Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

7.5 Cooperation between R&D and Engineering in ETO Companies

Intended learning outcomes: Describe different means used for cooperation between the R&D and the order-specific engineering departments. Present the portfolio of cooperation types between R&D and engineering in ETO companies.


Mass customization is widely used in sectors such as construction, machinery and equipment, auto­motive and fashion. The “standard” product solution space is ultimately determined by the R&D department, as a part of the product design (PD) process, by determining the parameterization. The Engineering department (generally separate from the R&D department) sets up the order specific engineering (OSE) process, which covers all the design activities aimed at a specific customer order. This process should extend the product solution space quickly and efficiently so that it can cater for non-standard requirements.

A lack of cooperation between the R&D and Engineering departments in companies is one possible cause for delays and cost overruns. Engineer-to-order (ETO) firms have to find ways to quickly adapt and integrate engineering, manu­facturing and supplier capacities. In practice, however, there are significant differences in cooperation between the R&D and Engineering departments. [SöWe17] addresses these differences in firms in the construction and machinery industries. Section 7.5.1 summarizes the observations in the case of two companies — details about the various means (practices and tools) used can be found in [SöWe17]. Section 7.5.2 identifies factors that influence the cooperation and thus the choice of such means. From this, it develops a portfolio with four sectors of fundamental types of cooperation in ETO firms. Companies in the same sector can benefit from sharing their methods and tools.


7.5.1      Different Means Used for Cooperation between the R&D and the Order-specific Engineering Departments

It is practical to classify the means utilized, among other criteria, by five conse­cutive phases of potential cooperation between R&D and Engineering along the value chain, as shown along the green line in Figure 7.5.1.1. Thereby, the typical market-driven PD differs from customer-driven PD (i.e. when a customer order triggers conventional PD activities). Also, customer-driven PD and (pre- and post-award) OSE differ in their primary scope: the design of a standard component and the customization of a component, respectively.

Figure 7.5.1.1    Design and specification of a product in an ETO environ­ment (green line): Five phases of potential cooperation between R&D and Engineering along the value chain

[SöWe17] describes several formalized practices and tools used in two companies. These means allow the companies both to fulfil actual customer requirements via OSE and, regular­ly, to integrate the newly developed product specifications into the standard solution space for future reuse. In both companies, there are also informal means of communication. These are just as important. However, their investigation is not within the scope of this Section.

The Industrial Steam Turbines business unit of General Electric (GE) has about 90 R&D and OSE engineers. Engineering is active during 70% of the delivery lead time. Almost all of the 10-20 orders per year follow specific customers’ requirements such as output capacity, pressure and temperature levels for the turbine. Each engineering project is divided into subtasks accord­ing to knowledge domains and to specific components of the final product. The assembly of the different modules also requires order-specific interfaces. Such complexity results in, on average, more than 6,000 (sic!) man hours per project. GE often benefits from quick retrieval of product-related information out of ad-hoc repositories, and deve­loping search engines aimed at navigating through the company’s product solution space and relevant design instructions. R&D and Engineering cooperate using several formalized organizatio­nal practices and IT tools. R&D and Engineering jointly develop and maintain these tools and processes. Overall, there is a high degree of cooperation between the two departments.

The high-rise elevator business unit is a relatively small entity within Schindler Europe and Asia-Pacific. The use of a sophistica­ted product configurator allows a high degree of standardization, and therefore offers high efficiency of the order acquisition and fulfilment process. This IT tool was developed in view of the substantial number of orders sold per year. It enables identification of commonalities in the customer’s requests, and in turn expansion of the company’s standard product solution space. For many orders, the classical make-to-order approach is adequate. If customers’ requirements entail a non-standard solution, the Engineering team attempts to generate new designs and associated technical solutions. The majority of orders require less than 100 hours of engineering work. Very few tools are used for cooperation between R&D and Engineering. Most of the practices and IT tools are used within the high-rise elevator business unit, often only within Engineering. Overall, and in particular during the OSE process, there is only a low degree of cooperation between R&D and Engineering. Also, phase 3 in Fig. 7.5.1.1 is not used by Schindler.

Furthermore, the majority of the means used by GE are organizational practices and short-term oriented, whereas for Schindler they are IT tools and long-term oriented.


7.5.2      The Portfolio of Cooperation Types between R&D and Engineering in ETO Companies

In terms of cooperation between R&D and Engineering, the following influencing factors were noted from the observations in companies and from the literature. Thereby, the influence of the factors are not of equal weight in each company.

  1. Sales volume, or the number of orders (for a batch size of one, this is equivalent to the number of units). According to [WiPo16], two or more orders per day counts as a high sales volume, and a dozen orders per year as a low sales volume.
  2. Level of integration of product design and guidelines: A high level means that knowledge about the method of generation of customer-specific components using OSE has been integrated into the PD process, and therefore into the product design guidelines and the product configurator.
  3. Degree of product customization: From the company's perspective, a high degree means that it involves developing new components, rather than just adapting existing ones.
  4. Level of component engineering complexity: A high level means that the OSE contains a high measure of time and effort to adapting components, or developing new ones.
  5. Level of architecture engineering complexity: A high level means that the combination and interfaces of (main) compo­nents in the product have to be newly developed and produ­ced each time, as is often the case in e.g. plant engineering.
  6. Accuracy of estimating the duration of OSE. A high accuracy also involves a high level of component modularization and commonality, making it easy to estimate time and effort needed to select them and position them in the product (whether time and effort needed are low or high).

Being more precise about “high” or “low” for all six influencing factors (e.g. using mathematical formulae) depends on the product and on the competitive situation, and is usually difficult to implement in practice. However, even using just two simple values, i.e. “high” and “low”, the examples of GE and Schindler show clear differences in two funda­mental types of cooperation between R&D and Engineering, as shown in Figure 7.5.2.1.

GE Industrial Steam Turbines belongs to the high cooperation type, whilst Schindler high rise elevators is of the low type. [SöWe17] present further companies that fit this division.

Figure 7.5.2.1    Two fundamental cooperation types in ETO companies

[SöWe17] also contains examples of ETO companies with two other types of cooperation, which fall between the two types in Figure 7.5.2.1. This situation entails a two-dimensional classification where influencing factors 1.) to 4.) above represent one dimension, and factors 5.) and 6.) represent the other. Figure 7.5.2.2 shows the resulting portfolio.

Figure 7.5.2.2    The portfolio of cooperation types between R&D and Engineering in ETO companies. (A filled arrow shows high cooperation in the respective direction, an empty arrow shows low cooperation).

Sector C1 describes the high, and Sector C4 the low mutual cooperation between R&D and Engineering in both the PD and OSE processes, as discussed with Figure 7.5.2.1.

The cooperation type in sector C2 represents a situation where R&D regularly cooperates with Engineering in OSE by supporting the development of new product specifications, while, vice versa, Engineering cooperates rather less with R&D in PD.

The cooperation type in sector C3 represents a situation where Engineering contributes to defining the new variants or components by updating the product family in PD, whilst, vice versa, R&D is largely not included in OSE activities.

Workshops showed that comparing practices and tools becomes fully useful when it involves two firms that use the same cooperation type according to the classification in Figure 7.5.2.2. But even then, the practices and tools must be adapted to suit the specific situation of the relevant company and product family.



Course sections and their intended learning outcomes

  • Course 7 – The Concept for Product Families and One-of-a-Kind Production

    Intended learning outcomes: Produce logistics characteristics of a product variety concept. Explain adaptive and generative techniques in detail. Describe the use of generative and adaptive techniques for engineer-to-order. Differentiate various ways of cooperation between R&D and Engineering in ETO Companies.

  • 7.1 Logistics Characteristics of a Product Variety Concept

    Intended learning outcomes: Differentiate between high-variety and low-variety manufacturing. Describe different variant-oriented techniques, and the final assembly schedule.

  • 7.2 Adaptive Techniques

    Intended learning outcomes: Explain techniques for standard products with few variants as well as techniques for product families.

  • 7.3 Generative Techniques

    Intended learning outcomes: Disclose the combinatorial aspect and the problem of redundant data. Present variants in bills of material and routing sheets as production rules of a knowledge-based system. Explain the use of production rules in order processing.

  • 7.8 Scenarios and Exercises

    Intended learning outcomes: Apply adaptive techniques for product families. Disclose the use of production rules in order processing. Elaborate the setting the parameters of a product family.

  • 7.9 References

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