Reducing Engineering Change Orders

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Jim Wynne

Staff member
Admin
#12
I have just began working for my new employer and I am preparing an assessment of their document control system. The first item that stood out to me was the numerous amounts of engineering change orders within days of a drawing's initial release. This is waste and not typical in my experience. Any ideas or methods to reduce this wasted activity? Appreciate it! :thanx:
This usually happens because of a deadline for release of a drawing or drawings. Even though the designers/drafters know the drawing needs changes, it will be released to avoid going past the deadline. This means that some manager somewhere will pull up a spreadsheet, see that the drawing has been released on schedule, and go back to sleep. Meanwhile, there's a flood of ECNs to bring the drawing up to date.

If this happens consistently, it probably means that the time allowed isn't sufficient, or in some cases, there are inefficiencies in the engineering department that need attention.
 
C

CliffK

#13
A few of other thoughts to toss on the fire:
  1. Tie engineering's compensation to product profitability. You may not be able to accomplish this, but I've seen it in action; it seems to act as a wonderful incentive to do things right the first time.
  2. Make upper management aware of the cost of an ECO. It's shockingly high. Know that there is a risk to this tactic: management may resist fixing problems because the cost is "too great."
  3. Give the engineers a sandbox to play in. Don't put the drawings/BOM's/etc's under formal control until after they are released to production.
  4. Control the ECO's up front with a Change Review Board. The board won't allow any work on an until the proposing engineer justifies it and proves that he has his act together as far as risks, costs, impacts to documentation and existing inventory and etc. is concerned. It's surprising how much better the first pass ECOs become after the engineers have had to justify new revs to catch stuff that any decent desk check would catch.
  5. Put some teeth into your design review before release to Production. Make the engineer give a complete set of documentation to the review team at least a week before the review meeting. The Manufacturing and/or Quality engineers can usually spot a lot of flaws if they have enough time with the documents. If Engineering has surprises waiting for the review team, be prepared to postpone the review to give everyone enough time to look at the new documents.
I have seen all these things work in various organizations. Unfortunately I do not have the dollars and cents justifications in front of me.
 
C

CliffK

#14
If this happens consistently, it probably means that the time allowed isn't sufficient, or in some cases, there are inefficiencies in the engineering department that need attention.
In my experience, this one falls right at the feet of top management.

Sometimes they don't provide sufficient resources/time. Sometimes they allow mismanagement to fester. Sometimes they just seem to give engineering a free pass when it comes to quality.
 

Stijloor

Staff member
Super Moderator
#15
Friends,

From Industry Week:

How Much Do Your Engineering Change Orders Cost You?
Some manufacturers lack proper cost information.


Compiled By Adrienne Selko

June 18, 2007 -- It seems that manufacturers need to get a better handle on their costs with regard to customized products. According to a new study by Cincom Systems, only 67% of build-to-order and engineer-to-order manufacturers know how much it costs to produce customized products, and 73% don't know the cost of engineering change orders.

"Manufacturers that cannot determine the cost of customized products take a huge risk in taking orders that may not be profitable. More importantly, without understanding the cost of selling, it is difficult to make strategic decisions regarding product mix and target customer segments," says Jim Wilson, Cincom program director and author of "Best Practices: Mass Customization and Build-to-Order Manufacturing."

Despite the lack of cost information, more than half of the survey respondents believe that they have the ability to charge a 10% or higher premium with a product customization strategy. While 73% of total respondents see product customization as critical for products over $100,000, 25% also see them as critical for products under $1,000.

This is a growing issue as 63% of the engineering reported requests for customized products increasing over the last five years, and 26% anticipate that the growth rate will be between 25% and 50% in the next two years.

Cincom Systems targeted the survey at senior engineering managers at 900 manufacturers of complex industrial, electrical, and transportation equipment and systems between January and February 2007.
 
C

CliffK

#16
Friends,

From Industry Week:

How Much Do Your Engineering Change Orders Cost You?
Some manufacturers lack proper cost information.


Compiled By Adrienne Selko

June 18, 2007 -- It seems that manufacturers need to get a better handle on their costs
<snip>
and 73% don't know the cost of engineering change orders.

"Manufacturers that cannot determine the cost of customized products take a huge risk in taking orders that may not be profitable. More importantly, without understanding the cost of selling, it is difficult to make strategic decisions regarding product mix and target customer segments," says Jim Wilson, Cincom program director and author of "Best Practices: Mass Customization and Build-to-Order Manufacturing."
I can vouch for this. Having recently spent five years with a high-tech, specialty manufacturer, I will tell you that they had no idea of the true cost of goods sold. None, whatever. And they were losing money. No surprise there, actually.

Despite the lack of cost information, more than half of the survey respondents believe that they have the ability to charge a 10% or higher premium with a product customization strategy
A number like 10% is totally meaningless if you don't know your margin. I've never understood where managers like these get this stuff.

In the Cove, we often characterize upper management as being interested only in the numbers. From this report, and my experience, it seems like a lot of them are interested in numbers that they make up.
 
#17
In a previous life, as the Design Assurance Manager of a company, I brought just this issue to management's attention, not just from the basic cost of an post release engineering change, but also the fact that up to 25% of our available engineering time was spent on processing them. Furthermore, the changes were often assigned to our newer, just-out-of-college engineers, who hadn't bargained for being given the task to re-engineer an existing design.

This is highly demotivating and often these young engineers only lasted at the company about 2 - 3 years. As a result, Engineering management failed to meet many targets. At the same time the company were making such substantial profits, that they didn't really seem concerned...........
 
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