A Remedy for Hair Loss!

by Dave Biggs

100 starter motors that were purchased for a new product are being scrapped. The purchased items scrapped during the year are part of Cathy's performance review, and this latest event is not going to help. These particular items cost $1500 a piece and she knows this is definitely going to become a discussion topic and an embarrassment in this week's meeting. These events are causing her to pull out her hair by the handful!

Cathy is a planner/buyer for Ajax Company, and she is between a rock and a hard place. The rock is the need to get new products to the marketplace quickly. The hard place is long lead time purchased parts. Ajax's marketplace is demanding that new products be delivered within a month of the time when the design is completed. The new purchased items like starter motors can have lead times of 12 weeks. The dilemma is long lead time items have to be purchased before the design of a new product is complete.

Purchasing items before the design is completed carries the risk of scrapped parts. Communication/coordination problems and the design being changed after it was thought to be complete are the two major contributors to scrap items. There are ways to minimize design stability issues and they are a topic of a different article, but scrap caused by communication/coordination problems is a totally unnecessary waste!

Using our story company, Ajax, to review how the bills of material and materials management should be managed during product development shows how to avoid communication and coordination problems. Ajax builds large diesel engines and early in a project engineering and manufacturing should plan the product structure and load skeleton bills of material. They know even before a project is started that the engine is going to have a block, pistons, connecting rods, valves, and so on. Past experience building engines gives them a pretty good idea of how the engine will be manufactured, so they know what the product structure should look like even before the individual parts are actually designed.

These "early" bills of material have dummy part numbers, like "piston," loaded for the items that are not designed yet. As parts of the design are completed, Engineering loads real part numbers and completes the bills. This practice is common and has given a competitive edge to the companies that use it.

In order to avoid problems, it has to be clear to both engineering and manufacturing which parts on the bills of material are complete and ready to order. The need to quickly get to the marketplace means that you can't wait until the entire project is production released, and it is too cumbersome and ineffective to go through a production release process for every part as it is finalized.

The answer is a "futures flag" on the parts in the bills of material. Depending on the software a company uses, the futures flag may by part of the item master file, but most likely, it is part of the revision control system. When the revision control system is used, a revision status such as NR can be used to clearly indicate that the part is not released for production activities. The idea is for engineering to use the "futures flag" to warn material planners that parts of the design are not stable enough to procure parts yet. So in Cathy's company, the starter motors are marked with a "futures flag" when the skeleton product structure is first loaded. When engineering feels that the design is stable enough, they change the "futures flag" to let the material planners know they can procure the parts.

The skeleton product structure technique has a second benefit in reducing confusion. Since the "early" bills of material are in place early in the project, the materials management people can use the formal information system to tell when it is time to order parts. If a futures flag has not been removed when it's time to buy the parts, the planners know to immediately have a discussion with engineering.

Using the "futures flag" technique eliminates the need for complex production release forms and procedures, which usually don't add value. In effect, the product design is released one item at a time and manufacturing has the maximum time to procure the items required for the first built units.

Sometimes the best offense is a good defense. That's the case for material planners and buyers who pull their hair out during new product development. A "futures flag" is one of the better hair loss remedies!