They simultaneously consider the design of modules and the decision of common modules to be used for different applications and markets. The issue of part commonality on cost saving in inventory is first addressed and studied by Rutenberg (1969) and Rutenberg and Shaftel (1971).

Answering machines in different price categories share common features such as `memo' and `remote access' while they are differentiated through the length of recording time and the number of outgoing messages. Toyota Camry and Lexus ES300, the entry-level luxury sedan, are built on the same design platform (Automotive Industries, 1996). Honda manufactures different versions of Accord targeting local markets around the world based on a single design platform (Business Week, 1997). Hence the concept of commonality in product design is widely used in many industries ranging from automobile to household appliance (Sanchez and Mahoney, 1995). The use of modularity/commonality in the design of a product family or generations of products provides the firm with a chance to meet diverse customer needs with less cost due to economies-of-scale in procurement, production and distribution. (1991) discuss the operational problems related to the complexity of product variety, and recognize that 80% of manufacturing costs, 50% of quality, 50% of order leadtime, and 80% of business complexity can be influenced by product and process design. (1998) give examples of four manufacturers (Boeing, Denso, Hewlet-Packard and Seagate) concerned about product variety. Pollack (1992) gives several examples of Japanese Manufacturers and goes on to say that “Nissan expected to save 3 percent of its costs by reducing the number of parts it uses by 30 percent in next three years”. Many companies have started to address this problem. Stalk and Webber (1993) trace many problems faced by several Japanese manufacturers to excessive product proliferation.

Higher product variety leads to higher forecast errors, excessive inventory for some products and shortages for others, higher overhead and administrative costs, and higher manufacturing costs due to more specialized processes, materials, changeovers, and quality assurance methods (Lee and Billington, 1994). It is generally accepted that a proliferation of products results in deterioration in manufacturing/logistics performance.

Gillette product cannibalization