Companies in the automotive and engineered-product industries face complex and costly product-development challenges. Last-minute changes and time and cost overruns are common and, in many cases, attributable to poor alignment of product requirements, the development project’s time line, and the product’s target cost. Some products move forward in the development process despite obvious deficiencies because internal politics frequently trump objective facts. These problems typically stem from inadequate collaboration within and among departments, as well as a failure to capture, utilize, and share knowledge throughout the organization.
Today’s market environment has intensified these challenges: product lines are proliferating, customers are ever-more demanding, and digitization is changing the way companies operate. To overcome these challenges and remain competitive in this dynamic market, companies need a new approach to product development that simultaneously improves quality, enhances speed, and controls costs. As Martin Winterkorn, CEO of Volkswagen, put it recently, “It’s no longer all about bigger, higher, further. Now, it’s about being leaner, faster, more efficient.”
To address this imperative, many companies have started to explore the opportunities lean engineering offers: they are adapting lean methods that are used in production and administration and applying them to product development. The companies that were first to master lean engineering have gained significant competitive advantages by developing higher-quality products in up to six months less time, while reducing deviations from product target costs by more than 35 percent.
Although the benefits of lean engineering are clear, capturing them has proved difficult for many companies. The tried-and-true lean methods applied in production and administration do not correspond neatly to product development, in which processes are not easily analyzed and sequenced and waste is not clearly visible. Unlike traditional target areas for lean, the finished product is unknown at the beginning of the product development process.
Whereas production and administration entail consecutive processes, engineering requires creative loops within processes. This means that the process itself influences the final product specifications because the knowledge acquired leads to improvements. Moreover, deviations from a planned process—muda in lean terminology—are undesirable and costly on the shop floor or in the back office; however, in product development, deviations can provide valuable insights.
To what extent are companies applying lean methods in engineering and what are the success factors for creating value through these efforts? To find the answers, we have combined insights from our experience supporting lean transformations and a recent benchmarking study of 100 leading companies in the automotive and engineered-product industries. Our research partner in the study was the Department of Innovation Management of the Laboratory for Machine Tools and Production Engineering at RWTH Aachen University.
Our conclusions: Companies experience critical gaps between their aspirations for lean engineering and their current performance. To close these gaps, they need to take a broader and deeper approach to transforming the effectiveness and efficiency of their product-development function.