Product changes are necessary but costly
A finished product is often worlds apart from the idea that gave rise to it. In the manufacturing industry, functional or design changes are an important aspect of product creation. Their impact follows a simple rule of thumb: The later the change, the higher the cost.
In product lifecycle management we speak of the “rule of ten”, which says that with each successive product lifecycle phase, the effort required to implement a change increases by a factor of ten. To minimize work and costs, project managers therefore try to make adjustments as early as possible. But even if you have such a frontloading strategy in place, your business must anticipate changes at any time – as late as product launch and even beyond.
How do engineering changes impact your business?
The cost effects of engineering changes not only impact product development: They affect all business processes from purchasing to distribution, marketing and sales and through to controlling. If a supplier changes the material makeup of a component, for instance, purchasing will need to find new suppliers and the technical editing team has to adapt the documentation.
Our info graphic shows how and where changes produce costs.
What cost effects do engineering changes have?
Cost-efficient implementation of “can” and “must” changes
Changes can be prompted by a variety of reasons. Manufacturers may make changes to comply with new legal regulations or as a short-term reaction to perceived market opportunities. Regardless of the motivation, however, a business must always strive to minimize the cost of “must” changes and fully exploit the benefits of elective changes.
To keep a grip on the financial impacts of engineering changes, your business needs to develop a holistic view of your functional and constructive challenges, the cost effects of the respective changes, and the interrelationships between them. For many manufacturers, this is a tough nut to crack.
The cost risks of changes are often overlooked or underestimated
Particularly when making complex modifications, it is important to undertake a realistic assessment of change costs that takes all relevant aspects and data into account. However, the tasks handlers and business units involved in this exercise often lack a sufficiently broad perspective on the impacts of a change.
As a consequence, they may overlook knock-on effects and neglect important aspects that lie beyond the confines of product development. This may, among other reasons, be caused by a lack of
- standardized processes
- communication between stakeholders
- time and human resources
A structured engineering change management (ECM) system with clear procedures and roles can overcome these obstacles and enable an effective analysis of cost risks. The crucial factor is that the ECM workflows must be seamlessly digitalized so as to make the relevant information available at all times throughout the entire process.
Success thanks to end-to-end data
End-to-end data ensure that all information is continually available and traceable. Many businesses, however, have not yet fully integrated their data, particularly along the product creation process (PCP) and between the PCP and other business processes.
To enable improved and effective digital collaboration between business units including product development, production, purchasing and sales, they need to seamlessly integrate their product lifecycle management (PLM) scheme with their enterprise resource planning (ERP) system.
This integration offers all stakeholders ready access to reliable and correct information on materials, material costs, component changes, etc. It also ensures that all involved parties are up to date and can understand and trace the relevant processes.
Such a 360° view lets data-driven businesses close gaps in their cost assessments and resolve target conflicts between engineering goals and economic objectives.
If, for example, your sales unit requests a more competitive price for a product, the best answer may be to change the product’s technical specifications or component materials. End-to-end data and seamless cost calculation let you test various scenarios to find the most cost-effective solution.
Three strategies for short- and medium-term cost reduction in change management
When it comes to simulating changes and assessing the costs they produce, many business managers would love to have a digital twin of their processes and products and a means for leveraging artificial intelligence for assistance in decision-making. But until this goal becomes a reality, they can gain plenty of benefits from process control software and the three-prong strategy detailed below.
1. Structuring your process control
Businesses must find ways to enable seamless collaboration during change projects. Process control software opens up data and knowledge silos within the enterprise. Digital workflows, checklists, uniform validation criteria and automated documentation of change steps help your teams improve the way they share expertise and experience.
2. Optimizing your requirements management and your ECM
The more efficient you become in implementing changes, the lower your cost risks. Modernizing your ECM to address all phases from the initial change request to final implementation is therefore a wise investment. Structured procedures and a seamless exchange of knowledge throughout your business help you stay on top of costs.
To achieve seamless ECM processes, you should also upgrade your requirements management. If you can log requirements efficiently and traceably and digitally manage your product lifecycles, you will find it much easier to analyze the consequences of changes.
3. Improving your data basis
End-to-end data are the driving force behind digitalization and offer a wide range of benefits above and beyond pure product creation. To fully exploit these benefits, you should therefore also focus on expanding and improving data integration throughout the PEP. Integrating data flows within the PEP, and also between the PEP and other business processes, enables seamless communication and coordination between different business units and systems.
Process control software also produces clean data flows and creates a central data pool for materials, processes and changes.
This provides you with a complete, continually updated information basis for identifying financial risks and opportunities. End-to-end data management also lets you analyze historical data, making patterns and trends visible and thereby improving future cost estimates.
