The Management of Specifications in Engineer-to-Order Capital Goods Companies

© Chris Hicks, Tom McGovern and Paul Braiden, 29/3/2001

SPECS/1

The Management of Specifications in Engineer-

to-Order Capital Goods Companies

http://www.staff.ncl.ac.uk/chris.hicks/presindex.htm

[email protected]

Chris Hicks & Paul Braiden, Mechanical, Materials & Manufacturing Engineering

Tom McGovern, School of Management.


SPECS/2

Background• Majority of research in supply chain

management in automotive and electronics industries.

• Investigated supply chain management in ETO capital goods companies.

• Configuration of ETO companies along continuum from vertically integrated to design and contract.

• General work on the varying configurations of processes in ETO companies.

• Used SSADM functional modelling methodology to model internal processes and interactions with customers and suppliers.


SPECS/3

Typology of ETO Companies

(International Journal of Logistics: Research and Applications 4(1), April 2001)


SPECS/4

Insert FourTypes.doc


SPECS/5

Supplier

Customer

Non-Physical Processes

Physical Processes

Support Processes

1 Sales & Marketing

Identify marketsObtain invitations to tenderNegotiate with customer

2 Tendering

Deduce requirementsProduce conceptual designEstimate cost & lead timeProduce tenderContact internal functions &suppliers

3 Engineering

Conceptual designGeneric/specificdevelopmentProduce detailed design

4 Project Management

CommunicationPlanning of activitiesLiaising with customers / suppliersControlling progressBudgeting

5 Procurment

SpecificationSupplier Selection,Contract negotiationOrdering & Expediting

9 Manufacturing

Manufacture components

10 Assembly

Assemble components(in factory)

11 Construction

Construct product(site based)

12 Commissioning

Commision product

13 Service & spares

ServiceRefurbish

7 Finance & Accounting

Financial accountingManagement accounting

8 Human Resource Management

Selection, recruitmentTrainingKnowledge & skillsAppraisalPayrollNegotiation

6 Quality

Quality controlQuality assurance

Lin

ks to a

ll oth

er

pro

cesse

s

IEEE Tranasactions on Engineering Management 47(4), November 2000, pp1-11.


SPECS/6(International Journal of Logistics: Research and Applications, 2(2), April 1999 pp147-159)


SPECS/7

(International Journal of Logistics: Research and Applications, 2(2), April 1999 pp147-159)


SPECS/8



SPECS/9



SPECS/10

Outcomes

• Difficult to forecast demand• Tendering success rate low.• Many companies had ad-hoc

procedures for selecting which invitations to tender should be responded to.

• Relationship marketing becoming increasingly important.

• Common requirement to release value from supply chains.


SPECS/11

Observations

• Majority of cost and planning commitments occur during the tendering process.

• Variety of relationships: adversarial, partnerships, strategic alliances, joint ventures etc.

• Functional versus technical specifications an important issue.


SPECS/12


SPECS/13

Research Agenda

• Specification, Risk and Value Streams• Human Resource Management in ETO

companies.• Knowledge Management• Project planning and optimisation


SPECS/14

Specifications• “A written description of a product to

guide the development process” (Smith and Reinertsen 1992).

• Limited research on specifications• Nellore investigated “black box”

specifications in the automotive industry.

• CRINE initiative in offshore industry


SPECS/15

Aims

• Aim is to understand the wider process, significance and dimensions of specifications.

• Effective supply chain management requires the matching of specifications with suppliers’ capabilities and capacities.

• To develop a model that is applicable throughout ETO supply chains.


SPECS/16

Objectives• To understand and model the

specification process and its impact on:– Costs– value streams– lead-times– Flexibility– Risk– Innovation– product development.

• To identify current alternative and best practices in ETO supply chains.

• To facilitate learning within and across sectors.


SPECS/17

Method• Analyse various ETO specifications in

terms of document content.• Analyse the specification process

involved in creating, interpreting and decomposing specifications.

• Develop models of the above.


SPECS/18

Analysis of Specification Documents

• Analyse the language and content of specifications.

• Purpose of content: – Performance, technical, functional,

commercial and through-life requirements

– Risk minimisation– Compliance with legal, regulatory

and customer requirements.– Project management, quality

assurance and financial control.– Legal liability, arbitration

arrangements etc.


SPECS/19

Analysis of Specification Process

• Analyse the process of producing specifications for different types of supplier and systems.

• Analyse the process of interpreting customer specifications– Functional models– Tacit / Explicit knowledge of

requirements– Identifying and mitigating risk– Decomposition into internally and

externally sourced subsystems• Investigate the transmission of

specification information within the internal and external supply chains.


SPECS/20

Models

• Produce:– Functional models – Decision models– Mismatch models– Value stream models

• Match specification processes to different types of ETO supply chains / companies.