Product Line Selection and Pricing with Modularity in Design
Manufacturing & Service Operations Management
Computers and Industrial Engineering
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In this paper I review the component commonality literature through a management-accounting lens, focusing on the cost effects of an increase in the use of the same version of a component across multiple products. The bulk of this literature is of a theoretical nature, for example, analytical models, programming models, or conjectures based on casual observations of practice. Some of this literature purports, especially in introductions to the topic, that cost generally decreases with increasing commonality. However, based on a review of the theoretical literature using an activity-based costing framework and distinguishing between cost-driver and cost-rate effects, I conclude that the cost picture is more subtle. In other words, it is too early to make any general statement about the effect of increasing commonality on total costs. Moving to the limited empirical literature on the topic, consisting of case studies (sometimes combined with simulation) and empirical research on larger data sets, the conclusion that there is even more room for future research becomes evident.