Engineering Management

Meeting the Global Challenges, Second Edition

C. M. Chang

• Publisher: CRC Press
• Year: 2016
• ISBN:
  9781498730112
• Edition: 2
• Topic: Business
• Subtopic: Project Management
• Index: Business

Engineering Management: Meeting the Global Challenges prepares engineers to fulfill their managerial responsibilities, acquire useful business perspectives, and take on the much-needed leadership roles to meet the challenges in the new millennium. Value addition, customer focus, and business perspectives are emphasized throughout. Also underlined are discussions of leadership attributes, steps to acquire these attributes, the areas engineering managers are expected to add value, the web-based tools which can be aggressively applied to develop and sustain competitive advantages, the opportunities offered by market expansion into global regions, and the preparations required for engineering managers to become global leaders.

The book is organized into three major sections: functions of engineering management, business fundamentals for engineering managers, and engineering management in the new millennium. This second edition refocuses on the new strategy for science, technology, engineering, and math (STEM) professionals and managers to meet the global challenges through the creation of strategic differentiation and operational excellence. Major revisions include a new chapter on creativity and innovation, a new chapter on operational excellence, and combination of the chapters on financial accounting and financial management.

The design strategy for this second edition strives for achieving the T-shaped competencies, with both broad-based perspectives and in-depth analytical skills. Such a background is viewed as essential for STEM professionals and managers to exert a strong leadership role in the dynamic and challenging marketplace. The material in this book will surely help engineering managers play key leadership roles in their organizations by optimally applying their combined strengths in engineering and management.

1

Introduction to Management Challenges for Engineers

1.1 Introduction

In our modern-day economy, customers’ needs are changing rapidly, the marketplace is becoming global, and technology is advancing at an ever-increasing speed. To maintain competitiveness in such a challenging environment, companies need effective leaders who understand both technology and business. Engineers with proper management training have great opportunities to make valuable and lasting contributions (Chang 2005; Merino and Farr 2010).

In industry, managers are select employees entrusted with the responsibilities of putting communications means to use, making critical decisions, taking decisive actions, applying resources, and guiding the behavior of internal teams and external business partners to achieve company objectives (Shah 2012; Gomez 2014).

The communications means applied by managers may be verbal or written, with or without body language. The decisions made take into account technical feasibility, resources conservation, and economic viability. The actions taken include planning, organizing, leading, and controlling. The resources utilized involve people, time, capital, equipment, facilities, technology, know-how, and business relationships. The teams guided by managers are individual employees (teams of one), projects, task forces, quality circles, and others. The external business partners may include customers, suppliers, networked partners, and joint ventures or otherwise aligned companies. For individual science, technology, engineering, and math (STEM) professionals to succeed in such an environment, they need to heed the advice of Henry Ford, who said, “The only real security that a man can have in this world is a reserve of knowledge, experience and ability.”

This chapter starts with a brief review of the major sectors of a national economy. Then, it discusses the work of engineering managers and practicing engineers, and delineates the differences between these two types of work. Finally, the chapter addresses the challenges faced by engineering managers in the global environment.

1.2 Definitions

It is proper to begin with the language of management. The following are a sample of management terms that will be used frequently throughout this book (Weske 2012).

1.2.1 Management Responsibilities

The management group of a company has the overall responsibility of achieving the company’s objectives and meeting the diverse expectations of its stakeholders. The management group is composed of managers at various levels, from chief executive officer (CEO) down to first-line managers (e.g., supervisor, group leader, section head, and manager).

The stakeholders are groups of people who have a stake in the company’s performance. These include shareholders, customers, suppliers, employees, and the community in which the company operates. Typical expectations of these stakeholders include:

1. Shareholders: Return on investment, dividends, earnings per share, and appreciation in stock price over time

2. Customers: Quality of products, acceptable services, flexibility of company to accommodate changing customer needs, efficient delivery, and competitive prices

3. Suppliers: Financial stability, market share position, quality production, collaboration efficiency, and on-time payment

4. Employees: Innovative company policy and culture, good working conditions, stable employment, and competitive salary and benefits

5. Community: Environmentally clean, tax contribution, socially responsible, ethically acceptable practices, and good corporate citizenship

Over time, company management is responsible for satisfying this diverse set of expectation of all stakeholders.

1.2.2 Type of Work

Work is the task performed to add value to the company. Performing the work involves the use of resources (e.g., time, money, energy, tools, human efforts, technologies, and facilities) and applicable procedures. There are three types of work:

1. Management work: Plan, organize, lead, and control the efforts of self and others; this requires thinking.

2. Technical work: Specialized, nonmanagement work done by engineering managers if others cannot do it for them; this requires doing.

3. Operating work: Management and technical work that has been delegated to others; this requires monitoring and controlling.

1.2.3 Chain of Command

The chain of command refers to the chain of direct authority relationships between superiors and subordinates. This is derived from the traditional military systems.

1.2.4 Principle of Unity of Command

According to this principle, an individual worker reports to a single superior.

1.2.5 Efficiency

Efficiency refers to the accomplishment of a given task with the least amount of effort. Being efficient means not wasting resources (e.g., time, money, equipment, facilities, skills, talents, and management attention).

1.2.6 Effectiveness

Effectiveness refers to the accomplishment of tasks with efforts that are commensurate with the value created by these tasks.

The paradigm “All things worth doing are worth doing well” should be replaced by “All things worth doing are worth doing well only to the extent of their contributed value to the company.” Engineers and managers need to be value conscious. Perfectionists have no place in a progressive industrial environment.

1.2.7 Strategic and Operational (Tactical) Decisions

Strategic decisions are those that set the direction for the unit, department, and company. These decisions determine what are the right things to do. Examples include which new markets to pursue, what new products to develop, who should be engaged as supply chain partners, and when the right time is to acquire which new technologies to enhance competitive advantages. Operational decisions are those that specify ways to implement a specific task, project, or program. They define how things are to be done correctly.

STEM professionals with managerial responsibilities are involved in making strategic decisions. Others working as technical contributors are typically involved with decisions that are operational in nature.

1.3 Employment Trend in Industries

Graduates of STEM disciplines are typically employed in for-profit industrial companies, which design, produce, market, and service products or services or both to their business clients or individual consumers in the marketplace. In this section, discussions are offered regarding the differences between products and services, the major trend regarding employment into the future, and the special skills needed for STEM graduates to be successful in the years ahead.

1.3.1 Products versus Services

Products differ from services in a number of ways. According to Tidd and Bessant (2013), there are six characteristics that could be used to differentiate them:

1. Tangibility: Products are more tangible than services.

2. Perceptions: Product quality is assessed based on criteria such as functionality, reliability, durability, and maintainability. Service quality is, on the other hand, perceived based on physical evidence (the physical setting where the service is offered), responsiveness (speed of service and willingness of staff to help), competence (ability to perform the service dependably), assurance (knowledge and courtesy of staff and ability to convey trust and confidence), and empathy (provision of caring and individual attention).

3. Simultaneity: Products are typically made in advance of consumption, whereas services are consumed mostly at the time of production. Simultaneity brings about the potential for quality management problems related to the identification and correction of service errors as well as capacity-planning problems to match supply with demand.

4. Storage: Capacity-management problems may arise due to an imbalance between supply and demand. Such problems may be mitigated by pricing (e.g., discounts at off-peak time to induce demand), adding temporary workers or outsourcing or both.

5. Customer contact: Services demand a high level of customer contact, some more (medical, business consulting) and some less (financial service, information), whereas products are typically sold in the absence of much customer interaction.

6. Location: The proximity factor is more important for services than for products, making services more local and less competitive. Only about 10% of services in the developed economies are traded internationally.

Osterwalder and Pineur (2014) added a few more comparisons between the key features of products and services. Intellectual property rights are very important to products, but not so to services. Products are important as complementarities to other offerings of the same companies, whereas services are not so. For producing products, there is a fixed cost structure, which allows realizable gross margin to increase with production scale, whereas services are predominantly produced on a variable cost st...