Engineering Change Management in the Engineer-to- Order Production Environment
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Engineer-to-order (ETO) is a production environment where a product is designed, engineered, and produced based on a customer order. Companies operating in the ETO production environment create complex products tailored to the desired specifications of a customer. Typical ETO products are ships, offshore platforms, power generation plants, fish farms, heavy machinery, and original architecture houses, etc. The fulfillment of customer orders in ETO companies is usually organized as a project, and the delivery lead time is in the order of months or years (Bertrand & Muntslag, 1993; Hobday, 2000; McGovern et al., 1999). As in any other production environment, products produced by the companies operating in the ETO production environment are subject to engineering changes (ECs). ECs can be described as changes and/or modifications to the released structure, behavior, function, or the relations among functions and behavior, or behavior and structure of a technical artifact (Hamraz et al., 2013). They are made either to correct mistakes or to improve the product (Eckert et al., 2004; Jarratt et al., 2011). The handling of ECs in the ETO production environment is different from other production environments. ECs in ETO relate to specific customer orders, unlike other production environments, and cannot be postponed to the next product version or production run. ECs can be implemented at any stage of the project and can lead to consequent demolition, rework, and scrap. They can have internal causes, such as the correction of design errors, or external causes, such as a request from the customer. Due to the high product complexity, ECs can propagate deeply into the product, requiring the change of many other parts, sometimes even already produced (Eckert et al., 2004; Hamraz et al., 2015; Leng et al., 2016). Additionally, since incomplete product specifications are often exchanged between project stages in the ETO production environment, ECs are implemented based on preliminary information about the final product (Shen et al., 2010). Companies operating in the ETO production environment report considerable project cost and time overruns due to ECs (Love et al., 2019; Love et al., 2017; Riley et al., 2005; Yap et al., 2018). Engineering change management (ECM) is argued to reduce the negative effects of ECs and enhance positive ones, such as improved product quality, increased customer satisfaction, and even additional business value (Jarratt et al., 2005). ECM refers to the organization and control of the processes of introducing changes to the product. It aims to reduce a number of unnecessary ECs, detect and implement ECs early, correctly assess ECs, implement ECs efficiently, and continuously learn from the implementation process (Fricke et al., 2000). Contingency theory suggests that situational (or contingency) factors often affect the use of management practices and the associated performance outcomes (Sousa & Voss, 2008). In a similar vein, ECM is likely to vary considerably depending on the production environment. Available ECM literature, however, often does not explicitly distinguish between different production environments, and there is a lack of research specifically addressing ECM in the ETO production environment. Hence, the goal of this PhD study was to create knowledge on how to manage ECs in the ETO production environment to improve EC implementation performance. To address the goal of this study, the following research questions have been defined: RQ1. What are the challenges of engineering change management in the engineer-to-order production environment? RQ2. How do the characteristics of the engineer-to-order production environment influence engineering change management strategies, practices, and tools? RQ3a. What are the contingency factors affecting engineering change implementation performance in the engineer-to-order production environment? RQ3b. How do these contingency factors affect engineering change implementation performance? RQ4. How should engineering changes in the engineer-to-order production environment be managed to improve the EC implementation performance? In order to answer RQ1, a literature study was combined with two exploratory case studies. Both the literature and the case studies showed that ETO companies experience challenges with ECM, particularly with regard to impact analysis, data management, coordination and communication, and post-implementation review. In order to answer RQ2, a literature study was combined with in-depth multiple case studies to investigate the relationships between the characteristics of the ETO production environment and the use of ECM strategies, practices, and tools. Based on the literature review, a theoretical ECM framework was developed structuring how the different ECM practices and tools are linked to ECM strategies. An in-depth multiple case study was done to identify ETO characteristics and analyze how they affect the use of ECM strategies, practices, and tools. Five ETO case companies were included in this activity. The results showed that companies´ efforts were directed mainly at effective assessment and efficient implementation of ECs, while change reduction strategy is limited, and continuous learning is almost non-existent. Next, the results showed that ETO companies use similar practices for handling ECs, while ECM tools are either not used by the companies or used to a very limited extent. It was also found that the use of some ECM practices and tools was influenced by ETO characteristics. These characteristics include overlapping project stages, product complexity, customization level, production volume, production process uncertainty, time pressures, nature of relationships with suppliers, experience of a project team, level of customer's technical expertise, and a company's business strategy. No particular reasons were found for the lack of use of computer-based tools, change propagation tools, and design tools. The results also suggest that companies do not fully take advantage of existing ECM practices and tools, either because of a lack of awareness or the perceived unprofitability of these practices and tools. Based on the results, some suggestions were developed with regard to which ECM strategies, practices, and tools are appropriate for use in the ETO environment. In order to answer RQ3, six different ECs were analysed and compared to identify the contingency factors affecting EC implementation cost. The identified factors are risks of demolitions, rework, product damage, and constrained work conditions at late production stages, degree of vertical integration in a supply chain, and contractual, physical, organizational, and cultural distance between project actors involved in a ship production supply chain. The results show that failing to consider these factors leads to EC implementation cost overruns by as much as 30% of the product cost price. Based on the results of the RQs 2 and 3, this PhD study provides five recommendations on the management of ECs in the ETO environment, answering RQ4: Reduce firefighting under EC implementation by implementing ECs early and having a clear and structured ECM process. Re-assess ECs after their implementation for continuous learning and improvement (closed-loop ECM process). Have a flexible ECM process able to accommodate and differentiate between simple ECs requiring little effort and large complex ECs requiring extensive modification. Ensure an accurate EC impact analysis by accounting for contingency factors that might affect the cost of EC implementation. Reduce manual efforts in ECM and ensure central access to data. In sum, this study contributes with new knowledge on ECM in the ETO production environment. It identifies and analyzes factors affecting the use of ECM strategies, practices, and tools, as well as factors affecting the cost of EC implementation in the ETO environment. Based on this, it provides recommendations to practitioners on how to manage the implementation of ECs in ETO.