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Introduction

The success of an engineering design is not based purely on the ingenuity of the design.  Cost and ability to meet schedule are often just as important.  When developing these, it is important to ensure that all required tasks are accounted for, and which pose the greatest potential risk to the project.  The Work Breakdown Structure (WBS) and Critical Path map are tools which assist with this task.

Overview

Developing a budget for a project requires that we have a forecast of the resources that will be required to complete the task.  We need to estimate how much material will be required, how much manufacturing time will be required, and how long the design effort will take.   We may be able to base these on past experience on similar projects, by scaling of past projects.  In the case of an all new project, we may use Top-Down Budgeting where experts and managers estimate the required resources, or Bottom-Up Budgeting where the people who will actually perform the work make the estimates.  Once the resources are understood, it is possible to estimate the likely selling cost of the product. 

Developing a schedule begins by considering all of the tasks required to complete the project, including their sequence, duration and interdependence.  The key to using a project schedule is to understand that your goal is not to always be on schedule, but rather, to always know where you are on the schedule.  As some tasks fall behind schedule and other tasks are accomplished more quickly than planned, it is possible to adjust your resources and efforts in a manner that facilitates getting all tasks to completion by the major deadlines.

In order to predict cost and schedule, tools have been developed which can aid in making sure that all the tasks are captured and in determining which are the most important tasks to completing the project on time.  The Work Breakdown Structure (WBS) and the Critical Path map are two such tools.

As the project evolves, it is also important for the design team to maintain a list of action items that must be accomplished, and to track them so that nothing gets overlooked during the hectic design process.

Schedule

In today’s engineering world, one major constraint is the project schedule.  Most engineering efforts in industry nowadays are both schedule intensive and schedule driven.  That is, they have very tough and aggressive schedules which you have to work very hard to meet.  Meeting the schedule may be the biggest challenge of the project.  The way that most design teams will manage their time is to create a project schedule.  There are many ways that this can be done, ranging from pencil and paper to sophisticated project scheduler software (Microsoft Project is one of the most widely used).  The advantage to one of the scheduler software packages is that it is easy to make updates.  The first step is to determine what tasks must be accomplished for completion of the project.  Then estimate the time that each will take, and the logical order in which they must occur (some steps will obviously require the results of other steps). 

If you then simply place these tasks in order sequentially, you will almost certainly find that the whole process appears to take longer than the time available, and that it will be impossible to meet the required project milestones.  Obviously, this will not work.  So you need to begin looking at tasks that can be done in parallel with each other, rather than doing them sequentially.   Even if you have one task that requires the output from a preceding task, you need to look at whether it is possible to start the second task before the first is totally complete.  Now you can assemble all these tasks into a schedule which should meet the milestones.  If not, go through and try to improve it further, because frankly, the milestones probably are not going to move. If you are building your schedule using a software routine, you can create links between the tasks.  These links let you connect the start of a given task to the completion of an earlier task (or partial completion of the earlier task as I just discussed). 

The useful thing about this feature is that as you are proceeding along with the project, and you find that a given task got done quicker than expected (or took longer), you can modified that one task in your project schedule, and the links will automatically readjust all the following tasks.  So, essentially every down-stream task is realigned to your one change.  This is very handy in maintaining a constantly current schedule…….which is precisely what you are going to do.  In order to manage your schedule effectively, you must be constantly evaluating your progress, and updating where you are on your schedule. 

The schedule must be just as dynamic as the design process itself.  And as you see things developing, you must maintain a current and updated schedule so that you can predict completion dates.  It also means that when something goes horribly wrong, (which it may, at some point), you can instantly assess the impacts and figure out how to readjust your resources, your efforts, and your time to recover from the crisis.

A Gantt Chart, as shown below, is a method of displaying the project’s schedule

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Case Study

The following case study comes from a former Rolls-Royce aerospace engineer, and demonstrates how important scheduling can be.

“My last task in industry was as Rolls Royce’s Technical Lead, guiding the design of a major component of the Joint Strike Fighter (JSF).  The JSF project was so large that the airframe involved two of the largest aerospace manufacturers in the world, Lockheed-Martin and Northrop-Grumman.  It also involved two of the three largest engine manufacturers in the world, Pratt-Whitney and Rolls-Royce.  There were also countless smaller vendors servicing the program, all in partnership with the larger companies.  And every one of those companies, top to bottom, had a financial penalty clause if the first aircraft did not fly by a designated date.  If ANY one of those companies caused a delay big enough to impact the first flight, then EVERY one of them took a financial hit.  Needless to say, there was tremendous pressure within the JSF partner companies to make sure that things did not get behind schedule. 

The way we managed this, was that each design team at each company build a project schedule.  Then, one individual got the task of taking all those team schedules and combining them into an Integrated Master Schedule (IMS).  This linked all the individual schedules together, so that it became clear what team in what company had to supply a certain component or assembly to one of the partner companies so as not to impact schedule.  When I first heard about the IMS, I honestly did not believe it was possible.  But by the time I left the JSF program, we were using the IMS almost daily.  It was an incredibly powerful tool.  And when I had a crisis come up in my design team’s efforts I could use the IMS to determine whether it would impact anyone else or any required milestones.  If it didn’t, then the pressure was relieved and we could work around it fairly easily.  However, if it did have a down-stream impact on partners and milestones, then I could immediately tell what other teams I needed to talk to so that we could jointly find a way to rearrange tasks and still stay on track.   Frankly, it was quite amazing.”

Cost

Let us imagine that your design team has come up with a concept for the design of a new widget.  It looks like a great product and you believe that you can really get the advantage over your competitors, because your design should be far superior to theirs.  Management likes your idea, but before they are willing to authorize your team to proceed with the design, they want you to estimate how much you will have to sell it for, so they know where the new widget will stack up against the competition in the marketplace.

Your preliminary estimates are that the new widget will require 100 hours of design time and 50 hours of drafting time along with £3000 of new tooling.  In production, you believe that each part will require £50 of material and 10 hours of manufacturing shop labour time.  Your company’s policy is to recover start-up costs for new projects over the first 1000 units while earning a 20% profit.  The company’s fixed rates are:

• Engineering  £32/hour
• Drafting  £25/hour
• Shop  £15/hour
• Burden Rate  185%
• Material Markup  10%

What price will you have to sell your widget for? There are probably some terms here that are unfamiliar to you.  The hourly rates are the total of salary and benefits which the company must expend for each employee in a given role. The company incurs and additional expense (burden) simply by maintaining the facility where you work and where the parts are made.  This includes the cost of the building, the utilities, the manufacturing shop equipment, the computers, and everything that goes into keeping your facility in operation.  All this has to be paid for by the products you sell.  So the expenses from hourly rate are scaled up by the Burden Rate to cover these other costs. 

This is a good time to note that one of the approaches that some industries have been using to reduce cost, is to attack this burden rate by outsourcing services.  If you hire another company to perform certain tasks (it could be engineering or it could be producing certain shop parts) then several things happen.  First, your company does not spend the money that it would have paid in hourly rate to the employees performing those tasks, and secondly, it does not have to have the equipment or the building space required for those tasks.  The company, does, however, have to pay the outsource vendor for the work performed……so that the vendor can pay its employees and have the necessary equipment.  If those small firms focus on doing one or two tasks and doing them very well and very efficiently, then the overhead costs for their operation are much less than they would have been for your company.  Thus, even if the wages they pay are the same, they have a much lower burden cost, and therefore can sell the services to your company at a lower cost than your company could have paid its own wages and burden rate.  

Material Markup is a cost added to the material you buy to account for the fact that it costs your company something to receive it, move it, and store it.  As companies have worked with vendors to switch to “just in time delivery” across the past few years, this markup has gone down significantly, saving companies like yours money.

Now we are ready to begin.  In an analysis like this, we can divide the costs into two major types………recurring, and non-recurring.  Recurring Expenses (RE) are those that occur again, and again, with each item that you make.  Non-Recurring Expenses (NRE) only occur once during the development of the new component. 

They are often referred to as “start-up costs.”Let’s look at NRE first.

Non-Recurring Expense (NRE) 

Now let’s consider the RE that come with each of those units:

That is one expensive widget.  This becomes a good point to start thinking about how we could reduce that cost.  If you were going to cut that bottom line price, what number should you attack?  What about the labour cost?  If the labour cost goes down, then the associated burden rates go down also.  That could be a huge driver in reducing the selling price.  Well, the odds are we are not going to get the shop employees renegotiated to a lower salary, so how do we lower labour costs?    What if we could cut the hours required for the manufacture of each widget to 8?  Well, that would certainly have an impact !  So how do we do that?  We design it better.  We design it with an eye toward being able to manufacture it quicker, and therefore cheaper.  This is called Designing for Manufacturing and the point is, we can easily apply a little more design time to make a better, more manufacturable design, and save a lot of money. 

Example

Here is an example where we assume that we put in twice as much design effort and made a product that took 10% less time to manufacture (which is not unreasonable).  Our new values are shown in red font.

Non-Recurring Expense (NRE) 

NRE Amortized over first 1000 units = £30901.50/1000 = £30.90

Recurring Costs

You can see that the cost of the product is reduced.  In general, it is more beneficial to put the improvement time in up-front, because the cost versus time relationship looks like the figure below.  Spend the time to get the best design in the beginning…..it is more costly to fix problems later

Management Reserve Fund:  Often when a company is dealing with a risky venture, they will add a management reserve fund into the budget after the calculation of cost, and separate from any profit margin.  The purpose of this MRF is to cover the expense of any unexpected crisis, that arise during the project, such as cost over-runs in completing the design, or failures of components in testing necessitating redesign and retest, etc.  This fund absorbs those unexpected costs without sending the project into deficit spending when such problems arise.  However, keep in mind that if this is added into your budgeting, then the cost you bid to a potential customer is higher, and potentially makes you less competitive to the customer.  On the other hand, as problems arise, you can manage them without operating at a loss.

Work Breakdown Structure

The Work Breakdown Structure (WBS) is a tool which can be utilized to help a project team ensure that all of the tasks required to complete the project are accounted for.  The diagram below shows a generic WBS chart.  The given project is initially broken down into major tasks.  These might be such things as preliminary design, stress analysis, dynamic analysis, thermal analysis, detail design, prototyping, testing, etc.  Below each of these major tasks, are the sub-tasks that are required as part of that major task.  Additional levels of tasks may be added below the sub-tasks, if it aids the team in delineating all the tasks required for the project.  The objective of the WBS is to ensure that every task of the entire process is captured. 

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Once the WBS has been constructed, it can then be used as an aid to create the budget and schedule.  It is easy to see how this would help with those activities.  If every task has been captured, then the cost associated with each task can be estimated independently, and when they are all rolled-up together, all costs of the projects should be captured.  Similarly, as the schedule is created, the WBS provides a listing of each task which needs to be plugged into the project schedule.  It also helps determine the order and interconnectedness of the various tasks.  For these reasons, the WBS has become a popular starting point for constructing both project schedules and budgets.

Critical Path

It is important to determine the Critical Path for the project, so that the design team knows which tasks are the most important.  There are multiple ways to construct a critical path map.  The first of these is named the Program Evaluation and Review Technique (PERT).  PERT was developed by Lockheed Aerospace and the United States Navy.  It is sometimes referred to as the Arrow Diagram Method (ADM) and an example is shown below.

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Each circle represents a task that must be accomplished.  The arrows between the circles indicated the interconnections between the tasks, and the red numbers indicate the estimated time to perform each task.  This makes it easy to see which path of tasks is the most critical to the schedule.  In the example shown, the path from task 3 to 5 to 8 to 9 will take 15 days, while the other paths between tasks 3 and 9 will require less time.  Therefore, the critical path is 3-5-8-9, because any delay in those tasks delays the end of the project.  The other paths are less critical, because a slip of a few days does not make them critical, until they pass the time required for the critical path 3-5-8-9.

A second approach to determine the critical path was developed by the chemical company, Dupont, and is called the Critical Path Method (CPM) or the Precedence Diagram Method (PDM).  It is shown in the example below.

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In this method, the tasks appear as letters inside blocks.  Each box also has indicates the earliest possible start day (top left) and finish day (top right) as well as the latest possible start day (lower left) and finish day (lower right).  The duration of the task is shown above the box.   The critical path is indicated by red arrows.  The Total Float of the non-critical path tasks is indicated by the number below each task box.  It indicates the number of days that the task could be delayed without that path becoming the critical path.  The drag of the critical path tasks is indicated by the number below each task box.  The critical path drag is equal to whichever is less: its duration or the total float of the parallel activity with the least total float.

Probability of completing a project on time

Expected Time (TE) for each task:

TE = (a +4m +b)/6

where:

a = optimistic time estimate

b = pessimistic time estimate

m = most likely time estimate (average of all the estimates)

Variance (σ²):  σ² = [(b-a)/6]²

Standard Deviation (σ):  σ = (σ²)^1/2

Z = (D - µ)(σ²)^1/2

where:

µ = the critical time of the project = the sum of all the TE values for the critical path activities

σ²  = the variance of the critical path = the sum of the variances for all critical path activities

D = desired completion time

Z = the number of standard deviations of a normal distribution

Use a Normal (Gaussian) Distribution to estimate the percent probability of meeting the desired deadline.

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Action Items

Every time that the design team meets, there are likely to be issues which come up as needing to be addressed and actions which the team agrees need to be performed as part of the project.  These are known as Action Items.  They are things which need done, i.e. require an action, by all or part of the team.  Because the team members will be busy, it is entirely likely that these actions will be thought of, and then forgotten, as new issues are discussed.  For this reason, it is imperative that the team maintain an Action Item List.  Every time something new is thought of, it should be added to this list before it can be forgotten.  This then becomes a running log of the issues that come up as the project evolves.  Every action item should be assigned to at least one individual on the team who is responsible for its completion, and a target date for completion should also be included.  By doing this, it ensures that no task gets overlooked by the team. 

One team member should be given responsibility for maintaining and updating the list.  At each team meeting that person should have the current, up-to-date action item list available.  And at some point during the meeting, that list should be reviewed.  Any item which has been completed should be marked off the list as done, after the results of the action have been shared with the team.  Any item not completed should receive a brief update from the responsible team member, with an assessment of its status relative to the assigned completion date.  If a team member is working independently, and thinks of an issue that needs addressed, they should pass this item along to the member maintaining the action item list, so that it may be added to the list.  It can then be discussed more thoroughly at the next team meeting, where a responsible individual and an completion date can be assigned.  By following this process, even the busiest of teams can try to ensure that important issues which come up during the design are not lost or overlooked, but rather, receive the attention and closure that is required for project success.

Putting Things in Perspective

Summary

In order for a design team to be successful, there must be an understanding of project costs, an ability to track progress against a schedule which includes important deadlines, and a means of documenting and tracking items that require action by members of the team.  Without these, the project is likely to be too costly and be delivered too late and with important issues unresolved.

The success of a design project is dependent on meeting a number of requirements and constraints as defined for the specific project.  Two of the constraints on a project are scheduled and cost.  An additional key to success is ensuring that all the steps necessary for a design are understood and planned for.  The work breakdown structure and the critical path map are two tools that can be utilized by the design team to ensure that these objectives are met.

References & Bibliography

Chapman, J. (2004). “Work Breakdown Structure (WBS).” Available online:<http://www.hyperthot.com/pm_wbs.htm>

Dym, C. & Little, P. (2009). Engineering Design, 3^rd edition.  Hoboken, NJ, USA: Wiley.

Heizer, J., Munson, C. & Render, B. (2017). Operations Management.  New York: Pearson.

Horenstein, M. (2002).  Design Concepts for Engineers, 4^th edition. Upper Saddle River, NJ, USA: Prentice.

Meredith, J. & Mantel, S. (2012).   Project Management, 8^th edition. Hoboken, NJ, USA: Wiley.