European Journal of Operational Research 216 (2012) 312325

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European Journal of Operational Research

journal homepage: www.elsevier.com/locate/ejor

Production, Manufacturing and Logistics

Matching product architecture with supply chain design

Bimal Nepal a,, Leslie Monplaisir b, Oluwafemi Famuyiwa c
a

Industrial Distribution Program, Texas A&M University, College Station, TX, USA
Department of Industrial & Systems Engineering, Wayne State University, Detroit, MI, USA
c
Schneider Logistics Corporation, Green Bay, WI, USA
b

a r t i c l e

i n f o

Article history:
Received 5 November 2010
Accepted 25 July 2011
Available online 12 August 2011
Keywords:
Product architecture
Supply chain design
Modular strategy
Product development

a b s t r a c t
Product architecture is typically established in the early stages of the product development (PD) cycle.
Depending on the type of architecture selected, product design, manufacturing processes, and ultimately
supply chain conguration are all signicantly affected. Therefore, it is important to integrate product
architecture decisions with manufacturing and supply chain decisions during the early stage of the product development. In this paper, we present a multi-objective optimization framework for matching product architecture strategy to supply chain design. In contrast to the existing operations management
literature, we incorporate the compatibility between the supply chain partners into our model to ensure
the long term viability of the supply chain. Since much of the supplier related information may be very
subjective in nature during the early stages of PD, we use fuzzy logic to compute the compatibility index
of a supplier. The optimization model is formulated as a weighted goal programming (GP) model with
two objectives: minimization of total supply chain costs, and maximization of total supply chain compatibility index. The GP model is solved by using genetic algorithm. We present case examples for two different products to demonstrate the models efcacy, and present several managerial implications that
evolved from this study.
2011 Elsevier B.V. All rights reserved.

1. Introduction
Globalization and increasing customer demand for greater
product variety has forced many rms to move away from the traditional world of mass manufacturing to the world of mass customization. To achieve the agility and exibility needed for mass
customization, industries are adapting and improving their product design and development processes to better able to accommodate the rapidly changing needs of their customers. To bring a
product through its entire processfrom conceptual stage to the
customers doorrequires a very complex series of decisions related to product development (PD), production/manufacturing,
and supply chain management (SCM). This has traditionally been
a sequential process that suffered from two major deciencies
(Gunasekaran, 1998). First, it is slow because parallel processing
opportunities are often missed. Secondly, it leads to sub-optimal
solutions because each stage can make, at best, sequential,
locally-optimal choices. Simultaneous engineering (SE), however,
is a paradigm aimed at eliminating such aws as found in the serial
method. SE dictates that product and process decisions are made in
parallel as often as possible, and that production considerations are
incorporated into the early stages of product design (Fine, 1998;
Corresponding author. Tel.: +1 979 845 2230; fax: +1 979 845 4980.
E-mail address: Nepal@tamu.edu (B. Nepal).
0377-2217/$ - see front matter 2011 Elsevier B.V. All rights reserved.
doi:10.1016/j.ejor.2011.07.041

Fine et al., 2005). However, SE does complicate the design problem

because it requires a simultaneous optimization of a more complex
objective with a larger set of constraints (Wu and OGrady, 1999).
As noted in the prior literature (Ulrich, 1995; Fisher, 1997; Fine,
1998; Graves and Willems, 2005; Huang et al., 2005), manufacturing process-related decisions such as manufacturing lead time or
time to market, setups and changeover; and supply chain decisions,
like supplier selection and inventory placement decisions, are dependent on the structure of the end product. For example, it is reported
that product and process design inuences 80% of manufacturing
costs, 50% of quality issues, 50% of order lead-time, and 50% of
business complexity (Child et al., 1991). Change in product structure inuences the dynamics of supply chains (Verdouw et al.,
2010). Specically, the following effects can be seen on supply
chain network as a result of modularization: (1) outsourcing and
transfer of more components to suppliers; (2) consolidation of
rst-tier suppliers into mega-suppliers; this then qualies them
to manage the development and production of a ever-larger sets
of components as modules (Takeishi and Fujimoto, 2001); (3)
reorganization of value creation activities where some former
rst-tier-suppliers become value-added second-tier suppliers
(Doran, 2003); (4) suppliers become more powerful and increase
their bargaining power because of the larger role as a full service
supplier; and (5) formation of more strategic alliances/partnerships between OEMs and their suppliers.

B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

Certainly, ours is not the rst attempt to address product development and supply chain issues simultaneously, and researchers
are examining these topics with great interest because of the
increasingly high stakes to the manufacturing sectors. Lamothe
et al. (2006) developed a mixed integer programming model to select product variants by minimizing the total supply chain costs.
Designing of product platforms concurrently with the supply chain
congurations has also been studied using linear optimization
techniques (Zhang et al., 2008). Jiao et al. (2007) proposed a system-wide, holistic view of product family and supply chain design.
A number of papers have been published recently addressing the
issues of integrating PD decisions with SC decisions. Through case
study based exploratory research, Pero et al. (2010) have found
that the performance of supply chain depends upon the matching
between PD and SC design decisions. Chiu and Okudan (2011) proposed an integrative methodology to combine design for assembly
and SC conguration during PD. Likewise, Ulku and Schmidt (2011)
compared the matching between the level of product modularity
and supply chain conguration from the PD standpoint. The
authors have focused primarily on whether product development
should be done internally or through collaboration with supplier
based on the product architecture and the level of OEM-supplier
relationship. However, the prior studies on PD and SCM have not
numerically examined the effect of product architecture (PA) on
supply chain (SC) design. In this paper, we extend the works of
Graves and Willems (2003, 2005) on supply chain conguration
by integrating product architectural design with SC design.
Furthermore, research shows that majority of SC partnerships
fail in their rst year due to poor compatibility between the partners (Bruner and Spekman, 1998; Duysters et al., 1998; Famuyiwa
et al., 2008). We believe that raising these issues early, during the
product development stage, can provide greater cost saving opportunities for manufacturing rms by helping the rms make informed strategic decisions. Therefore, objective of this paper is to
address the challenges of developing a decision support tool for
designing an effective supply chain network that optimally
matches the product design structure. In particular, we use a multi-objective optimization framework to answer following questions: (1) What are the optimal supply chain congurations for
integral and modular architecture? (2) How do we address strategic alignment and supplier compatibility issues into supply chain
conguration decision making? (3) What are the benets of modular architecture with respect to supply chain performances? (4)

313

What kind of managerial implication or knowledge can be created

out of this exercise?
Section 2 presents a brief overview of recent literature that addresses linking product design and supply chain conguration.
Section 3 describes the proposed multi-objective optimization
framework to match product architecture strategies with supply
chain decisions. In Section 4, we provide two illustrative examples
to demonstrate the efcacy of the proposed framework. Managerial implications evolved from this study are listed in Section 5. Finally, Section 6 presents conclusions and directions for future
work.
2. Related literature
Product architecture decisions are far-reaching. They inuence
decisions throughout the entire lifecycledesign, production, distribution, service, and retirementof the product (Ulrich, 1995).
According to Dahmus et al. (2001) a modularization strategy enabled Volkswagen to save about $1.7 billion annually on development and production costs. Modularization is perceived as one of
the strategies to simplify process and improve the operational performance (Miltenburg, 2003). It enables original equipment makers (OEMs) to transfer or outsource production, and sometimes
the development of modules, to key suppliers. Fixson (2005) noted
that individual product architecture characteristics, such as degree
of commonality, nature of interactions, and interfaces between
components may constrain strategic decisions such as postponement or late customization. He suggests that these characteristics
also affect operational decisions in the supply chain domain such
as service level, delivery schedule, and resources planning as
shown in Fig. 1. Building on earlier work, Fixson and Park (2008)
have investigated effects of increasing the integrality of product
architecture on the structure of the supply chains as a whole. More
recently, empirical studies have been conducted to establish the
relationships among the SC variables with product design variables
(Pero et al., 2010).
The commercial success of a product depends not just on its design and technical performance, but also on the performance of the
rms supply chain in supporting the production of the product,
especially when the demand process is uncertain. In this regard,
Graves and Willems (2000) rst developed an optimization model
to determine the safety stock level at various nodes of a multistage supply chain. The initial model was based on the assumption

Fig. 1. Interaction between product architecture characteristics decisions in product, process and supply chain domains. Adapted from Fixson (2005).

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B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

of stationary demand process; however, the authors have recently

proposed a two-stage dynamic model to handle the non-stationary
demands (Graves and Willems, 2008). They also introduced the
term supply chain conguration by combining inventory placement decisions with supply options selection decision and presented optimization models for supply chain conguration of
new products (Graves and Willems, 2003, 2005). In addition to
supply chain costs, Bachlaus et al. (2008) have presented a multiobjective model considering volume exibility and plat exibility.
The authors used a hybrid Taguchi-particle swarm optimization
technique to solve the model. Yadav et al. (2009) used algorithm
portfolio approach to compare the computational performance of
ve methods to solve a total supply chain costs minimization problem during supply chain conguration. The other recent works that
have been published on supply chain conguration are limited to
supply chain design issues and do not link them with product design structure. Nonetheless, these studies cover a variety of issues
in supply chain network conguration. The sample topics include
determining the optimal manufacturing scheduling (Framinan
and Ruiz, 2010), inventory coordination policy (Toktas-Palut and
Ulengin (2011)), managing complexity due to multiple options at
the assembly chain nodes (Wang et al., 2010), data management
and coordinated decisions making in PD and supply chains design
(Jafari et al., 2009; Lee et al., 2009; Luh et al., 2010; Framinan and
Ruiz, 2010; Garcia et al., 2010), inventory location and tasks allocation (Gumus et al., 2009; Wang et al., 2011), and consideration
product lifecycle and reverse ows into the supply chain conguration decision (Salema et al., 2010).
A number of studies have focused on modeling supply chain
decision in conjunction with product design and manufacturing
process design decisions. Fine et al. (2005) developed a goal programming model to optimize product delity and cost objectives.
Feng et al. (2001) jointly considered component tolerances and
supplier selection decisions. Huang et al. (2005) developed a mathematical model to study the interdependency of supply chain conguration and product development decisions with respect to
product variety and commonality. Fixson (2005) and Fixson and
Park (2008) presented a comprehensive overview of how product
architecture signicantly inuences all domains of product development decisions, manufacturing, and supply chain issues. Jiao
et al. (2009) proposed a factory loading application problem
(FLAP) and constraint satisfaction approaches to address the issues of coordinating product, process, and supply chain decisions.
Further, ElMaraghy and Mahmoudi (2009) have incorporated currency exchange rate in determining total supply chain costs while
selecting the optimal modular design. In a recent study by Chiu and
Okudan (2011), the authors presented an integrated optimization
model for supplier selection decisions by combining with manufacturing process selection decisions during product development.
Several other studies have focused on designing a supply chain
for mass customization. Based on their empirical research ndings,
Salvador et al. (2004) argued that the degrees of freedom in choosing product features directly inuenced conguration decisions for
both the product architecture and the supply chain. Huang et al.
(2007) employed a game theoretic approach to congure both
the product family and the supply chain for mass customization.
Other important studies that integrated supply chain decisions
and mass customization include an assemble-to-order case study
on automotive wire harness using a simulated annealing heuristic
(Cunha et al., 2007), and response time reduction using queuing
model (Vidyarthi et al., 2009). Process exibility in supply chains
is central for achieving the objectives of being lean, agile, and able
to do mass customization. A exible manufacturing systems capability is helping Japanese automakers such as Toyota, Nissan, and
Mitsubishi to incorporate the ever-changing market demand into
their production plans (Tomino et al., 2009).To assess the exibility

of multi-stage supply chains, Graves and Tomlin (2003) have

developed a numerical measure of exibility. Moreover, a supply
chain can have different levels of responsiveness at different nodes,
depending upon the conguration of individual nodes (Reichhart
and Holweg, 2007).
Product architecture has also been studied in the context of
buyersupplier relationships. Sako and Murray (1999) suggest
two different roles to address modularity in the supply chain:
the integrator and the modularizer. In the integrator role, the
OEM retains module control, while in the modularizer role, the
OEM transfers module control to rst-tier suppliers that possess
the capabilities required to provide modular solutions. Camuffo
(2000) examines the implications of modularization in design,
manufacturing, and organization of the automotive supply chain.
Fine et al. (2005) suggest that product architecture and supply
chain architecture should be aligned along the integrality-modularity spectrum. They suggest, members of the modular supply
chain are highly dispersed geographically and culturally, with
few close organizational ties and modest electronic connectivity;
whereas the integral supply chain is one in which the members of
the chain are in close proximity with each other, where proximity
can be measured along the four dimensions of geography, organization, culture, or electronic connectivity. Ulku and Schmidt
(2011) have found analytically that supplier relationship and product architectural design are interdependent. However, as mentioned earlier, to our knowledge, there are not any mathematical
models available in the prior literature that quanties the inuence
of PA design on SC conguration. Another noted gap is the lack of
consideration of compatibility of partners into the SCM decisions.
This paper attempts to address these issues through a multiobjective optimization model.

3. Proposed framework to match PA with supply chain design

We propose a three-step process to match the PA with SC design. These three tasks include: (1) selection of product architecture, (2) evaluation of potential suppliers, and (3) optimal
conguration of supply chain. As mentioned earlier, our approach
is different from prior studies in that it integrates supply chain design decisions with product architectural decisions, and provides a
quantitative framework to study the sensitivity or impact of one
(product development) decision on the other (supply chain) decisions. Further, since the product architecture strategy and the corresponding supply chain conguration both are established during
the early stage of the product development cycle, the information
available on potential suppliers is generally ambiguous, and key
decisions are made based only on subjective evaluation criteria.
Therefore, we propose a fuzzy-logic based model to compute the
compatibility index of each supplier based on subjective information available through subject matter experts (SME) interviews.

3.1. Task I: Select architectural strategies and the corresponding supply

chain networks
The rst task involves the selection of potential product architecture strategies the rm might adopt using one or more of the
modular product design methodologies presented in literature
(e.g., see Nepal, 2005; Nepal et al., 2005). Through scenario analysis
or using multiple methods, one can arrive at multiple modular
strategies. These architectural strategies are then used to map
the supply chain networks to determine the optimal supply chain
conguration for each architectural strategy. A generic bill of materials (GBOM) (Jiao et al., 1998) is used to represent modular relationship for a product. For example, lets assume a product X

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B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

Product X

Module 1

Component 1

Module 2

Component 2

Component 3

Component 4

Component 5

Fig. 2. Generic bill of materials (GBOM) showing module relationship for product X.

with ve components that are arranged into three modules as

shown in Fig. 2. Component 5 is a module by itself.
Once the product GBOM is developed, the next step is to develop the corresponding supply chain network. For modeling purposes, the supply chain network is represented as a multi-stage
network. The stages or nodes of the network represent suppliers
of materials, and the directed arcs represent the demand and
supply relationships (i.e., ow of materials). For example, since
module 1 in product X consists of components 1 and 2, the stages
of components 1 and 2 are connected directly to that of module 1
in the supply chain network. Fig. 3 shows the corresponding supply
chain network for product X.
Two sets of stages can be observed from the supply chain
network. One set includes the most upstream stages that perform
procurement of raw materials and do not have any further predecessors. The second set includes the assembly stages where two or
more components are combined together.
3.2. Task II: Evaluate the compatibility of potential members of supply
chain
Once the supply chain network is developed, the second task involves identifying alternatives available for each node of the supply chain network and collecting the necessary information on
each one of them. The decision maker(s) collect information on
the production cost, lead-time, and compatibility index of each
alternative identied. Since we adopted the guaranteed servicetime model (Graves and Willems, 2000) in this research, we assumed that the production cost and lead-time of each alternative
are deterministic and known.
In this research, we consider three key factors (namely, structural, managerial, and nancial) to compute the computability index. In order to improve the precision of computation, the three
main factors are further divided into 12 sub-factors. The sub-factors are structural (cultural alignment, communication and information sharing, and coordination and cooperation); managerial
(managerial trust and commitment, compatibility in strategic
goals, conict management techniques); and nancial (prot mar-

1
Component 1

6
Module 1

2
Component 2

gin, return on investment, bond rating). Since the information

regarding these sub-factors is largely qualitative in nature, we
use rule-based fuzzy logic to aggregate the sub-factors into three
indexes such as structural alignment index (SI), managerial alignment
index (MI), and nancial alignment index (FI). Lastly, the overall
compatibility index is determined as shown below:

Compatibility index bi forasupplieri

w1  SIi w2  MIi w3  FIi :

It may be important to note that information on the degree of compatibility of each alternative to the supply chain is obtained through
subject matter expert (SME) interviews and then fed into a fuzzy-logic based model in order to compute an overall compatibility index.
More details on fuzzy logic model can be found in Famuyiwa et al.
(2008).
3.3. Task III: Match product architecture to supply chain conguration
In this task, a multi-objective mathematical model is developed
to determine the optimal supply chain conguration for each product architecture strategy. It is modeled as a weighted goal programming (GP) model (Ignizio, 1976), and solved by using
genetic algorithm (GA) because of the non-linearity of the resulting
model. The formulation of the GP model is as follows.
Notations
ci
production cost at stage i
production time at stage i
Ti
bi
compatibility index at stage i
Oi
supplier option is selected for stage i
production cost for stage i with option Oi
C iOi
T iOi
production time for stage i with option Oi
biOi
compatibility index for stage i with option Oi
Ui
inventory coverage period for stage i
replenishment lead-time for stage i
Li
Sout
guaranteed output service of stage i
i
Sin
guaranteed input service time for stage j by its predecessor
j
stage

Stages 1, 2, 3, 4, 5 = procurement stages

Stages 6 and 7 = assembly stages
Stage 8 = end stage
8
Product X

Component 3

7
Module 2

4
Component 4

5
Component 5

Fig. 3. Corresponding supply chain network diagram of product X.

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B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

ai

service level at stage i

cumulative cost of work in process items at stage i
cumulative cost of nished items at stage i
inventory holding cost per unit at stage i
time interval of interest to the decision-maker
mean and standard deviation of customer demand at the
end stagep
ofthe supply chain respectively
AOHi 12 ki li ai ri U i average on-hand inventory level at stage i
WIPi = liTi average pipeline/working inventory (WIP) at stage i
hi{(Ci  AOHi) + (Wi  WIPi)} + (H  ci  li) total cost of goods sold
and inventory carrying costs at stage i


P
hi fC i  AOHi W i  WIPi g
total supply chain cost
i2N H  c  l
i
i
P
 (TSCC)
i2N bi total compatibility index across the supply chain (TCI)
Wi
Ci
hi
H
l, r

3.3.1. Formulation of goal programming (GP) model

Goal programming model is a popular technique that is used in
simultaneous optimization of multiple objectives. In this study, the
objectives of the GP model are to minimize the total costs of supply
chain (TCSC) and to maximize the total supply chain compatibility
index (SCCI) among the supply chain members. That is,

(
)
X
Minimize
hi C i  AOHi W i  WIP i  H  ci  li
i2N

and

(
X

Maximize

)
2

bij

i;j2A

In this paper, we use a weighted GP model that is formulated as follows. Let kTSCC denote the optimal cost value when the TSCC model
is solved as single objective (known as target value for cost), kCI denote the optimal compatibility index value when the compatibility
model is solved as single objective (known as target value for compatibility). Our objective here is to minimize the deviations from
these target values. Mathematically, let wTSCC and DTSCC denote
the weight and deviation of the total supply chain cost from its target value, and wCI and DCI denote the weight and deviation compatibility index from its target value. Then the weighted goal
programming formulation of the multi-objective problem is given
as:



 

DTSCC
DCI
wCI
Minimize wTSCC
kTSCC
kCI

Subject to:
(
)
X
i:
hi C i  AOHi W i  WIPi  H  ci  li  DTSCC 6 kTSCC
i2N

TSCC Goal;
(
)
X
bij DCI P kCI CI Goal;
ii:
i;j2A

(
(

T iOi yiOi

Oi 2Si

iv:

iii:

 T i 0;

i 2 N;

 ci 0;

i 2 N;

Oi 2Si

T i  Sout
P 0; i 2 N;
v: Sin
(i
)i
X
yiOi biOj  bi 0; i 2 N;
vi:

8
9

i2N

vii:

yiOi 1;

i 2 N;

10

Oi 2Si

viii: Sout
i ; Oi ; bij P 0;

i 2 N;

ix: yiOi is binary for i 2 N and Oi ;

4. Examples
We use two case studies to demonstrate an application of the
proposed framework. The rst case study is taken from heavy
industry, and is applied to bulldozer assembly and manufacturing
as presented in Graves and Willems (2003). The second case study
is applied to an automotive climate control system. The reasons for
selecting these two case studies are as follows: rst, we felt it was
important to test the universality of the framework by selecting
case studies from two different industries; second, we wanted to
replicate the analysis given in Graves and Willems (2003) and
check whether the proposed approach improves the results in
terms of supply chain compatibility and stability. In other words,
we used Graves and Willems results as baseline values for comparing our results.
4.1. Bulldozer case study
The bulldozer supply chain is a good example of a heavy industry supply chain. At a high level, components of a bulldozer can be
combined into 14 major groups: frame assembly, case, brake, drive,
plant carrier, platform, fender, roll-over, transmission, engine, fan,
bogie assembly, pin assembly, and track-roller frame.
The supply chain setting of the bulldozer case study is same as
that in Graves and Willems (2003). The average daily demand is set
at 5 and the daily standard deviation is 3. Furthermore, the demand bound is equal to the 95th percentile of demand, so that
the safety factor is equal to 1.645. The following assumptions were
made for the purpose of analysis: the bulldozer manufacturing
company uses annual demand for conguring the supply chain,
there are 260 work days per year, and the company applies an annual holding cost rate of 30% when calculating the inventory costs.

)
C iOi yiOi

where, DTSCC ; DCI ; Sout

and yiOi are decision variables. In this case,
i
Sout
denotes the guaranteed service time by node i to downstream
i
node(s) and yiOi is an integer decision variable that represents the
option selected at node i. constraints (i) and (ii), referred to as soft
constraints. They ensure that the deviations of both total supply
chain cost and compatibility are not greater than their target values.
Constraints (iii) and (iv) apply to production time and production
cost corresponding to the option selected at each node. Once a supplier option is selected, the production lead-time and production
cost of the node are set to the corresponding production lead-time
and production cost of the option selected. Constraint (v) ensures
that the inventory coverage time is non-negative since back-order
is not allowed. Constraint (vi) ensures that once a supplier option
is selected, the compatibility index of the node is set to the corresponding value of the compatibility index of the supplier selected.
Constraint (vii) ensures that only one supplier is selected at each
node (single sourcing). The nal two constraints represent the characteristics of the decision variables. Lastly, N indicates the number
of nodes in the supply chain.

11

4.1.1. Task I: Select PA strategies and the corresponding supply chain

networks
Here, two product architecture strategies (integral and modular
architectures) are selected for the bulldozer example. For demonstration purpose, we assumed that in an integral architecture environment the 14 major groups of components would be arranged
into three modules as shown in Fig. 4(a). On the other hand, for
a modular architecture case, the main assembly module would
be further broken down into three additional modules (see
Fig. 4(b)).
Fig. 5(a) and (b) shows the supply chain network diagrams for
both the integral and modular architecture respectively.

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B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

Main Assembly Module

Frame assembly
Case
Brake
Drive
Plant carrier

Platform
Fender
Transmission
Brake & Drive
Engine
Fan

Suspension Module
Boggie Assembly
Pin Assembly

Common
Subassembly
Module

Chassis/Platform
Module

Dressed out
Engine Module

Frame assembly
Case
Transmission
Brake
Drive
Plant carrier

Platform
Fender
Rollover

Engine
Fan

Suspension Module

Track Roller Frame

Boggie Assembly
Pin Assembly

a) Integral architecture

Track Roller Frame

b) Modular architecture

Fig. 4. Modular structures of bulldozer.

Platform

Platform

Fender

Fender

Chassis/
Platform

Roll Over

Roll Over

Track
Roller
Frame

Frame
Assembly

Track
Roller
Frame

Frame
Assembly

Frame
and Case

Frame
and Case

Case

Case
Transmission

Transmission

Main
Assembly

Final
Assembly

Common
Subassembly

Main
Assembly

Final
Assembly

Brake

Brake

Drive

Drive

Plant
Carrier

Brake and
Drive
Suspension
Engine

Plant
Carrier

Brake and
Drive

Engine
Dressed Out
Engine

Boggie
Assembly

Boggie
Assembly

Suspension

Fan

Fan

Pin
Assembly

a) Integral architecture

Pin
Assembly

b) Modular architecture

Fig. 5. Supply chain network for bulldozer. Adapted from Graves and Willems (2003).

4.1.2. Task II: Compute compatibility index and costs of supply chain
members
Upon selection of candidate architectural designs and their corresponding supply chain network, the next step is to quantify the
compatibility and costs related to supply chain management of
each alternative available at each node. There are two types of
nodes in the bulldozer supply chain: procurement, which represent the procurement of components from outside of the supply
chain, and assembly, which represent where one or more components are combined together in the process. For testing purposes,
two alternatives are considered for each node. If the node is a procurement stage, the rst alternative represents the standard supply
option (that is, the existing procurement arrangement). The second
option represents a consignment option where the supplier is
responsible for providing immediate delivery to the bulldozer line.
Similarly, for the assembly node, the rst option represents the
standard manufacturing method while the second option represents an expedited alternative that corresponds to a supplier
who has invested in process improvement efforts in order to decrease its supply lead-time.
The production costs and lead-times data for the modular design are obtained from Graves and Willems (2003). It is worth noting here that the modular design data are aggregated to create the
corresponding integral design data, where applicable. For example,

chassisplatform, common-assembly, dressed-out engine, and

main-assembly production cost data in the modular design are
added together to provide production cost data for the mainassembly in the integral design; thus, $28,420 ($4320 + $8000 +
$4100 + $12,000 = $28,420) for the standard option and $28,795
($4395 + $8075 + $4175 + $12,150 = $28,795) for the expedited option. Table 1 presents production costs and the associated production lead-times for each alternative available for integral design.
To obtain data on the compatibility drivers for each alternative
at each node, it is assumed that the ratings of the compatibility
drivers for the low-cost alternative range uniformly in [18] and
that of high-cost alternative ranges uniformly in [310]. Therefore,
for the low-cost supply alternative, the value of the rating for each
compatibility driver is calculated as U(18), while that of the highcost supply alternative is calculated as U(310), where U(a, b) is a
discrete uniform distribution in the range of [a, b]. Table A.1 (see
appendix) shows the compatibility data and corresponding index
of all the potential supply chain members for the given bulldozer
case study.
4.1.3. Task III: Match modular strategy to supply chain conguration
Once the data is collected on production costs, production leadtimes, and compatibility index ratings for all alternatives in the
supply chain network, the next task is to match each architectural

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Table 1
Lead-times and costs for bulldozer case study (Graves and Willems, 2003).
Modular

Integral

Stage

Alternative

Lead time
(days)

Frame assembly

Standard
Consignment

19
0

605
622

19
0

605
622

Case

Standard
Consignment

15
0

2200
2250

15
0

Brake group
Drive group

Standard
Consignment
Standard

8
0
9

3850
3896
1550

Plant carrier

Consignment
Standard

0
9

1571
155

Consignment

Standard
Consignment
Standard
Consignment
Standard

6
0
9
0
8

Transmission

Consignment
Standard
Expedite
Standard

Final drive and

brake

Consignment
Standard
Expedite

Platform group
Fender group
Roll over group

Case and frame

Cost
($)

Lead time
(days)

Modular
Cost
($)

Stage

Alternative

Engine

Standard
Consignment

7
0

2200
2250

Fans

Standard
Consignment

8
0
9

3850
3896
1550

Chassis/platform

0
9

1571
155

157

157

725
732
900
912
1150

6
0
9
0
8

725
732
900
912
1150

0
16
4
15

1164
1500
1575
7450

0
16
4
15

1164
1500
1575
7450

0
6
2

7618
3680
3755

0
6
2

7618
3680
3755

Common
subassembly
Dressed-out
engine

Lead time
(days)

Lead time
(days)

Cost
($)

4500
4547

7
0

4500
4547

12
0

650
662

12
0

650
662

Standard
Expedite
Standard

7
2
5

4320
4395
8000

NA
NA
NA

NA
NA
NA

Expedite
Standard

2
10

8075
4100

NA
NA

NA
NA

Expedite
Boggie assembly
Pin assembly
Track roller
frame
Main assembly
Suspension
Group
Final assembly

Integral
Cost
($)

4175

NA

NA

Standard
Consignment
Standard
Consignment
Standard

11
0
35
0
10

575
584
90
95
3000

11
0
35
0
10

575
584
90
95
3000

Consignment
Standard
Expedite
Standard

0
8
2
7

3045
12,000
12,150
3600

0
8
2
7

3045
28,420
28,795
3600

Expedite
Standard
Expedite

2
4
1

3675
8000
83,000

2
4
1

3675
8000
83,000

Table 2
Results of optimal supply chain conguration for integral architecture of a bulldozer.
Stage

Alternative
selected

Guaranteed
service time (days)

AOH cost

WIP cost

Total inventory
carrying cost

COGS

TSCC

Frame assembly
Case
Brake
Drive
Plant carrier
Platform
Fender
Roll over
Frame and case
Transmission
Brake and drive
Engine
Fan
Chassis/platfom
Common assembly
Dressed out engine
Boggie assembly
Pin assembly
Track roller
Main assembly
Suspension
Final assembly
Total

2
1
1
2
2
1
1
1
1
2
1
2
1

0
0
0
0
0
6
7
7
7
0
6
0
7

$0
$12,614
$16,120
$0
$0
$0
$1,884
$1,702
$19,194
$0
$0
$0
$2,152

$0
$49,500
$46,200
$0
$0
$6,525
$12,150
$13,800
$85,728
$0
$66,762
$0
$11,700

$0
$62,114
$62,320
$0
$0
$6,525
$14,034
$15,502
$104,922
$0
$66,762
$0
$13,852

$808,600
$2,860,000
$5,005,000
$2,042,300
$204,100
$942,500
$1,170,000
$1,495,000
$1,950,00
$9,903,400
$4,784,000
$5,911,100
$845,000

$808,600
$2,922,114
$5,067,320
$2,042,300
$204,100
$949,025
$1,184,034
$1,510,502
$2,054,922
$9,903,400
$4,850,762
$5,911,100
$858,852

1
2
1
2
1
1

0
0
10
12
7
0

$2,823
$0
$0
$0
$0
$569,820
$626,309

$9,488
$0
$45,000
$326,760
$25,935
$415,410
$1,114,958

$12,311
$0
$45,000
$326,760
$25,935
$985,230
$1,741,267

$747,500
$123,500
$3,900,000
$37,433,500
$4,680,000
$10,400,000
$95,205,500

$759,811
$123,500
$3,945,000
$37,760,260
$4,705,935
$11,385,230
$96,946,767

strategy to its corresponding optimal supply chain conguration.

For this purpose, the goal programming model was solved using
genetic algorithm. Tables 2 and 3 show the results of numerical
measures of the supply chain for integral and modular architectural strategies respectively.
4.1.4. Discussion of results
As shown in Table 3, in the majority of the bulldozer supply
chain stages for a modular architectural design, option two has
been selected. While it is more expensive than option one, option

two has a lower production lead-time and higher compatibility ratings for all stages because its modularity increases the degree of
dependency, based on relative costs of inputs, between supply
chain nodes. Since more expensive alternatives are selected in
the modular design case, the value of the cost of goods sold (COGS)
is slightly higher for the modular design ($ 95,498,000) than integral design ($95,205,500). However, because of the corresponding
lower production lead-times for the options selected in modular
design, the inventory carrying cost in the modular design is about
20% lower than in the integral design ($1,381,503 versus

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B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

Table 3
Results of optimal supply chain conguration for modular architecture of a bulldozer.
Stage

Alternative
selected

Guaranteed
service time (days)

AOH cost

WIP cost

Total inventory
carrying cost

COGS

TSCC

Frame assembly
Case
Brake
Drive
Plant carrier
Platform
Fender
Roll over
Frame and Case
Transmission
Brake and drive
Engine
Fan
Chassis/platfom
Common assembly
Dressed out engine
Boggie assembly
Pin assembly
Track roller
Main assembly
Suspension
Final assembly
Total

2
2
2
2
2
2
2
2
2
2
2
2
2
1
2
2
2
2
1
2
1
1

0
0
0
0
0
0
0
0
3
0
2
0
0
5
5
3
0
0
7
7
7
0

$0
$0
$0
$0
$0
$0
$0
$0
$6,583
$0
$0
$0
$0
$14,923
$0
$0
$0
$0
$7,692
$0
$0
$502,290
$531,488

$0
$0
$0
$0
$0
$0
$0
$0
$21,957
$0
$22,505
$0
$0
$52,164
$76,445
$32,834
$0
$0
$45,000
$156,320
$26,030
$416,760
$850,015

$0
$0
$0
$0
$0
$0
$0
$0
$28,540
$0
$22,505
$0
$0
$67,087
$76,445
$32,834
$0
$0
$52,692
$156,320
$26,030
$919,050
$1,381,503

$808,600
$2,925,000
$5,064,800
$2,042,300
$204,100
$951,600
$1,185,600
$1,513,200
$2,047,500
$9,903,400
$4,881,500
$5,911,100
$860,600
$5,616,000
$10,500,000
$5,430,000
$759,200
$123,500
$3,900,000
$15,800,000
$4,680,000
$10,400,000
$95,508,000

$808,600
$2,925,000
$5,064,800
$2,042,300
$204,100
$951,600
$1,185,600
$1,513,200
$2,076,040
$9,903,400
$4,904,005
$5,911,100
$860,600
$5,683,087
$10,573,945
$5,460,334
$759,200
$123,500
$3,952,692
$15,951,320
$4,706,030
$11,319,050
$96,879,503

of supply chain conguration lies with management, the optimization framework provides a hands-on, objective process for making
an informed decision.

$1,741,267). Figs. 6 and 7 depict graphical representations of the

optimal supply chain congurations for integral and modular strategies respectively.
Table 4 gives a summary of the results optimal conguration for
both cases.
By selecting a modular design, a rm can outsource more of its
production, leading to further cost savings if such outsourcing can
be achieved at lower costs. While the nal decision on the selection

4.1.5. Sensitivity analysis of supplier development program

Research conducted by Krause (1997) shows that supplier performance improved signicantly in all dimensions as a result of a
supplier development program (SDP). The authors report esti-

1
6525

Legend

Alternative Selected

Platf orm

Inventory Level

1
14034

Fender

1
2

15502

Roll Over
1

Frame
Assembly
1

62114

1
45000
104922

Case

2
0

Track Roller
Frame

Frame
and Case

326760

Transmission

Main
Assembly

985230

Final
Assembly

62320

Brake
1
2
66762
0

Brake
and Drive

Drive
2

1
2

Plant
Carrier

12311

Engine

Boggie
Assembly

1
25935

Suspension

1
0

13852

Fan

Pin
Assembly

Fig. 6. Optimal supply chain conguration for bulldozer with integral architecture.

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B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

2
Legend
0

Platform

Alternative Selected

Fender

Inventory Level

67087

Chassis/
Platform

Roll Over

28540

Frame and
Case

Case

2
0

Track Roller
Frame

Frame
Assembly
2

52692

Transmission

76445

2
156320

Common
Subassembly

919050

Main
Assembly

Final
Assembly

Brake
2

22505

Drive

Brake and
Drive

2
0

2
0

Plant
Carrier

Engine

Boggie
Assembly

32834

26030

Dressed Out
Engine

Suspension

Fan
0

Pin
Assembly

Fig. 7. Optimal supply chain conguration for bulldozer with modular architecture.

Table 4
SC performance measures for integral vs. modular architectures of a bulldozer.
Cost category

Integral

Modular

Cost of goods sold (COGS)

Inventory cost (INVC)
Total supply chain cost
Contribution of COGS to TSCC
Contribution of INVC to TSCC
Total compatibility index

$95,205,500
$1,741,267
$96,946,767
98.20%
1.80%
9.15

$95,498,000
$1,381,503
$96,879,503
98.57%
1.43%
14.06

mated changes due to supplier development in the reduction in

number of incoming defects (by 75.91%), improvement in percent
on-time delivery (by 75.91%), reduction in cycle time from order
placement to receipt, inclusively (by 15.8) days, and an increase
in percent orders received complete (by 78.34%). In this study,
we argue that an implementation of a supplier development program will improve the compatibility measures (bi) of suppliers because the improvements in the above mentioned attributes have a
positive inuence on compatibility input factors. Thus, for sensitivity analysis, we assume a scenario where the standard suppliers
compatibility (option-1) indexes are increased by certain percentages, either through providing better information/educational
training to foreign suppliers or by more aggressive negotiations.
For simplicity, we also assumed that this will be part of a regular
supply management function of a companys purchasing department, hence it will not add any signicant cost. Table 5 shows
the compatibility index sensitivity analysis on supply chain performance, thereby also impacting the architectural strategy and supply chain conguration.
Sensitivity analysis results have shown that the total supply
chain costs have decreased with an increase in compatibility index.
However, there is no direct or linear correlation between the total
supply chain costs and the total compatibility index of the suppli-

ers. It may be due to the fact that the total supply chain cost is a
function of COGS and inventory cost, which mainly depends on
lead time. Secondly, lead times of standard suppliers tend to be
longer than consignment options, but because of standard suppliers lower prices, the model might have selected the standard option. Further, we also observed that the integral architectural
design approach selected a large number of standard supply options compared to modular architecture. As a result, the total supply chain costs and total compatibility index are both higher for
integral architecture than those for modular architecture.
4.1.6. Comparison of Graves and Willemss approach and the proposed
approach
The results of the proposed multi-objective optimization model
were compared with those of the Graves and Willems (2003) single objective model for supply chain conguration. We used their
approach as base case in this study. Table 6 summarizes the results
from optimizing the supply chain conguration based on a single
objective (total supply chain cost) and compares the results to
those for a solution based on multiple objectives (total supply
chain cost and compatibility) model as presented in the research
work.
Although the multi-objective supply chain conguration model increases the COGS by $690,300 relative to the single-objective model, because the higher production cost options have
lower production lead-times, there is a reduction of $338,797
in the total inventory cost in the supply chain network. This still
leaves an overall increase in supply chain cost of $351,503, but
with the added benets of more stability in the supply chain
relationship due to the selection of more compatible suppliers
in the multi-objective model, which in turn allows the decision-maker to directly ascertain the cost trade-offs involved in
achieving compatibility of supply options selected in the supply
chain.

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Table 5
SC performance measures of baseline scenario versus SDP case for bulldozer case study.
Cost
Category

Baseline scenario

10%

Integral

Modular

Integral

Modular

Integral

Modular

Integral

Modular

Integral

Modular

Inventory
cost
COGS
Total SC
cost
Total C.
index

$1,789,099

$1,696,595

$1,821,112

$1,540,692

$1,993,572

$1,412,148

$2,034,461

$1,412,148

$2,034,461

$1,487,746

$95,205,500
$96,994,599

$95,240,600
$96,937,195

$95,171,700
$96,992,812

$95,338,100
$96,878,792

$94,953,300
$96,878,792

$94,953,30
$96,871,148

$94,892,200
$96,926,661

$95,885,400
$96,987,778

$94,953,300
$96,946,872$96,871

$95,435,600
$96,923,346

14.6

14.61

15.6

14.5

16.3

14.6

17.0

15.1

19.6

15.4

20%

4.2. Automotive climate control system

As a second case study, the proposed framework for matching a
product architecture strategy with a supply chain design was validated through application to an automotive climate control system. The automotive climate control system is used for cooling
and heating of the passenger compartment in automobiles. A typical automotive climate control system consists of the following 16
major components: air controls, refrigeration controls, sensors,
heater hoses, command distribution, radiator, engine fan, condenser, compressor, accumulator, evaporator core, heater core,
blower motor, blower controller, evaporator case, and actuator.
The data for this case study was collected from a tier-1 automotive
supplier located in Michigan (US). In order to protect the condentiality of the company, the data was masked. We followed the
same steps to determine optimal supply chain conguration for climate control systems as in the earlier bulldozer supply chain
study.
In this case, two types of architectures are selected for further
investigation. The rst one is based on the current architecture of
the automotive climate control system. We refer to the current
architecture as integral architecture, and the other, proposed by
Nepal (2005), as modular architecture. Fig. 8 illustrates both integral and modular architectures for the automotive climate control system. Notice that the current/integral architecture has
only four sub-assemblies which can be treated as four modules
as shown in Fig. 8(a). The rst, a large HVAC module, consists
of eleven components: air-control, refrigerant-controls, command-distribution, sensors, blower-controller, accumulator, evaporator-case, actuator, heater-core, blower-motor, and evaporatorcore. The second, front-end module, consists of a radiator, condenser, and engine, while the third and fourth modules consist
of compressor and heater hoses, respectively. In comparison,
the new modular architecture has six modules as shown in
Fig. 8(b).

Big HVAC Module!

Air Control, Refrigerant Controls,
Command Distribution, Sensors,
Blower Controller, Accumulator,
Evaporator Case, Actuator,
Heater Core, Blower Motor, Evaporator Core

Front End Module

Radiator, Condenser
Engine Fan

Compressor

Heater
Hoses

a) Current integral architecture

30%

50%

4.2.1. Evaluation of potential members of the climate control supply

chain
Data on the potential members of the supply chain was collected through interviews with SMEs, senior climate control engineers with experience in various departments of climate control.
For each stage of the supply chain, each expert was asked to identify potential suppliers and provide production costs and production lead-times for those suppliers. Similar to Bulldozer case
study, here also for each state two types of suppliers were identied which are classied as suppliers 1 and 2. Supplier 1 was generally more expensive but offered lower production lead-times,
and Supplier 2, who offered lower production costs but with longer
production lead-times. The experts from automotive industry were
asked to evaluate each alternative supplier for computing a compatibility index. The total climate control experience of the experts
involved in the data collection was over 35 years.
4.2.2. Matching climate control architectural strategy to supply chain
conguration
For the purposes of supply chain conguration, we assume that
climate control will have a mean daily demand of 500 and a standard deviation of 100. We also assumed that the company uses annual demand for conguring its supply chain, and that there are
260 working days per year. The service level for each stage of the
supply chain is set to 95%, so that the safety factor at each stage
is equal to 1.645. By employing the goal programming model and
solving that using a genetic algorithm, we can optimize the supply
chain network for the given climate control system. Figs. 9 and 10
also show the graphical representation of optimal supply chain
congurations along with the inventory placement level for both
current and optimal architectures, respectively.
4.2.3. Discussion of results
Table 7 summarizes the results from optimizing the supply
chain conguration for existing and optimal modular designs. As

Controls/Sensors Module
Air Control, Refrigerant Controls, Sensors,
Command Distribution, Blower Controller
HVAC Module
Evaporator Case, Accumulator,
Heater Core, Blower Motor,
Evaporator Core, Actuator

Compressor

Radiator/Condenser
Module
Radiator, Condenser

Heater
Hoses

Engine Fan

b) new modular architecture

Fig. 8. Current and modular architecture of an automotive climate control system.

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B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

2
47250

Air
Control
2

Legend

47250

Alternative Selected

Refrigerant
Control

Inventory Level
1
1

22500

Sensors
632621
2

36300

Big HVAC
Module

Command
Distribution

2
2

43200

Blower
Controller

811882

1
24300

Final
Assembly

Evaporator
Case
2

47250

Accumulator
1

1
1

432000

181500

Radiator

Heater
Core

568977

436258

75600

Condenser

Blower
Motor

23851

1
1

584853

Evaporator
Core

341472

Heater
Hoses

Front End
Module
1
1848349

Engine
Fan

Compressor

2
4200

Actuator

Fig. 9. Current integral supply chain conguration automotive climate control system.

Table 6
Comparison of results of proposed multi-objective optimization approach with single objective approach.
Cost category

Results from single objective model (Graves

and Willems, 2003) without
considering compatibility index

Results from multi-objective

with compatibility index

Numerical difference

Cost of goods sold

Total inventory stock cost
Total supply chain cost

$94,807,700.00
$1,720,300.00
$96,528,000.00

$95,498,000.00
$1,381,503.00
$96,879,503.00

$690,300.00
$338,797.00
$351,503.00

shown below, the optimal modular architecture creates an annual

savings of $1,001,814 in total supply chain costs, primarily because
this architecture allows the company to source part of their
production to module suppliers who have lower production costs.
Furthermore, the optimal modular architecture offers lower inventory costs ($5,820,813) compared to the current architecture
($4,998,999). Therefore, it is highly recommended that the current
integral automotive climate control system architecture be
replaced with the optimal modular architecture.
5. Managerial implications
Based on the results of the analysis performed, our research
team made a few observations. First, the greater the number of
modules present in the supply chain network, the higher the compatibility ratings required in the supply chain (see Fig. 11) because
the modularity increases the degree of dependency (based on relative values) between nodes in the supply chain. Therefore, more
alternatives with higher compatibility ratings will be selected in
modular design.
The second observation is that the greater the number of nodes
there are, the greater the exibility of the supply chain will be. In

parallel, the higher the degree of modularity, the higher the number of nodes in the supply chain. Therefore, a modular architecture
will be more exible than an integral architecture, which more often leads to lower total supply chain cost. Third, if a rm can outsource production of the modules to suppliers at a lower cost, then
a higher modularity will lead to outsourcing of a larger proportion
of the production at lower cost, leading to an overall lower total
supply chain cost. In this case, it would be necessary to balance
the need to select suppliers with high compatibility ratings, which
can often be more expensive, versus the ability to outsource modules at lower costs in modular designs.
Managers can apply the proposed framework in four ways. First,
the framework can be a guideline to evaluate different architectural strategic decisions involved in the creation of a new-product
supply chain. For a planned new product, it can help to identify the
modular strategy that will best serve the companys overall strategy. Second, since the commercial success of a product depends
not just on its design and technical performance but also on the
performance of the rms supply chain in supporting production,
product designers must interact intensively during the product
development stage with supply chain professionals to fully grasp
the operational implications of alternative product designs. These

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B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

2
30000

Air
Control

Legend

2
30000

Alternative Selected
Inventory Level

Refrigerant
Control
129600
1

22500

Control
Sensors
Module

Sensors
2

61209

2
590148

Command
Distribution

285000
1

2
52788

HVAC
Module

Blower
Controller
1

Final
Assembly

252000

Rad/Cond
Module

24300

Evaporator
Case

182586

Radiator

36300

Accumulator
2

436979

Condenser
43200

Heater Core

573750

67500

Engine
Fan

Blower
Motor

1
22500
344770

Heater
Hoses

Evaporator
Core
1
2
1809670

4200

Compressor

Actuator

Fig. 10. Optimal supply chain conguration automotive climate control system.

Table 7
Summary of supply chain congurations costs for integral and modular architectural
designs of automotive climate control system.
Optimal modular
architecture

Savings due to
modular design

$65,700,000.00

$65,520,000.00

$180,000.00

$5,820,813.22

$4,998,999.19

$821,814.02

$71,520,813.22

$70,518,999.19

$1,001,814.02

High

Cost of goods
sold
Cost of
inventory
Total supply
chain cost

Current integral
architecture

match

Degree
of
modularity

mismatch

ges and limitations of various architectural strategies. For example,

the framework can help make the total supply chain cost be due to
using certain modular strategies visible at the early stage of
product design and development so that product designers can
evaluate the effects of their design on the supply chain and revise
accordingly.
Finally, the framework can help to improve a companys supply
chain efciency and stability by jointly considering sourcing,
inventory costs, and compatibility decisions during the conguration of the supply chain. The earlier these decisions can be incorporated into product design decisions, the more the leverage the
company has. By identifying compatible suppliers in the early
stage of product design and development, the suppliers can be
integrated earlier into product design and development, thereby
increasing involvement of suppliers in the product design.

6. Conclusions and future work

mismatch

Low

match

Low

Degree
of
compatibility

High

Fig. 11. Matching modularity to compatibility in the supply chain.

will help product designers to formulate their product architecture

strategies while taking the performance of the supply chain into
consideration. Third, it can help managers to explore the advanta-

In this paper we presented the impact of product design structure on supply chain congurations. We have extended the works
of Graves and Willems (2003) on supply chain conguration by
integrating the supply chain conguration decisions with the product architectural decisions. Further, we introduce the compatibility
of the SC partners into our multi-objective optimization model for
matching supply chain design with PA design. Since the architectural decision is made during early stage of the product development, much of the information on supplier compatibility is
subjective and vague. In order to quantify the subjective information, we have used fuzzy logic to compute the compatibility index
for various supply options available at each node of the supply
chain network. The proposed multi-objective optimization model
has been tested on two different types of products, a bulldozer
and an automotive climate control system. The information on

324

B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

bulldozer supply chain was adopted from Graves and Willems

(2003) and used as baseline for comparison of the proposed model.
The second product, an automotive climate control system, was selected as an extension to Nepal (2005) to compare the supply chain
performance of the proposed modular architecture versus current
integral climate control architecture. Several insights of managerial importance have also been presented in the paper.
There are at least three areas in which this research can be extended: rst, current assumptions of guaranteed service time
should be relaxed and more realistic (stochastic) service time be
considered; second, more factors like sustainability and exibility
should be considered in addition to cost and compatibility while
making the SC conguration decisions in order to capture the globalized supply market and shorter product lifecycle aspects of 21st
century marketplace; and thirdly, it would be interesting to see

how downstream nodes (distribution channel) can inform the SC

design decisions. Lastly, the sensitivity analysis results of the bulldozer case study have shown that total supply chain costs decreased with a correlating increase in the compatibility index.
However, there is no direct or linear correlation between the total
supply chain costs and the total compatibility index of the suppliers. This relationship needs further investigation in future. Lastly,
the current study involved two cases. An empirical study involving
a large number of companies can further strengthen the validation
of managerial implications described in the paper.

Appendix A
See Table A.1.

Table A.1
Compatibility index ratings for each alternative in bulldozer supply chain.
Alternative

Cultural
Communication
alignment and information
sharing

Coordination
and Cooperation

Compatibility
Managerial
in strategic
trust and
commitment goals

Conicts
management
techniques

Prot
Return
margin on
assets

Bond Compatibility
rating index

Frame
assembly

Standard
1
Consignment 5

4
6

5
4

4
10

5
10

6
9

1
7

3
10

6
8

0.3750
0.7568

Case

Standard
2
Consignment 6

5
8

5
6

2
5

6
8

2
10

3
5

1
6

6
10

0.3000
0.7000

Brake group

Standard
2
Consignment 9

6
6

4
4

1
6

1
8

2
6

4
4

5
4

4
4

0.3682
0.5500

Drive group

Standard
3
Consignment 7

1
5

1
5

4
9

5
4

6
6

3
8

3
7

5
6

0.2872
0.7000

Plant carrier

Standard
3
Consignment 8

1
4

6
9

1
6

2
8

3
9

6
7

6
9

5
7

0.3749
0.7500

Platform group

Standard
4
Consignment 5

3
9

1
10

2
7

4
9

6
8

1
10

5
5

6
5

0.3249
0.7500

Fender group

Standard
5
Consignment 9

5
6

3
6

4
9

4
6

6
9

1
10

1
10

3
10

0.2804
0.8517

Roll over group

Standard
2
Consignment 8

5
6

1
6

6
10

6
7

5
10

3
10

2
4

1
6

0.3249
0.7596

Case and frame

Standard
Expedite

2
6

4
6

6
10

6
8

1
8

6
10

3
7

4
7

4
10

0.4250
0.7500

Transmission

Standard
3
Consignment 8

4
5

6
4

4
4

6
6

4
6

2
5

6
7

2
10

0.3750
0.6250

Final drive and

brake

Standard
Expedite

3
5

6
8

2
4

2
9

3
6

3
4

6
8

3
4

1
9

0.2499
0.7000

Engine

Standard
4
Consignment 9

5
8

4
7

4
4

4
9

6
4

5
9

5
6

1
6

0.3750
0.7500

Engine

Standard
5
Consignment 4

6
10

5
7

2
6

2
10

4
5

4
6

3
7

1
10

0.3000
0.7500

Fans

Standard
Expedite

2
9

3
4

6
8

2
8

3
8

5
9

1
9

2
10

3
7

0.2499
0.8446

Common
Standard
subassembly Expedite

4
7

4
4

1
5

3
8

5
8

2
10

5
4

2
4

4
8

0.3749
0.5750

Dressed-out
engine

Standard
Expedite

2
4

6
6

1
9

1
4

4
6

2
6

4
9

6
6

4
10

0.3749
0.6750

Boggie
assembly

Standard
4
Consignment 5

1
8

5
6

5
10

4
8

3
8

2
6

4
5

5
9

0.4499
0.7000

Pin assembly

Standard
4
Consignment 9

1
6

4
7

6
8

6
10

3
7

3
5

5
7

2
7

0.3249
0.7500

Track roller
frame

Standard
4
Consignment 9

2
6

4
9

1
10

3
8

3
8

5
5

4
10

4
9

0.4250
0.7500

Main assembly

Standard
Expedite

1
4

3
5

5
9

2
7

5
5

1
5

6
10

5
6

2
5

0.3749
0.6750

Suspension
group

Standard
Expedite

1
9

4
3

1
4

5
9

5
6

7
5

3
4

1
9

2
4

0.3249
0.7000

Final assembly

Standard
Expedite

2
8

5
6

5
9

6
7

6
10

3
8

3
8

2
10

4
7

0.3750
0.7500

B. Nepal et al. / European Journal of Operational Research 216 (2012) 312325

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