Establish Core Infrastructure
Complex manufacturers work in a constantly evolving marketplace. They must be able to account for advances in technology; innovations in process development; breakdowns or changes in resources; the availability and cost of energy/raw materials, and so much more. Commonplace legacy systems or extensive use of QuickBooks are simply no longer sufficient in adequately supporting Complex manufacturers.
Manufacturers must be equipped with the agility to utilize the appropriate models, i.e. discrete vs. process, while maintaining the ability to customize products via MTO, CTO, and ETO means. Internal processes must be prepared to handle highly customized ETOs, which will certainly result in lengthy, iterative projects down the road.
Through establishing strong, core business processes, you can better control your engineering expenses. These processes should emphasize increased capacity utilization and adherence to production plan. In today’s globalized society, it is increasingly imperative to reduce cycle times and management ambiguity for leads and change orders, as well as better communicate with a vast extended supply chain network. This, of course, is in efforts to reduce project costs and improve the bottom line.
Change is Inevitable
Engineering is an iterative process. Despite our best efforts to achieve perfection in design engineering, we must be ready to incorporate change. Sometimes designs change; but oftentimes errors or malfunctions are not evident until testing or modeling phases. Change is expensive, and it is imperative to have the necessary infrastructure to be able to limit that expense. Interest in ERP solutions is growing as the smooth transition from engineering and design inception to production is vital to the overall success of a given project. Factoring in unforeseen changes is no easy task.
Engineering Change Orders (ECOs) are prominently used among complex manufacturing organizations. The iterative ECO process can haunt engineers and others pulled into its complicated review process. The issue must be identified and scoped, upon which a request is submitted for review. This can be translated to an order, which then becomes a notice, and finally ending with implementation. All of which requires the necessary sign-offs at multiple stages. While the whole process may be tedious and painful at times, it is a necessary evil. It is simply impossible to avoid revision in manufacturing highly engineered products.
The Nature of the Beast: The Good
An ECO is essentially a documentation package. It outlines all of the proposed changes, lists products/parts that would be effected or necessary for a modification, and requests necessary reviews/approvals. It outlines modifications that improve upon previous product models, and allows for necessary changes to me implemented. A fuel valve may be too wide to support proper tank level requirements, for instance. Or more recent modeling may show slight miscalculation in heat conductor specs. If these elements are placed in context of larger engineered products, such as a submarine or airplane for example, the ECO helps take all significant considerations into account.
People often groan at yet another set of documentation, rolling their eyes at the amount of time they know an ECO may take up. However, it turns out they are helpful. Aside from outlining necessary changes, they also bring in the stakeholders, constantly providing status updates on an ongoing project. However, there is a yin to this yang.
The Nature of the Beast: The Ugly
ECOs often remain incredibly time consuming and costly endeavors, draining unnecessary resources. INSEAD found that ECOs consume 30-50% of engineering capacity and 20-50% of total costs. (“Managing the Process of Engineering Change Orders” ). Aside from being part of an expensive process, ECOs also consume excessive valuable time of engineers that should otherwise be used for testing or other higher value procedures.
The potential negative impacts of improperly handling ECO’s have been very well documented. Their related increase in costs stems from two main sources. First, changes become more expensive the later they are brought up within any given project. Second, the organizational infrastructure that supports ECOs is often incredibly inefficient. The complexity of such support systems is much like that of the engineered products themselves in that they rely on processing networks that integrate information between various silos. They rely on tightly coupled activities that must be kept in harmony.
Coupling Complexity and Its Snowball Effect
Process coupling is extremely prevalent in the manufacturing world for highly engineered products. Product process coupling is a term used to describe interdependence among individual activities within a manufacturing process for a given component within a system. Due to the highly connected nature of these production environments, one breakdown or incidence to arise within a product design can snowball into increased sign-offs and permissions needed. A change to single component of a much larger product has effects that ripple through the entire product’s engineering design.
This snowball effect is only amplified by ECO mismanagement from a procedural standpoint. Cascading ECOs, and their related testing, push timelines back and raise implementation costs. INSEADs report on managing ECOs cited one study finding that “about 45% of engineering time was spent on changing components that had been ‘thought to be ready.’" By that logic, about half of their time was likely spent repeating tasks that had already been completed. Talk about gross inefficiency!
Once all stakeholders recognize that a change must be implemented, the ECO influence snowballs outward effecting more and more people, and consuming more and more time. Extensive process coupling ropes in extra required sign-offs. This snowballing effect only creates further confusion and ambiguity within poorly constructed ECO processes. This type of instability helps explain some of the painfully long time delays.
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