Phil Biggs covers the automotive industry for NewsTalk 1340 WJRW
January 6, 2014 – 1:30 pm ET
DETROIT, Michigan. – Now that 2013 has drawn to a close, most automakers have realized a nearly double digit year-over-year gain in the U.S. car and light-duty vehicle market, and that’s a pace we haven’t seen since 2007. On an annual basis, the seasonally-adjusted rate will easily surpass 16.5 million, giving good justification to be happy this holiday season. But the dark cloud hovering on the horizon is how the industry will tackle the issue of engineering productivity as volumes continue to rise, in-vehicle technology spikes, and available engineering talent remains static or shrinks.
Continuous innovation is driving the product and process technology curve. Coupled with the increasingly competitive nature of global markets, constant rapid product development has become a key strategic objective of the automakers. Driving this trend are four main factors:
- The need to quickly bring new products to market and increase product variety.
- The availability of new tools and techniques for planning and developing products and processes.
- The complexity of relationships between OEMs and suppliers, organic manufacturers, engineering firms, and other entities, and the requirements of integrating these networks.
- The need to involve key suppliers earlier in deciding the requirements of the product and process in order to avoid subsequent modifications, related costs and delays.
Consequently, many OEMs are beginning to re-define the ways in which products are designed, developed and produced, seeking to condense the time from conception to manufacture. This trend will not abate and likely there will be an increasing engineering productivity gap throughout this decade as the vehicle ecosystem transforms and new technology opportunities and threats are realized.
What can OEMs and integrators do to bridge the gap? The industry is making every effort to attract more Millennials, and eventually this will inject much-needed talent into the professional engineering mix on the front end. But while that process will take the rest of this decade, a short-term fix is needed. Automakers must immediately foster operational and behavioral change, empowering engineering teams to align people, processes and tools to maximize performance improvement. They must create and test new methods to align process design and execution with people development and tools to achieve product development productivity improvement.
To begin, OEMs must take a holistic approach to productivity optimization – incorporating people, processes and systems with bottom-up methodologies that focus on behavioral change, translating needs into operating tactics and eliminating barriers at the point of execution. This approach, coupled with new “systems for managing,” ensures that the results achieved during the course of a productivity project are sustained and enhanced in the months and years after the project is completed.
As Dr. Dave Cole, Chairman Emeritus of the Center for Automotive Research, told me recently, “Engineering teams must now reach beyond their traditional routines in a vertical or silo business model and begin to see the horizontal impact of their work across all functions and disciplines within an organization. As teams begin to be unencumbered by boundaries, they will exceed new technical and product requirements. At that point, new productivity standards are set, greater output can be achieved, and development costs are contained which will positively affect profits.”
Dr. Cole also notes that a future wave of productivity gains will be needed as flexible, configurable in-vehicle systems interface becomes industry standard later this decade, enabling “on-the-fly” telematics, GPS and infotainment systems changes. These new innovations will cause even greater productivity stress on already resource-challenged engineering teams. “Leading-edge virtual prototyping tools and breakthrough virtual integration processes comprise much of the answer, but embedding change management is the key to achieving new productivity levels. Change is tough. Not changing is tougher,” says Dr. Cole.
Overcoming engineering challenges is more than a technical goal…it is a major business hurdle. As the challenges and shortages are met and new productivity standards are realized, entire global organizations hang in the balance. Matching the speed of innovation and fast-paced change demands leverage of all resources throughout the entire company. Change or die. Engineering shortages don’t simply slow down product development, they are preventing on-time vehicle launches, crimping innovation-to-market plans, and causing a negative cost and profit drain everywhere. Monetization of technology is crucial and the best path to get there is through more effective and efficient product and engineering processes. Achieving engineering productivity is more than just clearing a technical hurdle because doing so creates competitive advantage that can be felt enterprise-wide.
Operational transformation must be guided by proven productivity improvement methodology. These new methods should be targeted at identifying the needed productivity gains and then implementing structured changes to deliver those gains. In that context, the engineering call of duty is clear: to close the gap between knowledge and commercially viable applications that deliver real aspirational value to car buyers worldwide. Not for the fainthearted as we forge forward into 2014, but for me it is inspiring how the auto business shows us that being world class is a moving target every day and success is usually found only in the rear-view mirror.
Phil Biggs is Partner, Automotive Markets, for the Bethesda, MD-based management consulting firm The Highland Group.
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