Modularity, product variety, production volume, and component sourcing: theorizing beyond generic prescriptions

Abstract Research in operations management suggests that firms can mitigate the negative impact of product variety on operational performance by deliberately pursuing modularity in the design of product family architectures. However, modularity is not a dichotomous property of a product, as different types of modularity can be embedded into a product family architecture. The present paper explores how manufacturing characteristics affect the appropriate type of modularity to be embedded into the product family architecture, and how the types of modularity relate to component sourcing. The study is based on a qualitative research design involving a multiple case study methodology to examine six product families belonging to six European companies. The themes derived through case analyses are synthesized in the form of empirical generalizations. Insights from these empirical generalizations are subsequently developed into two propositions explaining why and under what conditions these empirical generalizations might hold for a product family outside of the original sample. The theoretical results formalize, first of all, a type of modularity (i.e. combinatorial modularity) not currently described in literature. Second, the theoretical propositions suggest that when the desired level of product variety is low (high) relative to total production volume, component swapping modularity (combinatorial modularity) helps to maximize operational performance. Finally, the complexity of component families outsourced to suppliers and the geographical proximity of component family suppliers affect the extent to which the product variety–operational performance trade‐off can be mitigated through modularity.