How Many Bills of Material Does A Company Need?

by Dave Garwood

Finding a bill of material in a manufacturing company isn't a problem. In many companies, deciding on which one to use is the problem! Many departments have bills of material, often all different ... and all wrong! Engineering originates new bills and the other departments update their data base when they feel like it, add information they need and exclude the rest. These actions are often justified as "being flexible!"

Each department operates in a vacuum without necessarily communicating to anyone else. And out on the shop floor, each manager has a little black book with the "real" bill that is used to build the product. Configuration control may be unknowingly reassigned to the shop floor, not in Engineering, where it belongs. Continuing the practice of keeping Engineering, Manufacturing, Cost Accounting and "unofficial bills" is costly in many ways. The product as manufactured may be different than was designed. Product costs are calculated for something different than is actually manufactured. The material scheduled from suppliers or the plant floor may not be the material that will actually be used to make the product. Quality deterioration, excess and obsolete inventory, product liability and lost profits will be the visible results.

The Goal: A Single Company Bill of Material

One General Manager recently told me, "Our company isn't profitable enough to pay the price to maintain several bills of material any longer." The alternative to multiple bills of material is to create a single company bill of material.The advantages are obvious. But running the business with a single company bill of material does require a significant change in operating practices. Each department no longer has the flexibility to change the bills when they feel like it. They can no longer operate in a vacuum. Interdepartmental communication is a must.

Merging the many bills in a company into a single company bill of material can be a traumatic event. Several emotional issues, such as the part numbering system, whether to include hardware on the bills and deciding who is responsible for structuring the bills, are often hotly debated issues. The filibuster may even continue without reaching any meaningful conclusion. Progress on fixing the bill of material problems is indefinitely stalled.

But these emotional issues are not usually the most critical problems needing to be resolved. Bill of material accuracy, avoiding overstructured bills by removing unnecessary levels, or adding levels of understructured bills are some of the real problems that need to be addressed. Modularizing bills of material and creating planning bills to satisfy Order Entry and Master Scheduling requirements may be necessary for products with many options. Implementing the necessary systems and procedures to manage engineering changes is critical. These are the real issues that need to be addressed.

Where to Start?

The bill of material is a company document, not a departmental document. And every company needs only one. All existing bills should be combined into a common company bill of material that meets every department's needs. Unproductive efforts to maintain multiple bills should be eliminated. The job starts with reaching a consensus that the bill of material is a company, not single department document. A high "quality" bill of material means all of the internal customer's expectations are met. All functions need to first understand all the needs, i.e. all expectations of the bills. Treat bill of material structuring as a process. Apply the proven principles and tools to improving quality to the process and reaching zero defects. This will lead to one accurate company bill of material ... and more profit!