There are a couple of typical questions we explore when we’re looking for opportunity in engineering departments: (1) can you reduce cost by increasing the productivity of the department, and (2) can you simplify the design to benefit customers externally and sales, production, installation, or service groups internally.
Increasing the productivity of an engineering group requires quantifying work, scheduling the work with tighter parameters and then managing to those tighter parameters. This is easier in engineering departments that handle fairly repetitive requirements. The more creative or unique the engineering requirements, the more thinking and decision-making time is required which means a bigger reliance on good direction and communication from other functional departments. It also makes breaking down workload more difficult. However, like other departments that have “custom” or somewhat custom demand, many of the activities required to fulfill the demand are actually quite repetitive.
The key concept to focus on is “billable utilization.” How much of an engineers time is spent on activities that are billable, or “earned?” This is similar to the value-added, non value-added concept we have previously discussed. If you can fairly accurately determine the billable or earned hours, then analyzing what the engineers are doing in the non-billable time will uncover opportunities. Here are a few ‘red-flags” to look for that generally indicate room for improvement:
- Workload is not clearly estimated or not considered by managers to be reliable.
- The planning system (work in, work, out, backlogs, all by work type) to determine work prioritization and resource requirements is inconsistent.
- There are communication problems between departments that results in excessive rework.
- Productivity isn’t clearly measured.
- Performance indicators are not well understood outside of the department.
Opportunities for design improvements often come from peripheral functional departments, the people who actually use the engineering services (e.g. customers, sales, production, maintenance). Interviewing these user groups often leads to ideas that may simplify the complexity that can get built into things over time. Some of these opportunities could make the product or service easier to use, easier to build or deliver, or easier to maintain.
