Most of us work diligently to improve quality, reduce scrap and become more efficient in our routine production which will reduce our incremental product costs.
Improving continuously is an important and worthwhile discipline. The idea that these modest piece cost improvements roll up nicely as we produce and sell thousands or even millions of parts, modules or systems is very appealing.
If this sounds like your business, here is an interesting question – Have you ever observed a product or manufacturing process change that should have been straightforward to execute spiral out of control and become very difficult and expensive?
I have heard it said that:
The unexpected costs of an out-of-sync product launch or running change can consume much of the expected profit on a product line for a year or more.
The Cost of Mistakes in the Engineering Change Process
Over the years as an engineer in a large car company, a sales leader in Tier suppliers, and consultant leading dozens of ERP software implementations, I have gathered quite a collection of stories of changes gone wrong.
I have asked many colleagues and clients their opinions of the size of unexpected costs (spelled “s-u-r-p-r-i-s-e”) due to misunderstandings and mistakes in the engineering change process.
I have heard cost estimates ranging from $100,000 to near $500,000 per plant in a typical year. It is interesting to me that these numbers vary significantly depending on the role or the department of the person giving their opinion.
Regardless of the particular estimate, however, the scale of these numbers leads me to believe that there is low hanging fruit available for the picking in most manufacturing companies.
There can be many causes for these issues such as inaccurate customer requirements, insufficient lead time, different versions of the truth floating around the organization in various files and emails, confused suppliers or shifting target dates.
Any one or two of them can derail a change at any stage of the process: pricing, design, engineering, tooling / equipment changes, inventory control, production scheduling, shipping, or logistics management.
If even only 25% to 50% of these excess costs can be prevented, significant savings can quickly flow to the bottom line. There is potentially a very high return on investment (ROI) of the time and effort applied to improving the accuracy and reliability of the engineering change process.
The actual root causes in a given manufacturer depend on several factors (i.e. culture, product mix, supply chains, information systems, leadership styles, customer base, etc.) that are subjects of discussions specific to each business. But, one thing is clear: what many organizations commonly call “engineering” change actually impacts almost every function in the organization from sales through the entire value chain to shipping and logistics.
Product and Process Change Management
It is vital to view engineering change as product and process change management. Be sure the business logic used in the flow of information reaches everyone affected, in the right sequence. It is also important to leverage modern software technology with workflow automated to notify each stakeholder instantaneously when they have a task assignment due to review, update or approve some aspect of the change. This will minimize time between steps in the process.
For over 25 years IQMS has been delivering productivity gains to manufacturers. See how an award winning ERP system with a built-in engineering change order management supported by automated workflow can become the basis for holding one version of the truth to help keep the change process and your entire team in sync at www.iqms.com .