Modular design: how a product family becomes modules, options and a priced bill of materials

Modular design builds a product from separate modules that connect through standard interfaces, so one product family covers many variants with few distinct parts. In a plant that builds to order, the same structure drives the configurator: modules become options, and fit rules become constraints. This guide covers the types of modular design and real examples, then prices a conveyor family built from 40 module variants.

Derik Lawlis Founder, ThriveAI · builds AI systems inside manufacturers

What modular design means

Wikipedia’s article on modular design describes it as a principle that splits a system into smaller parts, called modules, that can be built, changed, replaced or exchanged on their own. The modules meet at interfaces: a bolt pattern, a shaft size, a connector or a mounting flange. When those interfaces stay fixed, a plant can change one module without redrawing the rest of the product.

Karl Ulrich gives a precise definition in a 1992 MIT working paper on product architecture, later published in Research Policy. He defines a product’s architecture as the scheme that assigns its functions to physical components. In a modular architecture, each function maps to one component, and the interfaces between components are decoupled. A change to one component then leaves its neighbours alone.

A conveyor family shows what that looks like in a plant. The drive, the bed sections, the stands and the guards are separate assemblies with fixed connection points. A larger motor bolts to the same gearbox flange, so the bed and the stands stay the same.

Modular vs integral product architecture

Ulrich sets modular architecture against integral architecture. In an integral design, one component carries several functions, or a change to one part forces changes to others. Neither is better in general. His paper lists the trade-offs that help decide which parts of a product to make modular.

His trailer example puts numbers on the variety row. Five customer choices give a family of 108 trailers. The modular design builds all 108 from 12 component types, while his integral design needs 73. Modular parts can also be made ahead and kept in stock, so an order only waits for final assembly.

Slot, bus and sectional: three types of modular design

Ulrich divides modular architectures into three types. All three keep one function per component, and they differ in how the interfaces are organized.

• Slot. Each interface is a different type, so components cannot swap places. His example is a car radio, which fits its own opening in the instrument panel. A motor bolted to a gearbox flange works the same way.
• Bus. Components attach to one common element through the same kind of interface. His examples are expansion cards in a personal computer, track lighting and shelving on rails. Devices clipped to a rail inside an electrical enclosure follow the same pattern.
• Sectional. All interfaces are the same, and there is no common element. Parts connect to each other, as in piping, sectional sofas and office partitions. Conveyor bed sections bolted end to end are a sectional design.

Ulrich notes that the types are idealized. Most real products mix them, and a product can show one type at the level of the final assembly and another inside its subassemblies.

Modular design systems: the rules behind a product family

A modular design system is the set of modules, interfaces and rules a company keeps for a whole product family. The truck maker Scania documents its system in public. Scania’s page on its modular system says its entire portfolio rests on a fixed number of standardised interfaces, so components and parts can be interchanged. It tailors each vehicle by changing modules, for example to adjust cargo capacity or engine output.

A 2024 story from TRATON, Scania’s parent group, traces the system’s roots to the 1930s. It lists three principles that Scania set out in the 1990s and still applies:

• Keep interfaces standardized over time, so every component in a series connects the same way.
• Meet the same need with the same solution, and reuse existing components wherever customers do not need a different result.
• Balance the performance steps, which means choosing how many sizes each component series offers.

The third principle matters for quoting. Every extra size multiplies the number of configurations a sales engineer has to price.

How modular product design becomes a configurator

A configurator for a modular family needs what the designers already defined. That means the modules, their variants, the fit rules and a bill of materials for each variant. Most of the work is translating the design into rules a program can check.

ERP systems already model the bill of materials this way. To see what a modular BOM adds up to at every level, paste it into the BOM explosion calculator. In SAP’s variant configuration, the bill of materials of a configurable product lists every component that any variant can use. That is why SAP’s documentation calls it a super BOM. Selection conditions on the variant parts decide which of them a given variant receives.

If the family is quoted from an Excel builder today, the rules already sit in its lookup tables and formula chains. The guide to product configurator software covers how to read them out and test them on past orders. The free Excel builder map shows the first layer of a workbook in your browser. A configurator can also write the model code for each order, and the free part number generator shows how such codes are built from option segments.

Worked example: 1,008 conveyors from 40 module variants

The numbers below are a made-up example, not data from a plant. Every derived figure comes from a short script. Take a belt conveyor family with six choices:

• Belt width: 450, 600, 750 or 900 mm.
• Length: 2 to 8 m in 1 m steps, which gives 7 lengths.
• Drive position: at the end or in the centre.
• Motor: 0.37, 0.75 or 1.5 kW.
• Stand height: 600, 900 or 1,200 mm.
• Side guards: none, or on both sides.

That is 4 × 7 × 2 × 3 × 3 × 2 = 1,008 configurations. The plant builds all of them from 40 module variants. There are 8 bed modules in four widths and two lengths, 8 drive units and 4 end pulley units. The rest are 3 motor and gearbox sets, 12 support stands, one side guard section and 4 belt widths cut to length.

Rules shrink the list. One example rule says a conveyor longer than 6 m needs at least the 0.75 kW motor. That removes 96 combinations and leaves 912 valid ones, and the configurator never offers the other 96.

Now price one order: 750 mm wide, 5 m long, centre drive, 0.75 kW motor, 900 mm stands and guards on both sides. Costs are example figures in Canadian dollars.

The modules come to $8,499.80. Six hours of final assembly at $82.00 an hour add $492.00, for a cost of $8,991.80. At a 30 percent margin, the price is the cost divided by 0.70, which is $12,845.43, quoted as $12,850.

Every figure in that quote traces to a module, a rule or a rate. When the steel in a bed module goes up, its unit cost changes once. Every later quote that uses the module picks up the change. The guide to BOM cost covers the roll-up itself in more detail.

Where AI does the work

AI helps most when the modules and rules exist only in old orders and in one person’s workbook. It reads and drafts, and engineers decide what becomes a rule.

• Finding modules in past orders. A model compares the bills of materials on past orders and lists the sub-assemblies that repeat, with how often each appears. Those clusters are candidate modules for an engineer to confirm.
• Reading the builder. It reads an Excel builder formula by formula and drafts the option lists, the fit rules and the quantity rules in plain words.
• Checking each configuration. Before a quote goes out, it compares the configured bill of materials with the rules. It flags a missing module, a part from the wrong width or a quantity that breaks a rule.
• Keeping module costs current. It reprices each module from recent purchase prices and flags any module whose cost moved past a threshold the plant sets.

The configurator applies only rules the engineers approved. A named person approves each quote before it reaches the customer, as human in the loop describes.

Where to start with modular quoting

1. Pick one product family that your team quotes often and that sells in many sizes.
2. Pull 20 to 30 past orders with their bills of materials, drawings and the prices that went out.
3. Mark the sub-assemblies that repeat, and name the variants of each one.
4. Write the fit rules: which variants work together, and which combinations never ship.
5. Price each variant from current costs, then run the past orders through the rules until every difference has an explanation.

Orders that fall outside the rules still go to an engineer, with the reason named. That part of the work is engineer to order.

How ThriveAI turns a modular family into a configurator

ThriveAI builds the configurator from the rules your team already uses. Derik starts with a free map of the Excel builder the family is quoted from today. The map covers every option, lookup table and formula chain. The first stage runs four weeks for one product family. In it, he builds the configurator and the cost roll-up from that map and checks the prices against orders you already quoted. Prices come from your own material costs, routings and markup method, and your CAD template produces the model and the quote drawing. A named person approves every quote before it goes out. The Excel builder to CPQ app offer lists what the four weeks deliver.