What Is Change Order Management?
The two most common changes within the Manufacturing Industry are changes to a Bill of Materials and manufacturing workflow. Change Order Management documents the changes in the Bill of Materials or manufacturing workflow, followed by a cross-functional review and approval of those changes and the execution of those changes.
Why are Change Orders needed?
Change Orders can show the historical changes made to a product or its manufacturing flow throughout its lifespan. Having these changes documented along with an effective date is helpful should the product experience abnormalities, defects, or other undesirable issues over time. The root cause process can utilize the Change order history of the product to help discover if any changes may have contributed to the issue at hand. Without a Change order process in place, it is nearly impossible to pinpoint an event or change that may have caused or contributed to the issue.
Explanation of the Two Most Common Changes?
Bill of Material Changes
Changes to the Bill of Materials (BOM) can significantly impact many parts of the business. First, changes to the material and quantities affect raw material inventory, outstanding material purchase orders, and material requirements planning. In addition, work-in-process (WIP) and Planned Work Orders can be impacted depending on the effective date of the change. Furthermore, a change in how the product is manufactured, or the material used during manufacturing can affect outstanding sales orders. Lastly, changes to the Bills of Material may impact products already sold or put into service.
Types of Bill of Material Changes
There are only three types of changes to a Bill of Material.
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Deletion of Bill of Material Line Item
Deleting a line item within the Bill of Material means that that material will no longer be in demand or needed to manufacture or produce that item. Therefore, any raw material inventory allocated to this item is now obsolete. In addition, any outstanding purchase orders for this material will no longer be needed.
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Change within a Bill of Material Line Item
Changing an existing line item may include changing the material or item, the required quantity of the material, or a combination of them. Changing the material impacts raw materials in two ways. First, the original material is no longer required to manufacture the product. That has the same impact as deleting it from the Bill of Material, ultimately resulting in the raw material being considered excess or obsolete. Secondly, if a new material or item is identified, then the new material will be in demand. The material requirements planning process will determine the necessary actions. The action ranges from using existing stock, creating new purchase orders, or creating new work orders. Thirdly, changing the required quantity of the material or item impacts the amount of the raw material required. Reducing the required quantity can result in some raw material quantity becoming excess or perhaps scrap. Increasing the quantity necessary may create new material purchase orders and revise existing ones. If the material or item is a “make” item, then existing work-in-process (WIP) or planned Work Orders may require increasing manufactured quantities.
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Adding a New Bill of Material Line Items
Adding a new line item into a Bill of Materials (BOM) results in a new material demand. If the material is to be purchased, then the material requirements plan (MRP) may require new purchase orders to be created or existing purchase orders to be amended. If the material is a “make” item, MRP actions may result in further work orders, revised work-in-process orders, or revised work orders.
Manufacturing or Process Flow Changes
Changes to the manufacturing or workflow can be more elaborate and generally have a similar outcome as the Bill of Materials.
Types of Manufacturing or Process Flow Changes
There are four types of changes to Manufacturing or Process Flows.
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Deletion of Operation Step or Sub-Step
Deleting a step or sub-step operation in a manufacturing router means that that step is no longer needed. An example might be removing the First Article Inspection (FAI) requirement after the first lot of the product has been manufactured and the first article inspection has passed and been approved. Subsequent builds no longer require an FAI, so removal of the operation step is warranted.
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Adding of Operation Step or Sub Step:
Adding a step or sub-step operation in a manufacturing router requires a new step within the workflow. An example might be to add an inspection step to verify product attributes based on a non-conformance from a previous build of the product or to add a step into the router that was inadvertently omitted during the first-time build.
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Change of Operation Step or Sub-Step Details:
Operational steps can describe the process or work to be performed. During first-time builds, or when a non-conformance is discovered, the description of the process or work performed of a specific operation step or sub-step may change. In addition, other information within the operation step, such as work center, machine, or process attributes, may also change to produce better results. An example of this might be to change speeds, temperature settings, or times of a process to have a more favorable result.
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Change of Operation Flow:
Routers or manufacturing workflows are created to identify a planned arrangement or process flow for manufacturing the product.
What are the Benefits of using a Change Order Process?
Transparency
Change Orders document the complete history of change within a Bill of Material and Process Flows over their lifetime and the adequate periods of those changes. This results in knowing the material’s content, the process flow, and details of how it was manufactured at a particular time.
Cross-Functional Review
Changes to the Bill of Materials have an impact throughout the organization. First, changes may impact current sales orders, so the sales group must review the outstanding orders and determine the effect on those. Secondly, the supply chain is affected because there may be exceptional purchase orders for material that will no longer be needed or for material that will now be required and needs to be sourced. Thirdly, production or operations are impacted because work-in-process (WIP) or planned Work Orders may require a material change –removal, substitution, or additional material now needed—furthermore, the change may impact process flow and resources. Fourth, materials, stock room, and supply rooms might be affected because current stock may need to be upgraded to comply with the proposed change. Lastly, engineering is impacted by revising the bill of materials, routers, and the item master. As you can see, understanding the change, what impact the change has, and how to execute the change must be considered during the process.
Changes to a Process Flow also have an impact. Adding a new step might add or subtract an outside processing demand. This change impacts purchase orders, forcing the need to create, delete, or revise them for further demand. Additions to process flows might impact lead times or manufacturing costs. Change to the process description might require program changes, setup changes, or new equipment or trained personnel.
Efficiency
An intelligent ERP Software, such as SimpleManufacturing™, will compile all of the impacts of the change. Changes to the Bill of Materials will result in the impact list consisting of all outstanding sales orders, purchase orders, stock, Work Orders, and Engineering Documents impacted by the change.
Process flow changes are more complex, but at a minimum, SimpleManufacturing™ will identify all the outstanding purchase orders for outside processes or services.
When all are compiled, these items must be reviewed, and a determination must be made as to whether or not they must be revised to comply with the change. Business decisions may drive what is to be changed and what is to be left as-is. Once this identification is made, intelligent ERP software will make the changes automatically.
Why do Companies Fail in Processing Change Orders?
Interpretations of the Change
Describing and identifying the changes with clarity and understanding equally by the two parties is not trivial. Language barriers, Experience, and Knowledge levels all contribute to misinterpretations of changes. Therefore, a review of changes must be completed by a cross-functional group with diversity in experience and knowledge. This will assist in understanding all changes being requested and passed on for consideration and implementation.
Not Identifying All Impacts
A change can have a wide breadth of impact within an organization. Different disciplines interpret the change and identify the actions required internally to accommodate the changes. What is impacted, what needs to change, how it is to change, and when it needs to change are all items that must be identified for each change order. Once identified, they can be assigned to an actioner for execution.
Poor Execution of Changes
Having a process in place that identifies what is impacted, what needs to change, how it is to change, and when it needs to change is only the first step. Assigning those actions to a responsible party to implement is step 2. The final step is verifying that the actions were taken and reviewing that the expected changes are confirmed. Companies fail because they do not have a process, do not identify the changes, or do not verify that the changes are complete.
Choosing SimpleManufacturing™ as your next Engineering Change Order (ECOS) Solution
The SimpleManufacturing™ Engineering Change Order (ECO) Module is a simple yet thorough approach to managing ECOs. Its efficient means of creating, reviewing, and automating some changes saves time and eliminates errors.