The quoting process was a mess, but the Engineering Change Management (ECM) process at this company was even worse. Nearly every engineering change I reviewed was riddled with errors or omissions.
One engineering change in particular epitomized the dysfunction. A customer’s RFQ for this change had been sitting untouched in our queue for nearly a year by the time I joined the company. I became involved when the Buyer contacted me, asking to process the old quote so it wouldn’t hold up a new, urgent change.
Here’s what I uncovered over the following weeks, starting with the design release history for the part:
Part Design Revision History
- Rev 0: Initial design release for production.
- Rev 1: Revised hardness requirement. The new drawing added a hardness callout for the bracket the pin was welded to, in addition to the pin itself. This increased costs but had been submitted as a “no cost” change before my time.
- Rev 2: Revised coating. This change altered the rust protection coating from zinc plating to e-coat.
Unraveling Rev 2
The Rev 2 change was originally proposed by my boss, who had been the Account Manager. Over a year earlier, he had quoted the customer a savings of $0.03 per part via email. Before submitting the quote, I decided to verify a few things:
- Shipping Levels: I contacted our Material Planning Analyst to confirm what we were shipping. Initially, he said the parts were e-coated (Rev 2). A day later, he corrected himself—they were still zinc-plated. This mistake stemmed from parts being mislabeled as Rev 2.
- Price Difference: I reached out to our Buyer, who confirmed the current zinc plating cost and solicited quotes from e-coat suppliers. The results were shocking: e-coat was $0.02 more expensive per part, not cheaper.
- Tooling Costs: Switching to e-coat required $3,500 in tooling costs to build racks, a cost overlooked in the original quote. Since it wasn’t communicated to the customer, it hadn’t been funded and the customer refused to pay it retroactively
- Performance Comparison: Data showed zinc plating offered superior corrosion resistance compared to e-coat, despite both meeting the customer’s minimum requirements. We used both coatings in similar applications, but zinc clearly provided better long-term protection.
The Fallout
In the end, my company had to quote the change to the customer at $0 cost just to save face, using “inflation” as an excuse for why the savings had vanished. But here’s the real cost of this debacle:
- Financial Impact:
- A $0.02 per part price increase, multiplied by 250,000 parts per year over five years: $25,000.
- Additional $3,500 tooling cost
- Total Loss: $28,500 over the life of the program.
- Product Quality: The customer and end consumers received an inferior product with weaker rust protection.
- Quality Risk: The mislabeling of parts could have led to a quality rejection if the customer had caught it.
Conclusion
This wasn’t the most expensive mistake I witnessed at this company, but it perfectly encapsulates the dysfunction. Encouraging a customer to make a change for cost savings when there were no savings highlights a complete breakdown in process.
Engineering Change Management is complicated, but that’s no excuse to continue working in chaos. At some point, you have to ask: If what you’re doing clearly isn’t working, why keep doing it the same way?