he Engineering Management Program at Washington State University has an innovative university/industry partnership for training tomorrow’s technical leaders. The Engineering Management graduate degree is designed to meet the educational needs of working engineers with a thrust towards project management, manufacturing management, quality engineering, systems engineering, design for manufacturing and theory of constraints. Students can choose from electives to customize this study of world-class management of technology. The Washington Higher Education Telecommunication System (WHETS), web-based instruction, and satellite allow the delivery of Engineering Management courses throughout the State and nationwide. Participants come from a multitude of industries and companies. This paper concentrates on the relationship with one company, The Boeing Company, with corporate offices in Seattle, Washington, with students and facilities across the country. Students of the Engineering Management Program complete class projects as a normal part of every course and as a final end-ofprogram project. These projects address issues that apply within their organizations. This paper explores the value The Boeing Company has received from the student projects. A recent survey of 55 students reported 109 projects valued at $39.1 million for an average of $710,000 per student for those reporting. This paper summarizes ten representative projects. Educational Value There is general acceptance that a college education is valuable. Having a college degree conveys a message that the student has a general understanding of governments and politics, history and culture, biology and science, languages and physiology, communications and writing, reasoning and critical thinking. It is difficult to put a value on the benefit of having this broad knowledge and general skills. You can’t put a price tag on attitude, approach, self-esteem, individual growth and the development of personal responsibility. But, it is easy to imagine the costs of not having them. The outcome of uninformed decisions, misunderstandings, and confusion could be monumental. It is easy to see why many employers require a college degree as a prerequisite for employment in decision-making positions. Most studies of the value of education focus on the value to the individual. In this situation, the value of the specific skill can be determined by measuring the difference between the personal incomes of the different graduates. Comparing the starting salary of a computer science graduate with that of a liberal arts graduate can identify the relative additional value of specialized skills to the marketplace. However, this is a very short-sided view that bases educational value only on the value to the individual and not to the employer. Such comparisons do not portray the whole picture. An additional important dimension is what the students accomplish of value for their employers. Washington State University’s Engineering Management Program focuses on working professionals. Consequently, the students have the opportunity to actually apply their new knowledge as they learn. Each course requires students to write a paper or complete a project that applies the tools and techniques of that course in their working environment. The Program also includes a final, end-of-program project that requires students to integrate the many topics studied as part of their graduate work and at the same time focus with some specific tools into the technical management concerns of their employment. The class projects encourages students to go beyond superficial understanding and try to integrate the realities of their world with the theory and practice of technical management. The class project brings relevancy to the course material and engages students in the learning process. The final end-of-program project often produces a significant contribution toward the improvement of technical management. Both P ge 698.1 Proceedings of the 2001 American Society for Engineering Education Annual Conference & Exposition Copyright 2001, American Society for Engineering Education the employer and students have a better appreciation for the course material when they can see its application. And, as a side benefit, the short-term value of the education can be directly estimated. Determining the Value There are almost as many different ways to compute value as there are cost accountants. Sadly, too many of the computations use the transfer of costs from one column to another as an artificial savings but of no overall value to the firm. To overcome this limitation, we encourage students to determine value based upon real, validated savings or true cost avoidance. Here are the guidelines we use: 1. Direct Throughput Value -Did your project produce any more product? If you produced one more at negligible increase in resources, the value is the sales price less truly variable costs (gross profit margin). -Did your project protect any sales? (Prevented lateness, Retained customers, Maintained relationships). The value of retained sales is the gross profit margin value of the product times the number of products per your influence time (say your influence extended for three months and you saved three per month then multiply the gross margin by 9). 2. Inventory Value -Did your project reduce any inventory (physical items or queued paperwork)? Inventory is valued at its raw material purchase price. Reducing variability 10% on a system can reduce the need for inventory significantly. Inventory holding costs can be 10 to 30% of raw material price. 3. Speed -Did your project speed up any process? Speeding any process is the same effect as adding additional capacity without additional resources. Reducing flow time 10% increases production capability 10% times the total productive capacity of the function. The function can accept more work per unit time. Reducing time also reduces the time inventory is held. 4. Cost Reduction -Did your project reduce actual money paid to perform a task? (Transferring people from one area to another can only be counted if you eliminate a new hire in the other area.) Material reduction, process simplification, process understanding all reduce waste, speed up delivery and increase output. -Did your project defer any costs (cost avoidance)? Often cost savings are not actual dollars in your pocket but money you didn’t have to pay as a result of your work. Prevented penalty. Eliminated need for consultant work. 5. Estimating Value of Intangibles -Often a project is of extreme value for the following reasons: The solution resolves problems, provides answers, eliminates conflict, provides a plan, reduces stress, satisfies concerns, etc. The value of such a project depends upon the scope of the problem, the level in the organization and the breadth of its nature. The best model to choose to estimate the value is the “equivalent consultant cost”. How much would it have cost if a consultant had provided the answer? -Here is an example determination. For a simple project, a consultant charges $1000 per day minimum and takes three days to find out what is going on. An outside consultant usually takes longer to solve a problem than an inside person. For this determination, assume the consultant solves the problem in about the same number of days over which you solved the problem (assuming you worked on the problem full-time). The consultant then takes three to prepare the solution in some presentable form. If you spend four full-time days doing a project, that’s worth $3,000 + $4,000 + $3,000 or $10,000 in simple terms. For far reaching projects, multiply the estimate by a factor of 2 for each layer of supervision and for each additional outside organization involved. If you spend 20 days solving a problem that spans three layers of management supervision in the organization and it includes another outside organization, a rough estimate in consultant value would be ($3000 plus $20,000 plus $3000)*2*2*2=$208,000. Adjust your numbers in a conservative fashion. -Some projects are reports, analyses or summaries. Again, The value of the report (while not tangible) can be determined using the consultant model. How much would it have cost for a consultant to provide the same material? 6. Recurring Values -Often an improvement of a repetitive process provides value with each subsequent repetition. When estimating value, limit your scope to the number of repetitions expected in the first year (even though there may be long term ramifications of the improvement). P ge 698.2 Proceedings of the 2001 American Society for Engineering Education Annual Conference & Exposition Copyright 2001, American Society for Engineering Education For a complex company such as Boeing, it is difficult to validate the value of any single initiative; it is seldom that any intervention is accomplished in a controlled fashion. Resources are often diverted to other processes in mid-stream, projects are cancelled or delayed, and priorities change frequently. A basic accounting principle holds that any decision should ideally be evaluated by the incremental effect on costs and revenues; however, this simple rule is difficult to apply when activities are so intertwined.
