The management of engineering change in the aerospace and the construction industry
This paper investigates and compares the engineering change management process found in two “blue chip” companies, one each from the aerospace and construction industries. The process of managing changes might help the construction industry to adopt tools and techniques developed by the aerospace sector or vice versa. In order to make a reasonable comparison, the authors performed a comprehensive review of the engineering change management process in both industries. The investigation has led the authors to conclude that the effective recognition of the change and transfer of lessons learned are key issues for good practice engineering change management.
In the search for management tools that work and provide benefit in top companies, the management of the Engineering Change (EC) process is worthy of investigation, both in the aerospace and the construction industries. It is vital for safety and it has a huge impact on productivity in both production processes. This paper studies similarities and differences in the EC process in the two industries with the objective of identifying transferable good practice.
The comparison of two major industries such as construction and aerospace provides the opportunity to contrast different products with different mechanisms for project control. PMI has established that the degree of application of project control concepts varies greatly from industry to industry (PMI Standards, 2000). This introduces the opportunity to identify transferable good practice.
Two recent effective comparisons between the aerospace and the construction industries were identified from the literature.
- Project managers in aerospace and construction adopted different techniques in response to the project environment, material flows, and information flows. The flow of information in the construction industry is based on encouraging people to discover the information plan, whereas in aerospace, the information flow has been formalised (Graham 1999).
- In the management of a change in the aerospace sector, people seem to be conscious of the company's strategies and believe in strong team spirit in every situation. This can be seen on the supply chain management process where lead times have been decreased by involving the extended organisation. The transfer of management ideas and methods directly from one industry to the other is not likely to be successful unless considerable effort is taken to modify management tools or the internal culture in the receiving industry (Riley 2000).
The competitive environment and the nature of the task itself will influence the impact of culture on the successful transfer of good practice. The Latham Report (1994) stated that an effective transfer process would include a high degree of innovation, top management commitment and measurable targets for productivity improvements. Also, since industry standards are still evolving in each industry, a special set of tools must be adopted for each specific industry, using its own specific language (Edan, 2001).
GOOD PRACTICE IN THE EC MANAGEMENT PROCESS
Good practice has been defined as the way organisations have worked to achieve success. A good practice in project management is the ability to identify and transmit the need for change (PMI, 2003). Change has been defined in the context of a project as “any modification to the benefit, scope, time or cost targets that have previously been approved” (Butrick, 1997). A change can only be identified if there is an approved project baseline. In most cases, change is perceived as a major cause of conflict, disruption and claims.
EC involves those alterations after the formal release of project documents (Mak & Huang 1997). When change provides safety and reliability of a product to meet the performance specification, its incorporation automatically becomes compulsory, no matter who initiates the request for the EC and whatever its beneficial effects may be; an EC is a distraction to the normal flow of production work and the baseline must be kept stable as possible (Dale, 1982; Augustine, 1989).
Eight good practices in the EC management process were identified based on previous work developed by Eldin (1991), Badiru (1996), Clough et al. (2000) and Ibbs (2001). These good practices were subsequently used to evaluate the effectiveness of the EC management process in two companies in different industries and to identify the potential for the transfer of good practice between the industries.
1. Formal Procedure– a formal approach and a well-structured procedure have been adopted as one of the most significant elements of EC management in industry, administered by an EC co-ordinator (Mak & Huang, 1997). Depending on the circumstances of the request, technical personnel help the EC co-ordinator to assign tasks to the right people.
2. Work Breakdown Structure – as part of the outputs from the project scope definition, having a WBS ensures that all the required work is covered and waste is eliminated (PMI Standards 2001). WBS is also the basis for control budget and it includes descriptions such as facilities, engineering disciplines and documents (Eldin 1991). In the integration process, a contractor must adapt its WBS to the customers' so that estimates are in a suitable format for a subsequent cost control of the activity. This creates the basis for effective performance measurement and engineering change control. (Badiru, 1996; Clough et al., 2000).
3. Project Plan – the project plan is often the core of project management efforts because it involves the work assignment of periods as detailed as possible (Badiru, 1996). Engineering documents such as drawings, specifications, BoM and books must be referenced here (Eldin, 1991).
4. Communication – a clear route must be established from the beginning of the project, so that all parties agreed in case of any request. Once change is notified, it requires maximum attention (Butrick, 1997). Good communication might eliminate bureaucratic events due to the level of agreement with all the people involved in the project. People in different areas develop their own language and therefore they differ from others in objectives and attitudes (Smith, 1995).
5. Recognition of the Change – team members must be encouraged to have open discussions and to identify potential changes in order to manage and anticipate them on critical stages of the project life-cycle (Ibbs, 2001). Cooperation with the client in the different stages of the project life-cycle might help to recognise the need for change early before it has a detrimental effect on the development of the project (Voropajev, 1998).
6. Progress Measurement – high performing volume producers have adopted measures to keep the product-line and varied without exploding project complexity. These include cumulative effects of rapid incremental changes, substantial jump in innovation, constrain the product through the project scope and keep the breakeven point stable between needs and cost of variations without confusing customers and suppliers (Clark & Fujimoto, 1993).
7. Choice of the Project Structure – the aerospace industry is focused on product orientation, and the construction industry is focused on project orientation (Riley & Clare-Brown, 2001). The effectiveness of EC implementation is a clear reflection on the way the company structure operates (Clark & Fujimoto, 1993; Li et al., 1998).
8. Lessons Learned – there will always be the possibility of improving processes and systems if data has been properly gathered, processed, channelled and put in practice (Imai, 1986). The causes of variances, the reasoning behind the corrective action chosen, and other types of lessons should be documented so that they become part of the database for current and future projects (PMI Standards, 2000).
The authors suggest that the transfer of tools between projects and industries is more likely to be successful when the characteristics of the industries are similar. Two projects of high complexity and high risk according to Puttick Grid (Toone, 1993) were therefore selected for this study (Exhibit 1). A qualitative case study approach has been adopted and semi-structured in-depth interviews were used to gather the majority of the data among different managers of both companies. Companies are assured of confidentiality and names have been altered.
Secondary data from project documents and company literature supported the primary data. Similar formats were implemented for each interview to provide uniform data gathering. Each company also provided their EC management procedures on current project(s). The main focus for the study is on EC management and implementation in these projects. In addition, other variables such as operating revenue, turnover, profit, number of employees, have been considered.
ALAS is part of a global group with locations in more than one quarter of the countries of the world. It designs manufactures, supplies and maintains aerospace assemblies for its clients around the world.
LADRILLO is the engineering and construction division of a European International group and a world leader in the design and construction of plants for the production of a range of chemicals derivates. It meets the needs of its customers by adding value to their business – innovation and cost-effective solutions to engineering, contracting and construction challenges.
Managing processes adequately might save costs and make incomes for the provided services. The EC management processes of both companies were reviewed against the best practice identified from the literature.
RESEARCH FINDINGS IN ALAS
- Formal Procedure – A Change Review Board (CRB) procedure is used as main tool to manage EC on every project. All potential ECs must be documented with a brief summary of the modification or improvement and its likely impact on the business (Exhibit 2).
- Phase 1 –the EC has appeared; a specific budget is assigned to understand the problem and outline a solution. An “EC-notice” is issued; this will grow into a record of all the technical and non-technical issues to address the problem.
- Phase 2 – if the proposed outline solution is accepted, a budget is awarded to create a detailed solution. The CRB also considers which part of the product will be benefit first. So, the EC requested and its solution are revalidated and extended.
- Phase 3 – if the detailed solution, the attached business case and the commitment acceptance are accepted, a new budget is awarded to develop a prototype not only to be spent in man-hours. Then, programme costs will acquire substantial involvement of resources.
- Phase 4 – once everything has been approved, it is time to move onto production. The cut-in effective date is confirmed and the modification is integrated in the product and therefore in the project overall.
- Work Breakdown Structure – The CRB controls the modification or the creation of a product. The different breakdown levels are clear and identifiable in order to assign necessary tasks to the right people.
- Project Plan – It is used for effective monitoring and prediction. Everybody knows and uses this document according to their needs with project management guidance.
- Communication – There is a continuous flow in every stage of the procedure. Once data is gathered, the process is not flexible enough and it can cause delays if critical changes are involved; hardly ever the procedure is not entirely efficient. Nevertheless, a great degree of commitment to the procedure was identified as part of the company's culture – an important factor in adapting new techniques.
- Recognition of the change – People are encouraged to identify possible sources to improve design or to reduce costs. When improving, ECs are welcome to the system and people start working on new solutions or process development. Top management has encouraged management and employee representatives to hold regular meetings to discuss opportunities.
- Progress Measurement – The impact on the baseline is measured constantly. If the EC requires more support from the owner, this must complete before proceeding to phase 3. The impact will be reviewed as indicated to promote a full solution with committed cost and programme. Previous to acceptance, the Federal Aviation Administration must approve this change; if rejected, the process cannot continue and a new EC process must start with a new design for the specific modification to be performed.
- Choice of the Project Structure – Depending on the magnitude of the problem or the opportunity, the structure can vary from flexible to task force or functional. The EC coordinator and the project manager allocate responsibilities for the proposed change. The procedure indicates the member of the team responsible for development of the EC.
- Lessons Learned – The policy of continuous improvement is applied to advance the main design and encourage new alternatives. The flexibility of the system is something to discuss for further research inside of the organisation.
The flexibility of the system is something to discuss for further research inside the organisation. Having looked to ALAS procedure, now the construction procedure will be analysed.
RESEARCH FINDINGS IN LADRILLO
- Formal Procedure – Any modification must be authorised immediately to proceed with the next steps. The promoter of the change must have strong argument to carry on with the modification; otherwise the change is only documented (Exhibit 3)
- Phase 1 –the EC has appeared; the problem is reviewed, classified and registered on an “EC-Sheet”. The project manager must be aware of the original budget if the change is to be implemented.
- Phase 2 –if approved, EC is allocated in a specific engineering area; safety implications and level of significance are assessed. The EC's owner is identified with its possible solution. If rejected, then the project team is aware of further consequences in the development of the project.
- Phase 3 – If the change is external, the client must approve an “Alert-form” and return it to the project manager. If the EC is rejected, the client is advised of further consequences, both economic and operational.
- Phase 4 – Both internal and/or external change must be authorised and exposed in the scope definition. The first real estimation is generated and a real EC scope is prepared including resources.
- Phase 5 – the programme is impacted and the team assesses trends. Risks, effects and accurate estimate of the EC are exposed to top management, client, and rest of the people involved. Whatever the modification is originated, it must be authorised by the correct entity.
- Phase 6 – once everything is authorised. It is time to perform and conclude. The variation is filed and classified according to the WBS and now it is part of the new planning and baseline.
- Work Breakdown Structure – When the EC is part of the project control board and is assigned to a specific entity. The change assignation is straightforward and its source and cause are known in early stages of the procedure.
- Project Plan – Everybody knows this document and it is used according to his or her needs and as guidance for the project manager. Subcontractors are also involved in the process, even though they would not be the source of a modification.
- Communication – Communication is extremely important, as the EC will bring a modification not only in the overall scope of the project, but also in the relationships between client-developer-subcontractors. A detailed scope definition and an estimate of the cost and schedule effect are known by all people involved.
- Recognition of the change – According to the type of project, site conditions, phase of the project and for safety reasons, the EC management can be variable and/or keep the basic structure. From data gathered, in phases such as the commissioning and start-up, EC must be validated on site and most of the decisions are taken in common agreement between client and customer, avoiding bureaucratic procedures where possible.
- Progress Measurement – The impact on the baseline is measured in phase 5; a new plan is created that requires to be authorised to assess the impact before phase 6. Project specialists review a full solution with committed cost and programmes as necessary. If the EC is not assessed carefully, then major implications and other disruptions will follow.
- Choice of the Project Structure – The Company uses matrix structures and depending on the magnitude of the variation, the structure varies from matrix to a task force team. Sporadically, ECs are driven through financial impacts and company's policies, and the structure is ruled according to internal policies and financial budgets along the project.
- Lessons learned – A change is validated only if it fulfils safety regulations for the relevant environment. EC and events are recorded and integrated in the project management system. Only the project team can view this data; not subcontractors, stakeholders and client(s).
DISCUSSION OF THE FINDINGS
Eight activities have been identified as good practice in EC management (see Table 1); they allow people to build a learning organisation, develop a faster collaboration, build trust and empowering relationships with others, identify and develop the people you can count on to lead and facilitate change. It is impossible to separate individual competencies of the people from the organisation capability. The relevant differences are expanded for a better understanding on how change may interact in these industries.
- 1. Procedure – Last year, the ALAS's project budget was not overspent as a result of the effectiveness of their EC procedure. Based on the evidence, the company has found a good balance between the refusal and authorisation of change. LADRILLO's procedure would be more practical to follow for employees and for subcontractors, if this procedure were integrated for everybody on the same basis and platform.
- 4. Communications – LADRILLO's flow diagram form is easier to follow than ALAS's because of the logic of the steps; but IT systems employed in LADRILLO's are not as sophisticated as ALAS's. In construction, multiple locations and subcontractors make communication difficult. In aerospace, manufacturing takes place in a fixed location and co-location of project and manufacturing personnel make effective communication much easier.
- 5. Recognition of the change – ECs are originated from different sources (See exhibit 4). If the maker does not satisfy the final user they are condemned to disappear from the market place by losing contracts. Recognition is important, not only possible sources of change are identified, but also different management styles in response are developed. In order not to waste time and resources, problem definition and understanding has been defined in the EC management. EC proposals in ALAS are as important as the understanding of the problem. The EC classification in LADRILLO is as important as the definition of the problem, because the source (Initiator) is identified, What action is required, How the problem will be managed and When action must be taken (I-W-H-W).
- 6. Progress Measurement – In ALAS, the comparison between the budget scheduled and the planned is the first parameter to keep the project under control. In LADRILLO, man-hours equilibrium is considered the principal factor to keep the project under control due to the number of subcontractors to manage.
- 8. Lessons Learned – In ALAS, an EC is seen as a long-term investment because the benefits are not perceived immediately. In both companies, a change must be officially notified and documented. Before implemented, the EC must be approved by the appropriate entity and the final consumer has an input on the decision about the product or service to be delivered.
The balance between the high levels of automation in the manufacturing side is only compared with the high level of management employed in the construction side; then the degree of management with the appropriate level of automation will give the success in industry according to the project momentum. Several factors influence the implementation of the procedure: mainly the rotation of personal is the most important, their needs vary from original status, current and future situation; as long as the project carries on, site conditions varies and decisions have to be taken according to the situation.
The encouragement for developing change, looking for opportunities and new challenges are also a way to reduce cost by improving their designs. But this opportunity is not shared in the same way because of tight contracts between clients and suppliers. The flexibility of making a modification is not seen as an opportunity most of the time, and perceived as a disturbance in the development of the project, especially when this modification will mean a modification in the original budget for all parties involved. As a consequence of project duration, a modification or a possible modification can be applied in the next product to be manufactured, unless there is not another similar circumstance to apply it. However, management practices can still be employed.
A change in the culture, in the way that customers and suppliers work in the construction industry, might reduce impact of changes on man-hours. Not only the modification involves man-hours but also tight schedules that increase costs for both parties. Another inconvenience is that construction projects do not have the same clients and suppliers every time. The aerospace industry has taken advantage at developing its relationships with their suppliers. Lessons learned in the aerospace company are seen and applied as project team; this vision is not always shared in the construction sector. Lessons learned seen as project team are rarely applied for the same project and with the same people. Most of these experiences are recorded on personal basis than team learning.
Even when these companies do not represent their entire industries, they are true representatives for their kind due to the degree of risk, complexity and success in their fields. Both companies have achieved profit in their respective projects according to the last year project report, as a good indication of correct overall management. However, there has been observed that some practices can be modified or even adapted from one company to the other. The quantitative information gathered seems not to enough background for addressing the transferability of tools between these industries. There are some evident weaknesses or limitations to projects' evaluations, notwithstanding the commitment and willingness shown during the development of this study. In addition, it is necessary to rely on the client, project team and subcontractor's feedback and reaction, without taken their own language but pointing at logical systems such as the EC management process. However, a qualitative survey might robust the transferability of good practices between industries.
This research was carried out under qualitative data; the next step is making it under quantitative basis. This will lead to observe these eight practices more objectively in order to see the viability of transferring tools from industry to industry and compare them with different degrees of complexity, risk and size of the companies
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