Monthly Archives: July 2010

RESEARCH BRIEF: Engineering Change Orders (ECOs), an important engineering performance indicator

By Chao Wang, MS Candidate
Department of Wood Science and Forest Products
Virginia Tech

What are Engineering Change Orders (ECOs)?

ECOs are also called Engineering Change Notices (ECNs) or just Engineering Changes (ECs). ECOs are a significant driver of product development costs and lead time (Loch and Terwiesch 1999). Engineering changes (ECOs) refers to making design changes to an existing product (Barzizza, Caridi, and Cigolini 2001). It includes changes for improving production efficiency as well as the changes for assuring product quality and performance (Balakrishnan and Chakravarty 1996).

Types of ECOs

(Barzizza, Caridi, and Cigolini 2001) categorized ECOs as “scrap”, ”rework”, and ”use-as-is”. “scrap” means serious technical faults and user safety problem and needs to be solved immediately. “Scrap” will directly affect the work in progress (WIP) inventory since all these inventory cannot be applied to other products. ”Rework” means ECOs are required for improvements of pre-change WIP without affecting finished products and components. ”Use-as-is” means a product has no technical faults and user safety problem but need to improve product design.

Engineering Performance of Furniture Industry

Figure 1. Causes of Engineering Errors

ECOs are also one of the reflections of engineering performance in the furniture industry. According to our interview, furniture engineers spend over 50% of their available engineering time on issuing ECOs for late design changes and architecture modifications. ECOs could be classified as ECOs for engineering errors and ECOs for engineering improvements. Less engineering errors could not only ensure product quality, but also could shorten the time-to-market and reduce the production cost. In order to find what are the most frequently occurred errors, a Pareto analysis could help us to have an idea on what the major contributors are. Figure 1 showed a Pareto Analysis of the engineering performance of a solid wood furniture company. The ECOs data represents a single month in that company. The number of ECOs issued for correcting engineering errors accounted for 98.67% of all the ECOS issued during this month. The rest 1.33% were ECOs for product improvements. From Figure 1, we could observe that “drawing error”, “part dimension error” and “wrong selection of hardware” take over 80 percent of the total engineering errors (most critical ones according to Paretto Analysis). Specifically, “drawing error” accounts for 44% of all the errors. Followings are” part Dimension Error” which accounted for 32%, “Wrong selection of hardware” accounted for 10%, “Hardware missing” accounted for 9%, “Wrong numbers of hardware” accounted for 3%, “Dimension missing” and “Missing drawings” both accounted for 1%.

Knowing what are the major causes of engineering error is important because ECOs (for correcting the engineering errors) are a type of waste which requires a lot of rework and iteration period. The Pareto Analysis can help us to find the major causes, and then we could try to find effective methods to eliminate these wastes.

Reference:

  • Balakrishnan, N., and A. K Chakravarty. 1996. Managing engineering change: Market opportunities and manfucturing costs. Production and Operations Management 5, no. 4.
  • Barzizza, R., M. Caridi, and R. Cigolini. 2001. Engineering change: a theoretical assessment and a case study. Production Planning & Control 12, no. 7: 717–726.
  • Loch, C. H, and C. Terwiesch. 1999. Accelerating the process of engineering change orders: capacity and congestion effects. Journal of Product Innovation Management 16, no. 2: 145–159.

RESEARCH BRIEF: Statistics for the Pallet Industry sector in US

By Leslie Scarlett Sanchez, MS Candidate
Department of Wood Science and Forest Products
Virginia Tech
 

Pallets

Pallets are the interface between packaging and the unit load handling equipment (White & Hamner, 2005). Another simpler definition is that pallets are “portable platforms”, which facilitates the movement and storage of unitized goods (Kator, 2008).

Unit loads are also important to define, as the system comprised of pallets, packaging materials, and unit load stabilizers (stretch wrap, tie sheets, corner posts, load adhesives, and strapping).

Pallet Sizes

The growth of domestic and international trade, the need to plan operations for the transportation, warehousing, and handling of materials throughout the supply chain have made necessary the creation of standard dimensions for pallets. If every manufacturer or transportation agent would create and use its own dimensions, there would be significant costs added to the logistics operations; costs that at the end would be transferred to the final customer as higher product prices. Standard dimensions also facilitate the mass-production of pallet parts, reducing their unit cost.

There are a variety of pallet sizes, depending on their major use and the geographic region where they are manufactured or used. Some of the most common sizes used in the U.S. according to the American National Standard/ MH1 (2005) are listed in the Table 1 below:

Table 1. Pallet Dimensions (American National Standard/ MH1, 2005).

Common use Pallet Size (in.) Share of annual production (%)
Grocery 48×40 30.0
Chemical 42×42 5.7
Military 40×48 4.0
Beverage 36×36 3.0
Source: American National Standard/ MH1, 2005
 

Employment in the Wood Pallet Sector

Pallet and containers manufacturers are rather small, with more than two thirds of establishments having less than twenty employees. A typical firm in this sector has only one establishment. Figure 1 shows the employment characteristics of pallet and container firms.

Figure 1. Employees per Establishment in 2006 (Census Bureau, 2010)

 

Lastly, the economic significance can also be understood by looking at the value of shipments in the U.S. As can be seen in Figure 1, value of shipments has increased almost 45 percent over the period shown (2000-2008), or at an annual growth of 5 percent.

 

Figure 2. Value of Shipments

References:

White, M. S., & Hamner, P. (2005). Pallets Move The World: The Case for Developing System-Based Designs for Unit Loads. Forest Products Journal, 55(3), 1-9.

Kator, C. (2008). Pallet basics. Modern Materials Handling. (Warehousing Management, Edition). Vol. 63, Iss. 5; pg. 28, 1 pgs, 2010.

MH1 Committee. (2005). American National Standard.

U.S. Census Bureau. (2009). Annual Survey of Manufacturers – Wood Pallet and Container Value of Shipments, Years 2000 to 2008. Retrieved January 2010, from Department of Commerce – Census Bureau:

http://factfinder.census.gov/servlet/DatasetMainPageServlet?_lang=en&_ts=282740229125&_ds_name=AM0531VS101&_program=EAS

U.S. Census Bureau. (2010). Annual Survey of Manufacturers – Manufacturing (Employment), Years 2000 to 2008. Retrieved January 2010, from Department of Commerce – Census Bureau: http://www.census.gov/econ/manufacturing.html