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Lean Manufacturing, Basics, Principles, Techniques

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Best of Gaw Lean Management Articles

Engineering

The design engineer is heavily involved throughout the project lifecycle and is very concerned about the profitability of each project they are involved in. Many believe the operative word in "engineer-to-order" is "engineer." For a design engineer to survive the rigors of the ETO environment, they must be above average in engineering skills, flex­ible, innovative, and because they often interact with the customer, they must have good people skills. A few critical business (not techni­cal) issues the design engineer has to cope with:

     better requirement definition and specifications

     limited availability of knowledge workers and craftsmen.
Better requirement definition and specifications    This critical

business issue has two dimensions. The first relates to getting an accu­rate requirement statement from the customer. Customers are expert at designing and building their products, not necessarily the special ma­chinery used in the manufacturing process. Identifying and articulating needs is more difficult then one might think. The defining of require­ments is really a process of discovery. Most customers want a machine "just like the one you designed and built for us in 1972 for our factory in Any Town, U.S.A., but with a few changes." The problem is in the "few changes" and what that really means. That's why the computer software professional often will prototype a new program for user (customer) re­view before starting to build the final program. The typical engineer would prefer to design in a systematic, thorough, and efficient manner. Unfortunately, the realities of the ETO world do not permit that. Often the issue is not just defining how the device will work, but designing within a budget and to an inflexible delivery schedule.

The second dimension is the completeness of designs and specifica­tions engineering releases to purchasing and manufacturing. A common complaint of those in manufacturing and procurement is that they are incomplete. Some of this can be attributed to the difficulty in getting the customer to adequately define their requirements. Much of it is time pressure, inadequate systems support, and perhaps habit. Since engineer­ing is concerned about profitability, they would prefer to improve the quality of the information they release to purchasing and manufacturing.

Limited availability of knowledge workers and craftsmen—This is a critical business issue shared by engineering with many of their

co-workers. If you design it and they cannot build it, either because they lack the skills and capabilities or because they cannot build it to the schedule required because of capacity constraints, the result is the same—a past-due shipment.

Contracts Management

This department is responsible for defining, in contractual language, what equipment and services will be delivered, the schedule for these deliverables, and the payment milestones. Another responsibility is to track requirement revisions and guard against "scope creep." Scope creep is a proven cause of eroded project profit and schedule integrity. Some critical issues for the contracts organization:

Performance tracking—If the project is running off schedule and the contract covering it has a penalty clause for late delivery, the con­tracts person responsible really would like to know about it. Conversely, if a major milestone has been achieved that is a billable achievement (progress billing), they also want to know about this. Unfortunately, getting the information on these situations is often difficult or time-consuming. The systems supporting the project are often the culprit.

Timely and flexible response—The dynamic of an ETO project is fluid. There is frequent interaction with the customer. Requirements often change, and these changes may have cost and schedule implica­tions. These in turn may impact payment schedules and contract terms, i.e., penalty clauses. The contracts function needs information from various organizations within the company. This information flow must be timely, and there must be easy access to the underlying supporting information. All of this is necessary to promptly communicate the con­tract changes that must be agreed upon between the customer and your company. Doing business without a valid contractual framework is an invitation for disputes and possible project write-offs at the conclusion of the project.

To Be Continued


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