Competitive Engineering does product development and finance fit together? Sure, they can!

It may sound paradoxical — but usually, the department that makes most of the decisions about product costs and customer value only rarely has the financial data it needs to make such key decisions.  For the entire company however, it would be a huge advantage when its designers, engineers and development technicians were well aware of the costs associated with technical product development decisions. The faster they can get detailed information, the better they can steer development and manufacturing costs. Here, Ingenics’ “Competitive Engineering” approach provides the backbone methods and tools.  

In the product development phase, technicians and engineers make thousands of decisions — ranging from which screws should be used, to the product architecture or the choice of construction materials. They therefore determine up to 75% of the customer benefits, the overall costs and the profitability. Despite this fact however, corporate management usually still defines overall pricing and cost policies. That’s why a fresh approach towards economically awareness during product development is needed, including enhancements along the entire product development process.  

Product designers need an overview of costs and customer demands
A corporate balance sheet doesn’t really help technicians or engineers much. That’s because, what they really need to know is: What do customers actually want? And how much do individual design factors or complete components really cost? Once they have these answers, only then can designers effectively search for more economical and customer-oriented alternatives. Or to put it another way, if designers were to receive design-related cost information, they could integrate it as a design parameter.

Failure due to a lack of financial information
Many developments fail due the lack or inaccurate estimates of product costs. And here’s why: technicians and engineers are not usually trained, nor experienced, to cost calculations, cash flow models or break-even evaluation. In short, they’re just not getting the information they need, and sometimes they may even get the impression that they’re being denied access to that information. As a result, engineers may prefer to routinely use their own estimates — which however can be far from the customer’s real expectations.

In the end, the development of truly competitive products is only possible when all criteria are available and fully understood by the development team.

Decisive information in only 2 minutes
Traditional cost calculations are usually inadequate for product designers, because they take too long: purchasing, production, cost and controlling teams need days, weeks or sometimes even months to provide quantified answers. These delays are not realistically compatible with the pace of design decision-making: cost criteria have to be available within minutes. If that takes longer, decisions will often be made blindly.

Independent estimates from technical teams
Theoretically, it would be best to give development teams all the information they need through databases or even AI-tools (Artificial Intelligence). These will be available in upcoming decades and could clearly bring major advantages. But the key question is: Do we really want to delegate cost-awareness to a system? After all, technicians or engineers can actually learn the essentials of finance and cost control theories in a very short time, based on their knowledge of industrial processes. On a specific product, designers usually only work with a limited number of technologies and can easily be continuously trained for new ones, such as through plant visits or expert briefings. What’s most important here is to accept the quick-and-rough estimates — particularly from engineering teams — while recognizing at the same time that responsibility for the final financial reporting remains with the purchasing, the production or the cost control teams.

Integrating middle management
For teams which are already overworked, this approach shouldn’t require additional effort. In fact, it often means just the opposite: With an increased financial awareness, many extensive technical studies could actually be avoided. And by using lean-development principles to reduce unnecessary work efforts, the development teams are also more efficient.

About 35 years ago, as corporate managers focused on quality issues, the decision-making ability and quality-consciousness of practically all teams were enhanced. And today, a similar step needs to be taken towards cost-consciousness. Ingenics is a solid partner to empower your development teams with “Competitive Engineering”, in order to integrate customer values and financial information as a parameter within the product development process, securing your competitiveness from the very start.
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