Research and Development (R&D) and Engineering are the backbone of innovation in the automotive and machinery equipment industries. With technological advancements moving at lightning speed, measuring the right metrics is essential to stay competitive and drive efficiency. In this post, we’ll dive into the seven most important R&D and Engineering metrics and provide examples and industry standards for the automotive and machinery equipment sectors.
1. Time to Market (TTM)
Time to Market refers to the period from the initial idea to the product’s launch. In highly competitive industries like automotive and machinery, reducing TTM without compromising quality is crucial for maintaining an edge.
Example: In the automotive industry, with increasing demands for electric vehicles (EVs), reducing the TTM from concept to mass production is critical. Many leading automakers aim for an 24-36 month TTM for new models.
Industry Standard: In machinery and equipment, the average TTM for a new product is around 12-18 months. Optimizing this can lead to faster adoption of new technologies and meet customer demands efficiently.
2. First Pass Yield (FPY)
First Pass Yield measures the percentage of products that meet quality standards without requiring rework. This metric is a strong indicator of the efficiency and accuracy of your design and manufacturing processes.
Example: In the automotive industry, a high FPY is crucial when manufacturing precision components such as engine parts or electronic control units (ECUs). A low FPY can lead to costly reworks and delayed product releases.
Industry Standard: Automotive and machinery manufacturers typically aim for an FPY of 95% or higher to ensure top-quality production and minimize the need for rework.
3. Engineering Change Order (ECO) Cycle Time
Engineering Change Order Cycle Time tracks the speed at which design changes or product modifications are implemented. A shorter cycle time reflects greater agility in responding to market needs or regulatory requirements.
Example: In the automotive sector, ECO cycle times are crucial when adapting to regulatory changes (e.g., emissions standards) or customer feedback for new features.
Industry Standard: In the machinery and equipment sector, a 30-day cycle time for critical engineering changes is a competitive benchmark, while more complex changes may take up to 60 days.
4. R&D Spend as a Percentage of Revenue
R&D Spend as a Percentage of Revenue is a key financial metric, reflecting how much of a company’s revenue is reinvested into research and development. A higher percentage indicates a stronger focus on innovation and long-term growth.
Example: Leading automotive companies such as Volkswagen, Tesla, and Toyota invest between 5-8% of their annual revenue into R&D to maintain a competitive edge.
Industry Standard: In the machinery and equipment sector, R&D expenditure typically ranges between 3-5% of revenue, depending on the company’s innovation strategy and market competition.
5. Product Defect Density
Product Defect Density measures the number of defects found per unit of product, a critical metric for ensuring product quality and customer satisfaction. Lower defect density points to higher-quality designs and manufacturing processes.
Example: In automotive, reducing the defect density in electronic systems or safety-critical components such as brakes can have significant safety and reputational impacts.
Industry Standard: In the automotive industry, defect density is often measured at around 1-5 defects per 1,000 vehicles produced. For machinery, the target is typically below 1 defect per 500 units.
6. R&D Productivity (Patent Output)
R&D Productivity refers to how efficiently R&D teams generate valuable intellectual property (IP), such as patents. This metric is particularly important in innovation-driven industries like automotive and machinery equipment.
Example: Companies such as Bosch and Siemens are known for their high patent output in automotive and machinery sectors, where each patent reflects a step toward greater market leadership.
Industry Standard: Leading automotive companies file hundreds to thousands of patents annually, with industry giants filing around 1,000 patents each year. In the machinery sector, high-performing companies may aim for 10-500 patents annually.
7. Innovation Rate
Innovation Rate measures the percentage of revenue generated from products that are new to the market or significantly improved over the last few years. It reflects how well a company is innovating and responding to market demands.
Example: In the automotive industry, where technological advancements like electric vehicles (EVs), autonomous driving, and connected car systems are rapidly evolving, maintaining a high innovation rate is essential for long-term success.
Industry Standard: Automotive leaders aim for 20-30% of their revenue to come from products that were launched in the last 3-5 years. In the machinery and equipment sector, companies often target 15-25% of their revenue to come from innovative products or improvements in the same timeframe.
Conclusion
Tracking the right metrics can significantly enhance the efficiency and success of R&D and Engineering efforts in the automotive and machinery equipment industries. Focusing on metrics like Time to Market, First Pass Yield, and R&D Productivity not only provides a clear picture of current performance but also creates actionable insights to drive continuous improvement.
By setting industry-specific benchmarks and continuously optimizing these key metrics, organizations can ensure their R&D and Engineering functions contribute to greater innovation, faster production times, and higher product quality.
