Genius ERP: ready out-of-the-box for custom manufacturing.
Spending large portions of my time with engineer-to-order (EtO) and make-to-order (MtO) manufacturers, I have noticed that many companies assume – with reason – that the drafting and engineering department is the most limited resource and therefore the pacesetter for all projects.
This assumption is stated with great confidence – not only as truth, but rather as an accepted fact of life. To test the validity of this supposition, I asked several management members a few questions, such as: “If you are certain that projects are being stalled exclusively by engineering, will revenues double if the engineering staff is doubled?” The answer has – so far – been unclear, with many management members avoiding a direct answer and looking somewhat uneasy. To reduce the directness of the previous question, I posed this question: “How many extra projects do you think could be delivered within the same timespan if the engineering staff is doubled?” Similarly, this question yielded no substantial or confident answers. At this point, I’m confident we’re dealing with a mysterious effect that management has limited confidence to address; Meaning we are dealing with an opportunity!
Four easy steps to deal with this dilemma:
STEP ONE - Validate Assumptions
Everyone in the organization has intuition that may have led us to assume that the engineering department is the choking point of the entire system – from marketing to cash. However, prior to validation, this is, at best, an assumption. It should come as no surprise that, like every department, the engineering department shares interdependencies with other departments, as well as the supply chain. It is of utmost importance to determine the extent to which everything else in the organization has more capacity than the engineering department. When validating whether one department is a company-wide constraint – meaning, as a result, decisions with great impact are about to be made – it is important to determine WHY and TO WHAT EXTENT the engineering department is the company-wide limitation.
STEP TWO - Exploiting Available Capacity
Once step one has allowed the team to sufficiently validate that engineering is indeed the actual limitation, then – and only then – required action becomes clear. Hiring new engineering graduates is, in some cases, an available option, although it is more often safe to make the assumption that hiring a new engineer fresh out of school may reduce capacity even more in the short term, since this requires significant attention from current resources to bring the newly hired engineer up to speed in the product knowledge, engineering drafting practice, and business processes. A solution should be devised that increases capacity in both the short and the long-term. To ensure success, follow the following order of exploiting the current available engineering capacity:
There is only one clearly pre-defined task priority - Each engineer and drafter knows precisely what to work on and – more importantly – in what order. These priorities should be shared with everyone. For example, if I work on task C instead of A, it will cost the company $5,000.00; but if I work on B instead of C it will cost us our biggest customer. If priorities change every day, it is clear that there is no priority at all. Any exception to consistent prioritization should be predefined as well, for example: Priority Category One: Resolve engineering dependent tasks on the shop-floor; Priority Category Two: Finish projects in the specified order to release them to the shop. If engineering is using a 3D design software, ensure that the team is knowledgeable on the use of sub-assemblies, electronics, cutting, and weldments in order to ensure purchasing and shop-floor staff does not interrupt the engineering department to clarify the interpretation of the drawing – in other words, nothing is left undefined. Furthermore, engineers should have access to the lead-time and the reliability of delivery of the vault items used directly from within CAD to visualize the lead-times of defined items, so that the project has at least a chance to meet a promised due date. This means items in the ERP must match the items in CAD and these items require two-way synchronization of both lead-times and descriptions between the purchasing, shop-floor, and engineering department. Without this, how can we set the priority of tasks and estimate their impact to each project, let alone the total project portfolio?
There is no multi-tasking - For an engineer or programmer to switch from one project to another requires a strong memory and the ability to validate facts in order to determine what to do, as there is substantial setup time whenever a switch occurs. Each application detail influences the selection of electrical and mechanical components in an Engineer-to-Order environment, many different things must be considered when drafting. Not only does switching priorities result in a longer completion time for each task, but it also increases the lead-time of all combined projects, in my personal experience, usually about 30%. This results in the project or program manager updating the newly negotiated due date for several projects, while maintaining the tasks and critical path displaying the detailed delay of each task and project. Not only is this a disappointing experience for a customer, but it also means, moving 30% of revenue into the future.
STEP THREE - Submit Everything Else to this Decision
Sales Engineering (Outside Sales) asks customers the right questions in the right order to ensure that the engineering department has all the necessary information for design. In particular, information that helps engineering specify long lead-time items should be readily available, and should not be chased by the engineer. The value this brings to the customer and the potential loss of revenue due to late delivery must be clear and understood in order to drive clarity of priority.
Purchasing maintains accurate records of suppliers – including their quoted lead-times and the reliability of their quoted lead-times – and ensures that this information is available, if not connected to the CAD vault with a two-way connection. The purchasing department also understands that saving 20% on raw materials does not justify delivering three less projects per year in value-added engineering. For example purchasing negotiates a 20% price increase with the suppliers in order to get first priority on their suppliers’ shipping dock, as well as negotiating the lead-time and increased reliability of that lead-time. (This does not always work for commodity "me too" products.)
The shop-floor provides information regarding their limitations concerning skill, space, time, and equipment – including maximum tolerances that can be held in cutting, disassembly, bending, joining, welding, assembly, etc. – to ensure that the job can be designed in the order best suited for the production schedule and their limitations.
STEP FOUR - Hire An Engineer!
Adding another full time engineer – or another 10 engineers in the case of larger companies – could be the only way to increase capacity to necessary levels. This is not a negative thing!
If engineering is no longer the company-wide constraint, another department or process is guaranteed to be. Progressive management should question themselves: "If engineering is no longer the constraint, what will be?" Ignoring this question could lead to chaos and surprising unpredictability due to the next created and unrecognized company-wide limitation.
"Deming is totally obsolete; Deming is 1942; He was a close friend of mine; and he didn't change anything, except using TV cameras" - Peter Drucker
Peter has extensive experience working with mid- and c-level management teams helping them to increase their throughput and level of performance. He has consulted with plants in a variety of manufacturing industries, including automotive, fabrication, food, plastics, stamping, aluminum and steel.
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