Situation: A company has an engineering structure which emphasizes function over cost. As a result, there is little collaboration between design and manufacturing, and little design for manufacturability or cost control. This contributes to a last-minute mindset and expensive solutions. How do you shift design engineering and manufacturing from a craft to a lean mindset?

Advice from the CEOs:

• Changing how people think and act may also mean changing people. Are you prepared for this? If not, then it may be difficult to achieve the change that you desire.
• Let’s use a mindset change in another area – sales compensation – as an example. In this case, the sales team had previously focused primarily on revenue, with no incentive to drive margin. This impact was continuously eroding margins, though the company realized revenue goals. The mindset was changed by introducing a new system with dual incentives: to retain their position, a sales person had to hit at least 85% of their revenue target, however commission was based completely on the gross margin from their sales, with a bump in commissions when they hit 100% of their revenue target. This system drove both revenue and margin targets and was very successful; however, the company lost a few sales reps who couldn’t make the adjustment.
• Transferring this lesson to the engineering situation, design an incentive structure that drives both function and low cost manufacturability to achieve both targets simultaneously.
  • Task your VPs of Operations and Manufacturing – and the key managers of your design and manufacturing teams – to create a dual incentive system that meets both function and manufacturability objectives. Measurements may include:
    • Actual vs. initial estimated manufacturing costs.
    • Margin on final product.
  • Once the parameters are developed, clearly communicate these to all affected employees up front to set clear expectations for the future.
  • Incentivize your VPs and key managers jointly on collaborative efforts and their ability to develop joint solutions.
• Another solution which will speed the process – put design and manufacturing engineering in the same work space instead of separating them. This encourages the teams to work together.

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