How SMEs deal with product line depth versus breadth requirements and, in particular, how they manage to maximize product variations, which increase the number of SKUs,Footnote 1 are a big challenge for all companies, large and small. For small companies with limited resources, the challenge is even bigger.

Adopting Modularization Strategies

Although Swiss SMEs, in general, follow a type of focus strategy, they have nevertheless found a way to offer the maximum amount of product variations, or models, in their chosen segment or market space. This poses a particular pressure on efficiency because companies are dealing with a large number of SKUs and a limited production volume at the same time. Modularization strategies, in combination with platforming, are used extensively to allow an efficient way to offer choice, as well as provide customers particular forms or models. Modularization strategy is a potent defensive strategy for Swiss SMEs against large, international competitors who typically offer a more limited choice in a given market space.

LEM, as a volume producer of high-quality products on automated production lines, combined skilled assembly and testing. Its product line was comprised of more than 2,000 separate models with prices ranging from a low of CHF 1.00 per unit to CHF 1,000 or more for selective components. Outsiders estimated the output at more than 50 million units.Footnote 2

Although it was primarily the larger SMEs with electronic products, such as LEM, and components that availed themselves of the modularization, even smaller companies, such as DC Swiss, producer of specialized threading tools, used the approach to bridge depth of choice with efficiency.

DC Swiss operated two manufacturing sites. The main site in Malleray produced all finished tools and a second site was opened in Bevillard producing tool blanks only. Between the two sites, the company produced more than 5,000 tools daily, or about 1 million tools annually. DC Swiss tracked several thousand SKUs, of which the majority were considered standard. The company operated a modern and flexible machine park with many CNC machines for grinding tools to specifications. The marketing process was supported by an on-line tool shop and catalog that also contained a tool finder program for on-line search. This on-line channel had been constantly growing. Intensive use of the YouTube channel was also made with specific videos explaining the many different types of tools.Footnote 3

At DC Swiss, the production process took place in two steps, beginning with tool blanks produced in large numbers and to be made later to specific requirements. The tool blank is the platform, the ability to machine thousands of product versions from it brings in modularization: to manufacture a large variety of items from a number of basic, modular choices.

The increase of product line depth—offering a large variety of products aimed at the smallest use variations—also causes challenges for customers. The development of product finder programs, as indicated by DC Swiss, is therefore a recurring topic among companies. Many of them are in the midst of launching such internet-based programs accessible only to their customers.

Employing Platforming Strategies

At Komax, maker of cabling machinery marketed into a number of industry user segments, the cabling technology became the platform around which a large number of model variations were created providing customer choice and leaving Komax with flexibility in the production process.

As Komax segment choices evolved over time, so did the complexity of its product line. At the outset, emphasis was on the functions performed by its equipment. Starting with wire stripping, crimping, and cutting and crimping, and then moving on to crimping to crimping, twisting and into harness manufacturing, the company’s range of functions performed steadily increased. These functions were offered in either freestanding equipment or as modules that could be plugged into larger systems. In parallel, Komax was offering different product platforms by scaling the desired level of automation, ranging from ‘essential’ to ‘advanced’, to ‘top of the line.’

Leveraging modularity around its core product platform,Komax built a large portfolio of equipment for each of the various functions. For wire stripping, eight different model families with different complexities, ranging from single wire to multiple wires, and different types of stripping technologies, were offered. For wire crimping, three presses were offered with increasing level of automation and complexity. The cutting and stripping operation, as well as the crimping to crimping function, were served with eight machine models each. For harness manufacturing, four machine models were in the product line, and two for wire marking. For wire handling, as many as 12 models were part of the product line. Additional products were offered for quality control, process control and service. Concerning platforms, or systems, these equipment modules were combined as needed and could be engineered to specific customer requirements.Footnote 4

While the number of product combinations at Komax was limited to various machine models, the choices literally exploded once it was applied to electronic components. u-blox, producer of positioning communication modules and chips, started with a small set of products to embark on creating an ever-expanding product platform.

Initially, u-blox developed a first surface-mounted GPS receiver which was accomplished in the second year of the company’s creation. After this first product, the company developed modules from purchased chips that could be integrated into different kinds of devices in need of communicating positioning information using the GPS. Over time, u-blox improved its products from one generation to another, constantly offering ever smaller form factors, reducing the amount of energy required and lowering costs for the user. Its products are offered in many different combinations and could be engineered to the specific requirements of a customer.Footnote 5

At maxon, the application of modularity and product platforming reached even higher levels of combination.

Ever since the introduction of its first motor, maxon consistently introduced new product families with ever better and ever more efficient motors. The company built an extensive, modular product line where products could be configured from a website using available components. Actual configurations ranged from 12,000 to 15,000 variants, but theoretical combinations were “in the billions.” The maxon product line covered motors which typically consisted of 30 to 70 components. Gears comprised another 20 to 50 components. Then there were controllers and sensors made up of several different technologies. Part of the maxon product line were accessories and ceramic components. All of these components and products were accessible to engineering designers through an online system allowing custom-specific configurations. Finally, the maxon mechatronic drive systems product line was built around the fact that such systems worked only if all components were perfectly synchronized. maxon was able to combine its product elements by integrating them into a mechatronic system resulting in a compact design and components configured for the customer’s application.Footnote 6

Although smaller in sales than maxon, EAO developed into a champion of modularization amassing about 15,000 individual components from which customers could compose their HMI products.

The entire EAO HMI model range consisted of a large number of variations and was built on the basis of about 15,000 individual components. From this large number of components, the number of possible combinations went into the millions. While not all theoretical combinations were in use, the possibilities were such that the company needed to assist customers in configuring their requirements. To address this complexity issue, EAO launched a digital catalogue, web-based and computerized, to make it easier for customers to select the right combinations. Some 30 percent of EAO sales were for customer specific combinations.Footnote 7

The EAO product overview listed the following categories, from which different combinations were possible:Footnote 8

  • 24 different basic button types.

  • 18 different functions provided (indictors, buzzers, etc.).

  • Two types of designs (flushed, raised).

  • 11 different protective designs.

  • Eight different VAC ratings.

  • Seven different mountings cutouts (diameter sizes, in mm).

  • Nine different connection terminations (soldiering, etc.).

  • Four different lens materials (aluminum, etc.).

  • One form of markings (laser, engraving).

  • 15 different approval standards (UL/UR, etc.).

The top seller among EAO products was the sound buzzer inside the seat belt closure to prompt the driver or passenger to put on their seat belt. Launched in 1996, the company was selling about 22 million units annually. EAO sold annually about 30 million human machine interface (HMI) units globally.

Combining Modularity with Platforming

The smallest company in the sample, DC Swiss, and one of the largest, maxon, are both featured in this chapter. That a larger company such as maxon was able to deal with an extensive product line and remain focused in purpose should not be surprising. That the smallest firm managed equally to go to market with an extensive line does raise questions about how this could be accomplished while staying competitive. How then do small firms manage to remain competitive globally under those circumstances?

The answer lies, as was pointed out, in the combination of applying modularity to the product line and in scaling this modularity into platforming to arrive at infinite variations in order to satisfy every possible client need.DC Swiss achieved this in a modular production process building upon basic, blank tools and postponing final design until later. This requires both great manufacturing skills and flexibility. Larger firms, such as maxon, and EAO, source many small components according to their specifications from multiple suppliers and assemble an infinite variety of possible end products. This requires a well-functioning supply chain that can depend on many suppliers for different, engineered parts. By adopting these principles of modularity in combination with platforming, the SMEs in this research achieved efficiencies that otherwise were reached only by much larger companies relying on volume production. It was essential for the companies to follow the cramming principle pursued in their segmentation strategies as described earlier in Part V. How this impacts on requirements for supply chains is covered in the next chapter.