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 / Summer 2005 / Issue 39(originally published by Booz & Company)


Are You Modular or Integral? Be Sure Your Supply Chain Knows

Modular supply chains consist of relatively flexible and interchangeable relationships among suppliers, customers, and partners. In the auto industry, because each supplier in a modular chain develops and retains a great deal of knowledge concerning how to integrate its subsystem with others on the vehicle, this type of integration can take place rapidly for a number of vehicles at once.

By contrast, integral architectures typically link subsystems with tightly coordinated relationships and distinctive or unique features that cannot be easily connected to other systems. Products with integral architecture tend to have complex and nonstandard interfaces, and the subsystems are built (or at least customized) explicitly for a particular product. The distinctive identity of the Apple iPod music player is based on its integral architecture. To be sure, it uses standard interfaces (such as the sound output for headphones or speakers), but the sound source is built into the unit and its internal components and software are relatively nonstandard.

An integral supply chain architecture is characterized by strong cross-company links and a relatively high barrier to entry for newcomers. Members of the chain are close to one another in geography, organization, culture, and/or electronic connectivity. For example, a manufacturer and its principal suppliers are likely to be concentrated in one city or region, have common or interlocking ownership, share a business and social culture, or maintain tight electronic communications links. If a supplier for an integral manufacturer like Mercedes or BMW goes bankrupt, the manufacturing process is seriously impaired until a new supplier can be found and its engineers can build working relationships with their counterparts in the manufacturing company and other key suppliers.

One interesting difference between modular and integral architectures is the way that product features relate to components. Instead of having a clean one-to-one correspondence between a component and its function (as typically occurs in a modular architecture product), integral products tend to have components so interwoven that each may perform more than one function. For example, an automobile sound system is typically modular. The system has one clear, identifiable function: to project sound from the radio and any other audiovisual component. There is typically very little interaction between the sound system designer and the auto body designer for any particular car, and it’s straightforward to enable most sound systems to work well in many automobile models. (Very high-end cars for which designers engage in sophisticated acoustics engineering are a notable exception.) You can order automobile sound systems on the Internet if you are willing to install them yourself.

In contrast, consider the integral architecture of a jet. The wing of a jet airplane serves several functions. It provides airlift through its shape, holds jet fuel, helps to control the momentum of takeoff and landing (through its moving wing flaps), and carries the engines. Aircraft fuselage designers work very closely with the designers of the wings. You would not want to ride in an airplane whose wing was ordered on the Web!

Aligning Architectures
At first glance, especially when decisions about their design are made, the supply chain and product architectures seem unrelated. But in practice, the architecture of the supply chain and the architecture of the product have a powerful impact on each other. For example, modular product designs make modular supply chains much easier to implement. The members of the chain can be highly dispersed geographically, organizationally, and culturally, because the interfaces among the subsystems they supply are either standardized or relatively easy to design from a distance. The modular nature of the subsystems also makes it easier for manufacturers to audit them for quality control, which would otherwise be a challenge in a modular supply chain.

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  1. Bill Jackson and Conrad Winkler, “Building the Advantaged Supply Network,” s+b, Fall 2004; Click here. 
  2. Tim Laseter and Keith Oliver, “When Will Supply Chain Management Grow Up?” s+b, Fall 2003; Click here. 
  3. Gail Edmondson and Kathleen Kerwin, “DaimlerChrysler Stalled,” Business Week, Number 3851, September 29, 2003; Click here. 
  4. Charles H. Fine, Roger Vardan, Robert Pethick, and Jamal El-Hout, “Rapid-Response Capability in Value-Chain Design,” MIT Sloan Management Review, Winter 2002; Click here. 
  5. Jeffrey H. Dyer, Collaborative Advantage: Winning Through Extended Enterprise Supplier Networks (Oxford University Press, 2000)
  6. Charles H. Fine, Clockspeed: Winning Industry Control in the Age of Temporary Advantage (Perseus Books, 1998)
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