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22OCT

Mark Boyd

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– Software Delivered asPromised. No Surprises.

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ERP for EngineeringChange OrderManagementOne of the main goals of an ECO is to improve the overallperformance of the product being manufactured (i.e. cost reduction,improved quality, market differentiator). In order to determine ifusing an ECO has improved operations, you must be able to trackthese Key Performance Indicators (KPI’s) and evaluate the impact.This can be especially difficult, if not impossible, if an organizationrelies on manually intensive tools. We’ve already discussed the risksinherent in using homegrown or manual solutions for managingyour ECO process, so now let’s look at what technology solutionsare available to evaluate the impacts of the ECO and helpdetermine the its effectiveness and yielded results.

According to Wikipedia, an “Enterprise Resource Planning (ERP)system provides an integrated view of core business processes,often in real-time, using common databases…”. Within a robust andcapable ERP system, it will offer a Manufacturing module that willassist engineering with the management of Bill of Materials alongwith the ability to do Engineering Change Orders (by modifying theBOM). One of the key benefits of an ERP system in this area is that itis an automated system requiring little or no human intervention tocarry out the tasks needed in managing an ECO.

Keeping in mind our Wikipedia definition of ERP, we have thebenefit of a system using a common database that can provide theorganization “real-time” views of business processes. This isespecially important if we are trying to analyze data and makingvaluable decisions.

Measuring the ECO’s Effectiveness

Earlier the question was posed on how to evaluate theeffectiveness of the ECO. A capable ERP system provides the abilityto acquire up to date information on historical BOM versions. Thisfunctionality can provide management with the tools necessary toperform comparative analysis on previous and current BOMversions. Now we are armed with the valuable and accurate dataneeded to determine whether or not the ECO had a positive impacton overall quality issues. By taking a snapshot of the BOM versions,we can gain visibility into the outcome of the change, and make adecision if more tweaking will be needed – another ECO, or wehave succeeded in our desired result.

Managing Part Changes

Another powerful function of ERP is to provide insight on how a partchange will impact other products being manufactured. Going backto our example of obsoleting a particular part component, how doesengineering determine where else this part is being used? If theydecide to remove it from the procurement sheets, what affect will ithave on other product lines? This is called a “Where Used” functionwithin ERP. Manually tracking this could present nightmarish resultsand tax the “already stretched beyond available bandwidth” of yourresources. With ERP’s “where used” abilities, we can make child’splay of this task. The “where used” feature provides clarity as towhere a component, sub-assembly, or phantom BOM is used. Notonly does it provide clarity, it also provides guidance as to whatother BOM’s will need an ECO to correct the problem.

Knowing “where used” can be helpful to procurement inunderstanding when to discontinue ordering obsoleted parts, andplace all future orders with the new BOM component. If any newsub-assembly or phantom BOM’s are going to be needed, havingthe information on hand will aid in providing lead times of thesourced components. The ERP system provides for automaticallysetting “End Dates” for the obsoleted part, and the “Start Date” ofthe new part. The process engineer does not have to manuallyremember when these changes go into effect for productionpurposes. No human interaction needed.

Comparative Analysis of ECOs

If management needs to see if our ECO did indeed slow down therate of defects and returns, tools within an ERP solution can help tocompare previous BOM’s and current BOM’s. A quality controlmanager should have the ability to run a “Matrix per Version” reportwhich is used to compare all existing versions of a Production BOM.This information can be used to view performance of the new BOMvs. the last version BOM. Comparing them side by side shouldprovide visualization to determine if the desired KPI’s were reached.Also, with robust reporting capabilities, finished production orderscan be used to investigate manufacturing problems, such as a highrate of defects or cost overruns.

Since it is possible to view historical snapshots of data with an ERPsystem, executive management now has a tool to assist withmaking sound business decisions. With the ability to report real-time data, they now have visibility into the entire lifecycle of themanufacturing process. This is powerful. Instead of having onlyhaving visibility into snippets of the business, one now has the toolsto see the big picture and the means to understand if the ECO wasfinancially effective.

ECOs and ERP Go Hand in Hand

In this era of “big data” the message is clear: “information is power”.The power to collect, report, and analyze data is not a “nice-to-have” in today’s competitive business environment. It is essential tosurvive and thrive!

It’s clear that utilizing ECO’ss can help a manufacturer improve theiroverall business performance, but the ECO alone is not enough.The risk is high when ECO’s are improperly managed, which is whywe recommend using a manufacturing accounting solutiondesigned to handle the nuances of all manufacturers. An ERPsystem that provides the type of tools and rich functionality requiredto effectively implement and manage your ECO system will help anyorganization make better business decisions, and that will enableyou to to differentiate yourself from the rest of the market.

Article written by Mark BoydAccount Executive at Rand Group

Mark Boyd has extensive experience working with manufacturers,helping them re-evaluate the way they do business and instigatereal operational change.

Ask Mark a QuestionAsk Mark a Question or call (866) 977-6850

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