Executive Summary FHE Engineering Services

Yankee Team David Boulanger 1/20/12

Background Information FHE Inc. is a manufacturer of pumps and related fluid-handling equipment. The company supplies products used to transfer liquids of all types such as paint, adhesives and food products. The pumps are used by the automobile and appliance industries, in vehicle servicing, in home construction and in other ways. FHE Inc. is a multimillion dollar company that has experienced improved sales and profits over the last five years through aggressive new-product introductions ($5,470,000 profit in 2008). The company has three main functional departments: Engineering, Marketing and Manufacturing, which are managed as follows: Vice President of Corporate Development and Marketing Phil Thomas, who oversees both Marketing and Engineering departments, and Vice President of Manufacturing Norman Hart. Although the past five years have been successful for FHE, product development engineering manager, Lum Donaldson began to wonder how procedures, organization and project control systems could be improved in order to make new-product introductions go more smoothly. As stated above, Thomas is in charge of both Marketing and Engineering; FHE chose to do this in order to facilitate cooperation between Marketing and Engineering, particularly with newproduct introductions. While it seems good in theory, it appears that Thomas is overwhelmed with so many responsibilities. In addition, with the marketing and engineering departments so integrated, when problems occur it is unclear as to who should assume responsibility. One major concern within the engineering department is the fluctuation in their services workload. Because all new-product development projects demand the help of various engineering services, there consistently seems to be a bottleneck situation for the engineers. This is limiting efficiency and slowing down the introduction of new-products. Another issue is that the manufacturing department seems to be excluded during the design stage of newproducts. Because of these issues, many problems arise during manufacturing and sometimes products must be recalled. Lastly, FHE is considering a new CAD-CAM system that would coordinate the three departments. This computer system promises to eliminate many errors encountered in translating between engineering and manufacturing. It would also speed up the new-product introduction cycle and eliminate many current production problems, and save the company hundreds of thousands of dollars. Issue Statement FHE has been experiencing difficult new-product development and introduction, with as many as twenty projects bottlenecking in the engineering services department at once and the engineers putting in 220% more hours than the project managers. This is due to over integration and lack of role clarity between the marketing and engineering departments, and requesting little input from manufacturing department during product design stage.
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Recommendations Decrease the ambiguity of primary responsibilities delegated to each department by clearly outlining tasks and specific goals, increase the utilization of manufacturing department input by involving the Materials Manager in product design stage, create specific schedule for future projects and engineering services needed in the next year, and implement a CAD-CAM system as a way of coordinating the three departments within two years. 1. Revise the current primary tasks performed by each department and set specific goals to ensure that all issues are being addressed and remedied. Eliminate ambiguity about which department is responsible for each task. Plan should be fully revised and set in motion by the end of the second quarter (see Appendix 3). 2. Bring the Materials Manager on board to the Design Team so that during the Design Stage potential manufacturing problems can be addressed and prevented with the help of a member with manufacturing knowledge. This will reduce the number of problems that have risen in past manufacturing stages and recalls that have occurred. The decrease should be apparent by the end of the second quarter (see Appendix 3) 3. Create specific schedule for future new-product projects and forecasted engineering services needed for the next year. This will help to stagger the services needed from the engineers and avoid bottleneck situations within the engineering department. There should be a noticeable increase in efficiency by the end of the third quarter (see Appendix 3). 4. Purchase and implement a new CAD-CAM system. With this new system all three departments will be electronically coordinated. Communication will become easier and more efficient and errors encountered in the past between engineering and manufacturing will be eliminated. This system will also create a speedier and efficient new-product introduction cycle for FHE and eliminate many of the production problems it had been experiencing. Summary FHE Inc. is a large, multimillion dollar manufacturer of pump and related fluid-handling equipment. The company supplies products used to transfer all types of liquids. Their sales and profits have increased over the past five years however it has become clear that there is room for improvement within the procedures, organization and project control systems. The problems that have risen in these areas are due to lack of clarity in department tasks and responsibilities, the over-integration of the Marketing and Engineering departments and the exclusion of input from the Manufacturing department. To solve these issues, FHE must address the inadequacies of their current departmental integration by mapping out definite duties required from each department, the integration of the Materials Manager into the Design team, a new and specific schedule drawn up for services needed from engineering, and lastly the implementation of a new CAM-CAD system.
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Attachment 1 FHE Org Chart

Attachment 2 Value Analysis Cost

Reevaluate and create a model of primary responsibilities and specific duties for each department. Create a new department integration plan that includes Materials Manager in Design Stage. Purchase and implement new CAD-CAM system. Create specific schedule for future projects and engineering services needed. $8,000

$7,000

$120,000 $9,000

Total Cost $144,000

Value With FHMs current organization the Marketing and Engineering departments both spent time on the same tasks. With a new precise model of tasks and duties for each department, efficiency has the potential to increase by 30% in each department, which will be a savings of about $12,000 a year. Along with a new plan for responsibility delegation, bringing the Materials Manager aboard during the Design Stage will cause fewer problems to arise later on during the Manufacturing stage, thus saving money in re-calls and post-product release. This will save about $18,000 in manufacturing costs per year. The implementation of the CAD-CAM system will speed up the new-product introduction cycle and eliminate many of the current production and communication problems that they are facing. A project schedule for new products and engineering services needed will decrease the current bottleneck issue that the engineering department is currently experiencing and increase efficiency by at least 30%, saving $120,000 in the first year and $240,000 each following year. So in the first year there would be a grand total of $414,000. ROI Value = $805,000 Cost = $144,000 Value/Cost = Return on Investment $805,000/144,000 = 5.59 The ROI for all of the recommendations stated is 5.59. It is important to remember that this analysis just covers the first years and that these changes will remain favorable for years to come. It would be beneficial for FHE to invest in these recommendations.

Attachment 3 Deployment Framework SMART Goal: Decrease the ambiguity of primary responsibilities delegated to each department by clearly outlining tasks and specific goals. Increase efficiency in the Marketing and Engineering department by 30% in the next year. Save $120,000 in the first year thanks to the efficiency increase and decrease of products recall. Implement new CAD-CAM system as a way of coordinating the three departments within one year.
Action Time Frame
Begin (Qtr/Yr) Q1/Y1 End (Qtr/Yr) Q1/Y1

Responsible

Cost

1.

2. 3. 4. 5. 6.

Analyze current situation of departmental issues and meet with management team to discuss recommendations. Assign a manager currently at FHE to revise current department responsibilities. Establish a plan and goals for the implementation of the new delegation of tasks for each department. Revise Design Stage involvement team to include Materials Manager. Meet with new Design team and discuss new meeting process and agenda. Create specific schedule for future projects and forecasted Engineering Services and Marketing needed. Implement schedule for new projects.

President, VPs & Mngt Team President, VPs & Mngt Team President, VPs & Mngt Team Mngt Team & Materials manager Design Team & Materials Manager Engineering Service & Admin. Manager & Marketing Engineering & Marketing Departments President, VPs & Finance Vendor & Mngt Team & Engineering & Marketing & Manufacturing Departments President, VPs & Mngt Team

n/a

Q1/Y1 Q1/Y1 Q1/Y1 Q1/Y1 Q1/Y1

Q1/Y1 Q2/Y1 Q1/Y1 Q2/Y1 Q2/Y1

$8,000 n/a $7,000 n/a $9,000

7.

Q1/Y1

Q3/Y1

n/a

8. 9.

Purchase new CAD-CAM system (25 Autocad License + computer update) Implement new CAD-CAM system.

Q1/Y1 Q1/Y1

Q1/Y1 Q2/Y1

$100,000 $20,000

10. Analyze the impact of the new CAD-CAM system on the production process.

Q2/Y1

Q4/Y1

n/a