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Moving the Mountain: Address R&D Efficiencies

Deloitte Debates


Reduce engineering churn and add more value early in the R&D process, or stick with the status quo?

In their ongoing quest to become more efficient, many R&D organizations largely focus on reducing administrative inefficiencies such as burdensome approval processes, lack of information and meetings that are unproductive or unnecessary. Yet they tend to overlook the bigger issue of engineering churn, which is caused by problems such as shifting design requirements, poor integration of design components and post-production design changes. Although engineering churn burns up a lot of time and resources -- and has a much bigger impact on the bottom line -- it is often ignored because it is more complex and challenging to address. And in some cases, it is not even recognized as a problem.

Should companies focus more attention on reducing engineering churn and adding more value early in the design process? Or should they accept the status quo and focus their efforts elsewhere? 

Here’s the debate that many business leaders and R&D executives are wrestling with.

  Point Counterpoint
Focus more attention on engineering churn and accelerate engineering value
“The best way to improve engineering efficiency is to avoid unnecessary design changes, minimize rework and improve coordination between design and manufacturing from the get-go.”
Reduced engineering churn will lower our design costs, accelerate development and improve our overall competitiveness. It’s too hard. We wouldn’t even know where to start.
Administrative inefficiency is wasteful, but not as wasteful as engineering churn. Administrative inefficiency is easier to tackle because everyone recognizes it and agrees it’s a problem.
  Point Counterpoint
Stay the course
“We are already doing everything we can to improve engineering efficiency.”
Design changes are inevitable. Engineering churn is just a cost of doing business. Although some churn is unavoidable, the truth is most churn can be managed and significantly reduced.
We already use process flow diagrams to understand the tasks that engineers perform and how much time is spent on core and non-core activities. Process flow diagrams tend to reflect idealized processes, rather than how work is actually performed. As such, they generally don’t capture the complex interactions that account for the lion’s share of manageable churn.

My Take

Brian MeekerBrian Meeker, Principal, Deloitte Consulting LLP

Many R&D organizations do not view manageable churn as a waste, but as a value-added activity necessary to get the design right. However, our experience with companies around the world shows that excessive churn is a clear indicator of inefficiency and can be sharply reduced without an adverse effect on design outcomes. For example, poorly defined requirements early in the design cycle can cause excessive churn in later phases, which ultimately increases costs and slows things down. Other common causes of manageable churn include:

  • Lack of integration. R&D organizations are becoming more and more sophisticated in their use of computer-aided tools to design and model product parts. However, disconnects can still occur when individual design efforts are not tied into a requirements management process that ensures the separate components will ultimately work together. Not having the right tools, processes, people or data to achieve the necessary integration can contribute to excessive churn.
  • Poor synchronization across design groups. Different design teams tend to work at different speeds. Unless work is scheduled and prioritized, some groups inevitably fall behind or find themselves waiting on others. This is particularly challenging when the time comes to test that various components work together – especially if some components are mechanical while others are software or electrical.
  • Design by committee. Building consensus around decisions can be a valuable exercise. However, excessive deliberation and lack of clearly delineated decision-making roles is counter-productive and can make it difficult or impossible to meet product development deadlines.
  • Lack of cross-functional integration. R&D needs to bring other functions into the development process as early as possible. For example, failure to get the manufacturing organization involved can lead to inadequate tools and shop floor processes. Similarly, failure to involve the after-market service organization can create costly support problems for the company and its customers. The best design in the world is useless if it cannot be built or supported.

One reason engineering churn is hard to fix is because it is hard to see. The right diagnostic tools can help decision-makers visually analyze engineering data to better determine how much churn is unavoidable and how much can be eliminated. Tools and techniques from lean manufacturing and Six Sigma can then be applied to help address the root causes of manageable churn and add more engineering value in the early stages of the design cycle.

A view from global manufacturing

Thomas Marriott, Principal and Consulting Leader for Consumer and Industrial Products, Deloitte Consulting LLP

Manufacturing businesses around the world have been operating in a severe cost-cutting environment for more than a year and the pressure to keep costs down is unlikely to abate any time soon. In fact, for many global manufacturers, cost reduction and limited R&D funding have become a basic business requirement. 

Of course, most manufacturing companies do not have the luxury of cost-cutting their way to prosperity and growth. At some point, they will need to invest in new products, markets and growth opportunities. Achieving sustainable growth and innovation in the face of limited R&D funding requires improved capabilities. Sticking with the status quo is simply not an option.

Attacking engineering churn to significantly improve R&D efficiency, while, at the same time, improving R&D performance, must be considered. For example, a global construction equipment manufacturer recently identified 30,000 engineering labor hours that could be better spent developing new products. Similarly, a global aerospace manufacturer identified $10.6 million in annual engineering labor that could be used more efficiently.

Identifying and reducing engineering churn can enable a company to redirect wasted resources and effort to activities that create value for the business and improve its overall competitiveness in the marketplace.

A view from the automotive, process and industrial products sectors

Mark Gardner, Principal and Consulting Sector Leader for Automotive and Process and Industrial Products sectors, Deloitte Consulting LLP

Automotive, process and industrial products manufacturers share a common characteristic: they all manufacture highly engineered products. For these businesses, the benefit opportunities of attacking waste in engineering are the same as for attacking waste in manufacturing operations — reduced cycle time, increased throughput, higher product quality and lower costs.

Unfortunately, the drivers and impact of non-value activities and inefficiencies in engineering tend to be less apparent than in manufacturing operations, where physical scrap, inefficient flows and poor production quality often are readily visible. The good news is that analytical tools are available to help companies in their efforts to identify and address the damaging effects of engineering churn.

The payoff for auto, process and industrial manufacturing companies can be relatively high since engineering costs comprise such a large percentage of their overall cost structure. For example, a global automaker recently identified 298 man-months of wasted development time per full vehicle program, which represented millions in excess R&D costs. That is a level of waste and inefficiency today’s manufacturers simply cannot afford.

Related Content:

Library: Deloitte Debates
Services: Consulting
Overview: Strategy & Operations, Supply Chain and Manufacturing Operations
Industries: Process & Industrial Products, Automotive and Aerospace & Defense

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