Silos changing: Smart product components

This week, Cambiasi research director, Mike Evans discusses the initiatives that respond to consumer and business demand for smart products and devices.

Experts at industry analyst and market consulting firm Cambashi contribute a regular blog for TM titled Silos Changing exploring how new software applications enable manufacturers to implement business initiatives for the new economy.

In the 1920’s, when Ford’s River Rouge Complex was developed, manufacturing companies tended to favour vertical integration, where all aspects of their products were designed and produced in-house.  This does have the advantage of controlling component pricing, quality and maximising value added in the final product.

However, there are also disadvantages. In an attempt to control the whole product, corporate policies often constrain the actions available to management of the entities’ in-house manufacturing sub-systems and components. 

In contrast, new entrants to a market are less constrained and are without legacy investments. They are often more innovative.

With innovative design, one design of component could be the basis for a wide range of sub-system components sold to different customers. This provides the opportunity to beat the in-house cost of a specially engineered sub-system. Fixed costs will be spread over a larger number of units sold to several different customers. Also, with multiple supplies of a sub-system, the supply chain has additional resilience.

By reusing sub-systems, even at the basic level, a manufacturer’s product can be brought to market faster and at lower cost and risk. Designing with a clear product architecture and well managed interfaces helps manage complexity and reduce component counts. That simplifies the re-use of components and enables the increased use of bought out parts to replace engineered parts with longer lead times. 

Today, most manufacturers see the industry network approach as more appropriate. This is well established for mechanical components and electro-mechanical sub-systems.

However, the arrival of smart products containing a great deal of software introduces more complexity to existing supply chains.  While the use of software packages is widespread, the re-use of software at a more granular level is quite a challenge. 

There are few equivalents of the market for bought out components in the world of software. However, by looking at the automotive sector, we can discern a future pattern.

The European automotive OEMs are at the forefront of establishing standards for component software.  In 2003, BMW, Bosch, Continental, Daimler Crysler, Siemens VDO and Volkswagen formed the Autostar consortium, now joined by virtually the entire world’s automobile OEM and tier 1 suppliers.  Autostar’s objective is to define a standard for software components in automobiles. Autostar provides a set of open standards and a reference architecture for electrical to software integration.  By standardising basic systems functions, Autosar will enable scalability to different vehicle and platform variants. Autostar will facilitate integration and transferable sub-systems from multiple suppliers throughout the industry network.

Part of the initiative is a methodology to define the design model in terms of software components; hardware; and systems interconnect. The software components are described in terms of their interfaces and hardware requirements independent of the actual implementation.

There is already a healthy ecosystem of both Electronic Control Unit (ECU) and software tool suppliers for Autostar.  Some of the effort goes into synthesis – automatic generation of software.  We think off-the-shelf software components will follow. 

The computer games industry is further down this road.  It is already possible for games developers to buy software components they will include in your game running on a console or mobile.  For example, one component takes in the trajectory of something striking water and returns a visualisation of the splash it makes.

For other industry sectors to progress, we think their key players will too need to co-operate to define standards.  There are such initiatives in the aerospace and defence, but elsewhere the picture is much more mixed.  Perhaps this is a government or more likely an EC level initiative that could generate some growth?

In future blogs, we will go on to write about other potential deployments that respond to these business initiatives to address consumer and business demand for smart products and devices.