Firms never have enough engineering resources to meet business demands yet projects often overrun in cost and schedule.  Today’s engineering work environment is a complex and chaotic mix of market change, multiple projects, and development risk/uncertainty.

Development projects, the bread and butter of most engineering organizations, require robust project and risk management protocols to achieve cost, schedule, and quality goals. Engineering resources are often pulled in different directions with discretionary requests for their time contrary to what business leaders set as priorities and their strategic intent. The gap between reality and perception can be large leading to misunderstanding, misdirected blame, reduced morale, and degraded business performance.

To understand engineering delivery throughput it is essential that business leaders understand the total demand that the firm is placing on their engineers beyond project commitments caused by six hidden demands on engineer’s time.

Total Engineering Workload

A non-supervisory engineer’s normal available work time for direct engineering project work is about 82-86% of total possible work hours or approximately 47 weeks when holidays, vacation, and normal business demanded time (performance reviews, town halls, functional group meetings, training) are taken into account. There are slight differences for country, role, company situation, and their level (determining vacation) but this baseline range is fairly consistent world wide. Overtime and weekends are normally held in reserve for short term capacity surges to address unforeseen issues and is over and above this total possible work time.

The reality for most engineering organizations is a total engineering workload for a non-supervisory engineer is comprised of eight types of activities:

• Multi-Project Direct Work Tasks & Activities;
• Development Project Risk / Uncertainty Mitigation & Treatment;
• Discretionary Business Activities;
• Multi-Project Inefficiencies;
• Un-Forecast Back-Door / Walk-In Activities;
• Process Inefficiencies (Business & Engineering);
• Rework; and
• Daily Distractions.

Project schedules are often based on the first two types of activities or the work that one would expect would make-up the majority an engineer’s productive time. This approach can lead to under resourced engineering organizations. The problem is that the six hidden demands can create 15-25% additional work. Only 60-70% of engineering capacity may be going to project work as a result causing schedule and cost overruns as well as excessive overtime to keep up. This work volume disconnect drives the engineering capacity perception / reality gap. To address the gap business leaders and engineering management/staff need to determine the extent to which the six hidden demands are impacting their engineering capacity plan.

Discretionary Business Activities

Discretionary business activities are undertaken for good reasons because they lead to growth or improvement in business performance. Engineers often must support business sustaining activities because of their product/technical knowledge, experience, customer knowledge, and academic credentials.  Bids and proposal support alone can on average demand 3-5% engineering productive capacity. Other discretionary business activities aimed at improving business performance may include enhanced training, continuous improvement, or reorganizations which can also consume several percent engineering productive capacity.

The firm’s industry environment, market cycle, and the degree of market force driven change can also have a significant short or medium term impact on the volume of this discretionary engineering workload. Assumptions about discretionary business activity volumes based on years with little change leads to significant engineering capacity demand under estimation.

Capacity availability problems also often arise from discretionary business activities if they are not timed or integrated well with direct project schedule commitments. Discretionary business activities should be synchronized during project demand valleys avoiding seasonal project demand peaks if present in annual work cycle.

Multi-Project Inefficiencies

Most businesses today are multi-project environments because the extremes of dedicated functional or dedicated project teams are inefficient or impossible to implement with scarce specialist expertise. The number, size mix, complexity mix, and novelty mix all combine dynamically to create a constantly shifting work plan with winning / losing project managers. Multi-project inefficiencies are always bad.

Priority conflicts are a leading source of project schedule delays in multi-project environments. Organizations that operate lean or with labour shortages are particularly susceptible to priority conflict. Furthermore a misalignment between project priority and project manager assertiveness can often put individual engineers into difficult situations that impacts morale and job satisfaction that if left unchecked can degrade the operational effectiveness of the engineering organization and impact overall business performance.

Inefficiencies can also be caused simply by the sheer number of individual projects.  The more projects that individual engineers support the more project related overhead activities they are required to keep up with. Project related overhead activities include stand-up or status meetings, project email information, email responses from them, schedule updates/EACs/ETCs, and customer meetings. This activity can require several hours of work per week to sustain multiplied by the number of projects and depending on the stage of the project can be quite intense. This workload is often budgeted under project management as opposed to engineering so is drain on engineering capacity even though project budgets are fine and the net result is a schedule overrun.

To solve this issue business leadership need to implement engineering WIP constraints by limiting the number and mix of projects in process and establish a company wide priority system. Leadership must resist the temptation to load engineering staff up to 82-86% which causes schedule overruns, cost overruns, and near constant overtime leading to fatigue and increased error rate.

Un-Forecast Back Door / Walk-In Requests

Often business leaders and even engineering managers are unaware of many requests coming through the back door to their staff. Individual engineers want to do their best, satisfy external/internal customers but are left confused and unclear of priorities.   Back door and walk-in requests can lead to project schedule delays. Typical examples of back door  and walk-in requests for engineering advice include engineering support to supply chain, engineering support to production, and customer support requests. Another type of back door and walk-in requests on engineers are management questions or management emergencies. Although good intentioned engineers are compelled to respond or they fear being labelled as non-team players, non-responsive, or difficult employees.

Leadership should test whether these back door and walk-in requests are essential for the business and if so should budget to meet this demand. A separate support group could be established if the volume is large enough to separate support work from project work potentially rotating junior staff through the group for experience. Often engineering support groups are completely overhead but when times are difficult the groups are down-sized and the work load moves back to the project support engineers leading to a re-emergence of schedule and cost overruns.

Process Inefficiencies

Waste and inefficient processes add to total engineering workload. Process inefficiencies can relate to either business or engineering process waste. Focusing on engineering process inefficiencies, forms of engineering waste include:

• Over production of information;
• Over processing of information (over design);
• Miscommunication of information;
• Stockpiling of information;
• Generating defective information;
• Waiting for information; and
• Unnecessary movement in working to the process.

An excellent discussion on engineering waste can be found in Waste in Lean Product Development by Josef Oehmen and Eric Rebentisch. Lean engineering methods provide solutions to eliminating waste in engineering processes.  Simply redesigning business or engineering processes can free up enough engineering capacity to mitigate the other hidden workload – sometimes in the 10-15% range. Leadership should ensure that a volume of engineering capacity is budgeted for continuous improvement on an annual basis.

Engineering Rework

Engineering rework can also be a large drain on engineering resource capacity sometimes exceeding 5%. Engineering rework is difficult to see in the same way that engineering work in process is difficult to see because engineering work involves information rather than physical parts. Engineering rework is any effort spent in correcting information resulting from engineering mistakes, errors, or change required to manufacture, build, or support a product. Often though the actual presence or need for engineering rework can be subjective where right or wrong are not clear cut but accountability for solving engineering rework rests with engineering staff and engineering management. The degree of product novelty and complexity can drive higher rates of rework. Common defect categories include:

• Technical accuracy;
• Technical argument structure & soundness;
• Engineering approach;
• Deliverable completeness;
• Regulatory compliance;
• Deliverable format, typos, or grammatical errors (least important)

Rework is a form of waste and must be eliminated. Organizations should establish engineering error tracking systems as part of an engineering quality management system to determine trends, volumes, and support root-cause analysis continuous improvement activities to reduce rework. Rework should be measured and addressed in conjunction with engineering process improvement.

Daily Distractions

Finally, the daily distractions that impact everyone in a work environment go largely unnoticed in most firms also drain valuable engineering resource capacity. Daily distractions include: phone calls; emails; office noise; excessive meetings; and social walk-in interruptions.  Even just 15min/day of distractions can add up to 60 hours per person. A good method to address daily distractions is to have quiet times, often in the morning when staff are most productive, where emailing and phone calls are not permitted.

Annual Engineering Capacity Forecasting

In today’s complex work environment business leaders and engineering managers need to  understand the total engineering workload, how it behaves dynamically, and how it can degrade the operating efficiency of their finite and constrained engineering capacity to correctly forecast the needed capacity.  The six hidden demands on engineer’s time can have a significant impact on engineering delivery throughput.

Problem areas are opportunities to free up capacity to use on more productive work and reduce project schedule and cost overruns. The annual business operating plan is the time to take a deep look at total engineering workload, underlying work volume assumptions, and plan improvement work to prepare a realistic engineering workload forecast. Periodic time studies may be worthwhile to uncover the degree to which the six hidden demands on engineer’s time are causing project schedule and cost overruns.

Firms never have enough engineering capacity to meet their needs. Down-sizing, hiring freezes, narrow specialist expertise, labour shortages, and increasingly demographics are significant constraints on engineering capacity. Engineering work is also constrained to highly qualified staff with unique knowledge, experience, and competencies.   Yet the demands on engineering are continually growing, changing, and becoming increasingly complex.  Capacity shortfalls impact customer satisfaction, company reputation, and goal accomplishment potentially leading to negative fall-out and financial consequences.

If they can’t recruit, managers typically respond to capacity problems with three solutions: working overtime, prioritizing, and outsourcing. These solutions have their limitations.  Lean engineering is a fourth solution that managers can use to expand their capacity by providing a systematic approach to make more efficient use of their existing talent.  Engineering specialists can benefit from lean engineering because it allows them to do more of what they want to do – engineering – which in the long run fuels their career development. Significant results on the order of 5-10% improvements in efficiency can be achieved in the first year of applying lean engineering which for a 100 person engineering organization means freeing up 5-10 scarce resources to meet business needs. Committing to a lean engineering program in the long run can deliver an important competitive advantage to the business and support increased growth but it will take some effort.

Limitations of Overtime, Prioritization, & Outsourcing

What are the limitations of overtime, prioritization, and outsourcing?

Overtime enables short-term capacity surges but can hurt productivity in the medium term from the effects of fatigue and reduced morale. Unfortunately many firms have come to rely on almost continual overtime since the financial crisis.  Overtime can hit overheads hard if not chargeable. If it is chargeable excessive billing can signal inefficiency directly to customers leading to cost overruns that impact the reputation of the firm. Overtime should be held in reserve to mitigate the risk of sudden surprises due to the uncertainty inherent in most engineering and new product development work.

Prioritization allows high priority committed work to be completed but delaying lower priority committed work hurts customer satisfaction that can result in lost revenue in the longer term when customers decide to go elsewhere. Depending on where high, medium, or low priority lines are drawn delaying too much work volume can have a significant impact on the business. Priority decisions should be applied where slack exists between multiple projects off the critical path on any project.

Outsourcing can be effective but can be difficult to manage. Engineering service supplier work needs to be tightly aligned with internal engineering processes, structured to meet project needs, requires extra management overhead, and can be very costly if requirements change often or are not correctly defined up-front.  Outsourcing can lead to hollowing out of a firms core competencies and can create future competitors.  Outsourcing can be effective in the long run but requires extensive investment in the relationship and setting up an effective work allocation/performance management system. Outsourcing engineering work is usually most effective for algorithmic tasks that can be more easily defined, packaged, and monitored with clear end deliverables.

These three solutions help solve capacity problems but are often not enough and can be overused so managers need to look at finding efficiencies.  Unfortunately the process of finding efficiencies often involves an ad hoc approach with mixed, un-repeatable, or un-scalable results.  Managers need a systematic approach to engineering delivery efficiency which is why managers need to take a serious look at lean engineering.

Lean Engineering

Lean engineering is about doing more with less.  Lean engineering is the application of Lean Thinking to engineering and new product development work.  Lean was popularized by James Womack and Daniel Jones in the early 90s with their book on Lean Thinking based on the Toyota Production System. Although lean is best know in the context of lean manufacturing, lean engineering methods have evolved as a systematic approach to gain efficiencies in engineering while taking into account the unique influences of uncertainty, complexity, variety, and creativity in engineering and new product development work. Direct application of lean manufacturing methods to engineering does not work because of these subtle differences from production work that is algorithmic, predictable, and repetitive. In fact drawing parallels with how lean is applied in manufacturing to engineering work in my experience leads to disappointment. Instead lean engineering needs to be understood by starting from the same basic principles of lean but then adopting an information based perspective.

Lean is based on the central principle of delivering only what the customer (internal and external) needs and eliminating all forms of waste.  Quoting Womack & Jones lean ‘is the process of reducing effort, time, space, cost, and mistakes while producing more nearly what the customer wants’ when the customer needs it.  Lean thinking is ‘a way to specify value, line up value creating actions in the best sequence, conduct activities without interruption whenever someone requests them, perform more and more efficiently’. Value creating actions are visualized as continuous work processes or value streams. While lean manufacturing focusses on the flow of physical items through a production environment, lean engineering diverges from the physical model because ‘work items‘ flowing through engineering and absorbing value derived from an engineer’s time are information based.  Engineering work items are primarily virtual in the digital age thus difficult to see in the typical engineering work environment. In fact lean engineering is really about how most knowledge based professions will need to compete in the information age going forward. Software professions are already do this with Agile scrum lean methods.

Lean engineering seeks to improve how engineering value is specified, how value creating actions are lined up in the best sequence, how to conduct engineering activities without delay whenever someone requests them, and perform engineering activities more efficiently. Lean engineering involves a change in mindset. Lean engineering requires managers and staff to ‘question the status quo’ and their prevailing assumptions in how engineering work should be performed to free up capacity in the firm. In this respect lean engineering does involve the complexities of change but the results in terms of capacity efficiencies are compelling.

Waste in Engineering Burns Capacity

Waste in engineering effort is anything that does not contribute to what the customer needs or delays when the customer’s need is satisfied. Not surprisingly examples of waste in engineering include waiting for data, unnecessary tasks, multitasking, hand overs, reinventing, engineering IS tool incompatibilities, over-engineering, rework, distractions – the list is very long.

Waste in engineering can take many forms but the impact is the same – waste burns engineering capacity unnecessarily.  So the underlying logic of lean engineering is that by eliminating waste the capacity of existing engineering talent can be freed up to meet the business needs including making more time for business success enablers such as talent career development and innovation to create new value for the business.

Lean Engineering Methods

There are two varieties of lean methods prevalent in engineering worth noting: lean engineering; and engineering for lean. Making this distinction is important because they represent two very different forms of value capture. The focus of lean engineering is the fast and efficient delivery of engineering work (thus freeing up engineering capacity) while the focus of engineering for lean is to enable lean manufacturing.   Both are important but engineering for lean often gets more attention across the business because 80-90% of a product’s costs are ‘baked in’ during design which greatly restricts buyers and production leaders from achieving cost savings. Lean engineering should be of interest to delivery managers (ie. project managers, project engineers, functional managers, depending on organization structure of the firm) who need engineering capacity to meet their commitments.

Lean engineering methods emerged in the 1990s from global competitive pressures first in the automotive industry followed very quickly by the aerospace industry.   Diffusion of automotive/aerospace lean engineering experience to other industries has been slow – awareness and lack of competitive intensity being leading reasons. Experience from the automotive and aerospace industries has demonstrated that firms can successfully implement lean engineering through value stream mapping, waste identification, process measurement, and some form of local continuous improvement methodology (usually based on DMAIC) to establish repeatable engineering processes and basic process standardization.  Firms should begin standardizing  algorithmic engineering processes first – such as detail drawing production, release, and the change process – then move can to processes involving more creative work when algorithmic processes demonstrate results.

The  basic framework then provides the opportunity for intermediate methods such as engineering work batch sizing, capacity or WIP constraints, sequence, cadence, and synchronization. These methods allow for flow to be managed between multiple engineering processes.  In the longer term more advanced lean engineering methods such as fast feedback, iteration, rapid prototyping, and simulation allow process standardization for those involving higher uncertainties where outcome is less certain – for example fuzzy front end processes supporting new products, new methods, and concept development.    Agile scrum and the Lean Start-up movement are examples of more advanced lean engineering methods being applied in extreme uncertainty situations.

Key Success Factors

In my experience successful implementation of lean engineering requires time, patience, and a methodical application of a series of solutions starting from the most basic to more advanced. Strong evidence suggests that best in class performers have committed to lean engineering for longer than five years.  In my experience improvements came steadily from the application of lean engineering over several years.   Lean engineering is a long-term investment – lean engineering is a journey.  Certainly as competitive intensity increases in an industry, like it did in automotive and aerospace, surviving firms need continuous improvement to stay in the game.

Lean engineering also requires nurturing a culture of lean within engineering and across the business.   Lean requires the application of a DMAIC methodology for continuous improvement.   Lean requires a performance measurement system for appropriate feedback and monitoring.  Lean engineering also needs to be integrated with the firm’s business processes: project management, cost accounting, and resource allocation systems.  This is achievable with the use of visual workflow methods that complement the existing systems without the need for costly investments in additional software.

Lean engineering is a solution for capacity problems that results in faster, more efficient, streamlined delivery with reduced rework. Unfortunately many firms wait until too late to begin the lean journey then don’t have enough time to respond to increased competition, increased demand, or labour shortage.  Please contact me at andrew@alopex-mc.com for help deciding if lean engineering is right for your firm or to successfully implement lean engineering methods, cultural change, and ensure results are sustainable in the long run.