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Component Sharing in the Management of Product Variety: A Study of Automotive Braking Systems

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Author Info

  • Marshall Fisher

    (The Wharton School, 1300 Steinberg-Dietrich Hall, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Kamalini Ramdas

    (Darden Graduate School of Business, University of Virginia, Darden School, Charlottesville, Virginia 22906)

  • Karl Ulrich

    (The Wharton School, 1300 Steinberg-Dietrich Hall, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

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    Abstract

    Product variety in many industries has increased steadily throughout this century. Component sharing---using the same version of a component across multiple products---is increasingly viewed by companies as a way to offer high variety in the marketplace while retaining low variety in their operations. Yet, despite the popularity of component sharing in industry, little is known about how to design an effective component-sharing strategy or about the factors that influence the success of such a strategy. In this paper we critically examine component sharing using automotive front brakes as an example. We consider three basic questions: (1) What are the key drivers and trade-offs of component-sharing decisions? (2) How much variation exists in actual component-sharing practice? and (3) How can this variation be explained? To answer these questions, we develop an analytic model of component sharing and show through empirical testing that this model explains much of the variation in sharing practice for automotive braking systems. We find that the optimal number of brake rotors is a function of the range of vehicle weights, sales volume, fixed component design and tooling costs, variable costs, and the variation in production volume across the models of the product line. We conclude with a discussion of the general managerial implications of our findings.

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    File URL: http://dx.doi.org/10.1287/mnsc.45.3.297
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 45 (1999)
    Issue (Month): 3 (March)
    Pages: 297-315

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    Handle: RePEc:inm:ormnsc:v:45:y:1999:i:3:p:297-315

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    Related research

    Keywords: component sharing; product variety; commonality; product platform; product design;

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    Cited by:
    1. Brun, Alessandro & Capra, Eugenio & Miragliotta, Giovanni, 2009. "VRP revisited: The impact of behavioural costs in balancing standardisation and variety," International Journal of Production Economics, Elsevier, vol. 117(1), pages 16-29, January.
    2. Nils Boysen & Armin Scholl, 2009. "A General Solution Framework for Component-Commonality Problems," BuR - Business Research, German Academic Association for Business Research, vol. 2(1), pages 86-106, May.
    3. Qu, T. & Huang, George Q. & Zhang, Yingfeng & Dai, Q.Y., 2010. "A generic analytical target cascading optimization system for decentralized supply chain configuration over supply chain grid," International Journal of Production Economics, Elsevier, vol. 127(2), pages 262-277, October.
    4. Johnson, Michael D. & Kirchain, Randolph E., 2009. "Quantifying the effects of product family decisions on material selection: A process-based costing approach," International Journal of Production Economics, Elsevier, vol. 120(2), pages 653-668, August.
    5. Block, Joern H. & De Vries, Geertjan & Schumann, Jan H. & Sandner, Philipp, 2014. "Trademarks and venture capital valuation," Journal of Business Venturing, Elsevier, vol. 29(4), pages 525-542.
    6. Carolyn D. Egelman & Dennis Epple & Linda Argote & Erica R.H. Fuchs, 2013. "Learning by Doing in a Multi-Product Manufacturing Environment: Product Variety, Customizations, and Overlapping Product Generations," NBER Working Papers 19674, National Bureau of Economic Research, Inc.
    7. Grau, Christoph & Wolf, Christian M. & Kramer, Florian & Hess, Thomas, 2007. "Modularisierung in der Medienproduktion: Drei Fallbeispiele im Vergleich," Working Papers 1/2007, University of Munich, Munich School of Management, Institute for Information Systems and New Media.
    8. Gautam, Naveen & Singh, Nanua, 2008. "Lean product development: Maximizing the customer perceived value through design change (redesign)," International Journal of Production Economics, Elsevier, vol. 114(1), pages 313-332, July.
    9. Lau Antonio, K.W. & Yam, Richard C.M. & Tang, Esther, 2007. "The impacts of product modularity on competitive capabilities and performance: An empirical study," International Journal of Production Economics, Elsevier, vol. 105(1), pages 1-20, January.
    10. Israelsen, Poul & Jørgensen, Brian, 2011. "Decentralizing decision making in modularization strategies: Overcoming barriers from dysfunctional accounting systems," International Journal of Production Economics, Elsevier, vol. 131(2), pages 453-462, June.
    11. Nepal, Bimal & Lassan, Gregg & Drow, Baba & Chelst, Kenneth, 2009. "A set-covering model for optimizing selection of portfolio of microcontrollers in an automotive supplier company," European Journal of Operational Research, Elsevier, vol. 193(1), pages 272-281, February.

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