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Emerald Group Publishing Limited
Copyright © 2001, MCB UP Limited
Agile case study
Agile case study
Keywords Honeywell, Product development
The goals of the study were to:
shorten product development and product change processes;
reduce scrap and rework costs; and
implement new features faster.
The results achieved were:
scrap and rework costs reduced by half;
a reduction in engineering change order (ECO) turnaround times;
the achievement of competitive advantage through earlier sales;
the establishing of a paperless database; and
the elimination of weekly shipments to China.
Speed development: communicate better with manufacturing
Sales early in the product cycle yield greater value. For Honeywell, streamlining new product introductions yielded new profits and restored competitive advantage.
Honeywell is a US$24 billion diversified technology and manufacturing leader, employing approximately 120,000 people in 95 countries. C&K Systems is a Honeywell division that designs and manufactures products for the professionally installed security industry, including motion sensors, glass break sensors, contacts, control panels, keypads, and software. Honeywell/C&K Systems' products are designed in Folsom, California, and at a satellite design center in the UK, but product manufacturing takes place at a C&K plant in China.
The cost of delay
The security industry in recent years has become a commodity market, and costs are a major issue. Competitors are always striving to drive costs down, while struggling to maintain adequate profit margins. Honeywell enjoys the cost benefit of manufacturing in China, but it takes four weeks to get finished products from the factory to the USA. In addition, at the pre-production end of the cycle, releasing product change information from company engineers to the China factory consumed nearly three weeks in transit.
A product change documentation package was sent from the Folsom engineering center to the Hong Kong office, where necessary business transactions were handled, then the package was forwarded to the factory in China. At the factory, engineers analyzed the changes for the effect they would have on existing parts inventory and new parts procurement. Often parts supply complications caused additional delays, and changes ended up taking an inordinate amount of time to be put into effect. Scrap and rework costs were escalating, averaging about one-half million dollars per year.
Moreover, the factory had no inkling of changes that were coming until they actually arrived, so no planning for anticipated changes could be done, such as holding reorders on parts slated to be discontinued or reserving contingency supplies of parts in short market supply.
C&K managers came to realize that shortening their product development and product change processes was important to the company's strategic objectives. "Our industry as a whole was increasing and expanding", says Hugo Haselhuhn, Honeywell/C&K's director of engineering, "but our market share was decreasing. We had to maintain costly US inventory stockpiles, so we could keep our customers supplied. But if we got behind the competition curve because new features were late being implemented, then that on-hand inventory developed into spoiling fruit. Either we couldn't sell it, or we would have to give discounts and destroy our margins".
Adopting an agile solution
One of C&K Systems' main drivers was to speed up the development process and communicate better with manufacturing. "We had time zone issues and language issues, and we couldn't just walk down the hall to the assembly line to fix a problem", says Haselhuhn. "Getting documentation to the factory, accurately and in a timely manner, was absolutely critical for us. Documentation in Agile is now available globally on each user's desktop.
"When the Agile solution became available", Haselhuhn notes, "we saw that the processes embedded in it were a clear fit for all of our requirements, and it came at a manageable price. Going from a paper-based to an electronic process now makes it all painless, and eliminating all those information package shipments to China saves us not only physical shipping costs – but more importantly, time".
Accelerating the ECO cycle
And saving time is the name of the game. "The biggest improvement is that our factory knows what we're doing now", says Cathy Achen, C&K Systems' Agile Administrator. "People can log on and actually see changes in real time as they progress. They can prepare for component changes that are coming and order the new parts or stop orders for the old ones. That saves us money on procurement and helped us cut the time for a product change in half. Our goal was to reduce ECO time by half, from four weeks to two weeks. We have been able to reduce the typical turnaround time to one week, but we can turn an ECO in 24-48 hours when necessary, and that has made all the difference".
Back in the running with 24-48 hour turnaround
With the help of Agile Anywhere, Honeywell/C&K Systems is right back leading the competition. "The impact is that our people can implement a change within a 24-48-hour period, which means we don't end up with rework or scrap, and we don't end up with product that is slow moving", says Haselhuhn. "Before Agile, if an engineer determined there was a problem on a circuit and a change was needed, it could take several weeks before the change could be implemented at the factory. And we would have three to four weeks of bad product built. Now we can fix it in a few days. The old way, we could be purchasing three weeks' worth of the wrong parts. Now our purchasing people can be getting substitute parts ordered the very next morning. The first year after we implemented Agile, our scrap costs were cut in half."
Haselhuhn is quick to point out that "The cost reductions we've realized don't even take into account the competitive value that comes from getting to market faster, reaping more of those high-value, early-in-the-cycle sales. In addition, we're very proud of the fact that we were the very first manufacturer to complete an Agile Anywhere implementation in China."
Contact: Agile Software Corporation, 3000 Hillswood Business Park, Chertsey, Surrey KT16 0RS, UK. Tel: Tel +44 (0)1932 796156.