brazil, Russia, India and China (BRIC) OEMs to develop truck models for both developing and developed markets. Irrespective, Frost & Sullivan forecasts that global heavy-duty truck production from global truck platforms will reach approximately 612,000 units by 2018, nearly double the global platform-based truck production levels in 2011.

In their research, Frost and Sullivan focus on specific benefits achieved by Scania AB’s platform approach

  • Estimated 50% percent part reduction achieved internally, compared to reduction achieved by non-modular approach
  • 30%-50% reduction in design and development costs
  • 10% manufacturing cost reduction
  • 30% reduction in sales and service expenses

There is no question that strategies and benefits of a consistent global platform strategy can apply to other companies. In fact, many companies beyond the heavy-truck industry are already applying those strategies and reaping the rewards.

Part 3: Companies Responding to the Challenges of Product Diversity

The Volkswagen Group

Alongside the global heavy-truck industry, global automotive OEMs have also sought a strategy to address challenges in global product development. The Volkswagen Group, makers of VW, Audi, Porsche, and other vehicles, are one of the world’s most profitable automakers, largely due to its global platform strategy. In an interview with German automotive trade publication Automobil Industrie, Michael Macht, member of the Board of Management of Volkswagen AG (responsible for production), said he expected cost savings of up to 20% and assembly-time reductions of up to 30% with the introduction of Volkswagen’s new MQB platform. In total, the Volkswagen Group expects standardization to cut product development costs by 20%, parts costs by another 20% and production time by 30%. Furthermore, analysts at Société Générale3 believe the annual savings could reach $3 billion.

KHS GmbH

KHS Filling and Packaging is a worldwide manufacturer of machines that serve the beverage, food, and non-food industries. Producing many variations of refillable and non-refillable PET and glass bottles or cans; be it for mineral water, beer or sparkling wine, KHS is able to control these product variants and satisfy customer need by using a consistent approach to their product platform strategy. By implementing a modular product architecture in a global product development environment, KHS is able to organize and map a customer’s requested application into a pre-defined set of capabilities, which in turn can be mapped to specific design options to especially overcome variants in the filling stage. As a result, KHS is able to address specific customer requests and at the same time reduce process costs and cycle times proving their overall strategy supports consistency in dealing with variances and complexity.

WinWinD LTD

WinWinD, a Finnish based company, lives and breathes wind energy. The company has been successfully managing business growth within the wind turbine industry since 2002. Its main drivers for moving to a consistent platform approach were to manage product quality, change, and growth. In a recent interview, Jonas Hagner, ICT Director at WinWinD, said the company doesn´t get many second chances when building a wind turbine. With its product platform approach, WinWinD has successfully produced a high class product and has grown its business at the same time.

Part 4: Exploring the Best Practices of a Product Platform Strategy

With the opportunities and benefits outlined for a global product development environment, it is easy to understand why many manufacturing companies are investigating the best approach to managing a product platform strategy within their organization. The PTC Global Platforms solution helps companies efficiently meet the varied requirements of market, region, and customer-specific products without drowning in complexity. This solution allows you to take a consistent approach to platform information by taking into account the engineering bill of materials (BOM), the platform logic, all the various configurations, the variant offerings, and the resultant CAD geometry. With this level of control, companies can achieve component reuse, module standardization, process standardization, validation of platforms and variants (cost, weight, and interference), configuration management, and change management across the entire platform definition. Managing product platforms in a consistent manner enables companies to achieve product diversity with scale, resulting in cost saving for their organization and their customers.

About the Author:
Matthew Sheridan, PLM Director Product Marketing

Matt Sheridan is currently PLM Director of Product Marketing at PTC. He has twenty years of experience in product development with an emphasis on PLM. He has a degree in aerospace engineering and a master in mechanical engineering.

Appendix

1Frost & Sullivan research report “Strategic Analysis of Platform Strategies of Major Heavy-duty Truck Manufacturers” and Global Platform Strategies of Major Heavy-Duty Truck OEMs: Nearly One in Three Trucks Manufactured by 2018 to Feature Platform Based Lineage www.frost.com

2IBISWorld - Global Heavy Duty Truck Manufacturing Industry Market Research Report Now Available from IBISWorld http://www.prweb.com/releases/2012/7/prweb9722375.htm

3“How VW shucked off its provincial ways and became a global powerhouse” – Alex Taylor III, senior editor-at-large Fortune Magazine