Continuing the posts on Bill of Material handling for different types of companies, this time the focus on BOM handling in a Build to Order process. When we are talking about Build to Order process, we mean that the company is delivering solutions for its customers, based on existing components or modules. A typical example is the food processing industry. In order to deliver a solution, a range of machinery (ingredient manipulation) and transporting systems are required. The engineering tasks are focused on integrating these existing components. In many cases new or adjusted components are required to complete the solution.
Research and Development in a BTO company
In a typical BTO company you see actually two processes.
- The main BTO process, fulfilling the needs for the customers based on existing components
- An R&D department, which explores new technologies and develops new components or modules, which will become available for selling to new customers.
This is the innovation engine of the company and often can be found in a complete isolated environment – extra security – no visibility for other departments till release. The task for this R&D department is to develop machinery or modules based on new, competitive technologies, which are rapidly configurable and can be used in various customer solutions. The more these machines or modules are configurable, the better the company can respond to demands from customers, assuming a generic machine and interfaces does not degrade performance, compared to optimal tuned machinery.
I will describe the BOM handling for this department in a future post, as also here you will see particular differences with the ETO and BTO BOM handling.
Back to the core of BTO
I found a nice picture from 2003 published by Dassault Systems describing the BTO process:
We see here the Bidding phase where a conceptual BOM is going to be defined for costing. Different from the ETO process, the bidding company will try to use as much as possible known components or technology. The reason is clear: it reduces the risk and uncertainties, which allow the bidding company to make a more accurate and competitive cost estimate for these parts. When a company becomes mature in this area, a product configurator can be used to quantify the estimated costs.
The result from the bidding phase is a conceptual BOM, where hopefully 60 % or more is already resolved. Now depending on the amount of reuse, the discussion comes up: Should modifications being initiated from the eBOM or from the mBOM?
In case of 60 % reuse, it is likely that engineering will start working around the eBOM and from there complete the mBOM. Depending on the type of solution, the company might decide to handle the remaining 40 % engineering work as project unique and treat it the same way as in an ETO process. This means no big focus on the mBOM as we are going to produce it only once.
I have worked with companies, which tried to analyze the 40 % customer specific engineering per order and from there worked towards more generic solutions for future orders. This would mean that a year later the same type of order would now be defined for perhaps 80 %. Many companies try to change themselves from a project centric company towards a product centric company, delivering configured products through projects.
Of course when solutions become 100 % configurable, we do not speak from BTO anymore, but from Configure to Order (CTO). No engineering is needed; all components and interfaces are designed to work together in certain conditions without further engineering. As an example, when you buy a car or you order a PC through the internet – it is done without sales engineering – it is clearly defined which options are available and in which relation.
However the higher the amount of reuse, the more important it becomes to work towards an mBOM, which we will than push the order to ERP.
And this is the area where most of the discussions are in a PLM implementation.
- Are we going to work based on the mBOM and handle all required engineering modifications from there?
- Do we first work on a complete eBOM and once completed, we will complete the mBOM?
The reuse from existing components and modules (hardware) is one of the main characteristics of BTO. Compare this to ETO where the reuse of knowledge is the target no reuse of components.
The animation shows the high level process that I discussed in this post.
What PLM functions are required to support Build to Order ?
- Project management – the ability to handle data in the context of project. Depending on the type of industry extended with advanced security rules for project access
- Document management – where possible integrated with the authoring applications to avoid data be managed outside the PLM system and double data entry
- Product Management - managing all released and available components for a solution, related to their Bill of Materials. Often part of product management is the classification of product families and its related modules
- Item management – The main activities here are in the mBOM area. As items in a BTO environment are reused, it is important to provide relevant ERP information in the PLM environment. Relevant ERP information is mostly actual costs, usage information (when was it used for the last time) and availability parameters (throughput time / warehouse info).
As historically most of the mBOM handling is done in ERP, companies might not be aware of this need. However they will battle with the connection between the eBOM in PLM and the mBOM (see many of my previous posts).
As part of the BTO process is around engineering, an EBOM environment with connections to specifying documents is needed. This requires that the PLM system has eBOM/mBOM compare capabilities and an easy way to integrate engineering changes in an existing mBOM.
- Workflow processes – As we are dealing with standardized components in the BOM, the Engineering Change Request (ECR) and Engineering Change Order (ECO) processes will be the core for changes. In addition you will find a Bidding Process, a Release process for the customer order, Manufacturer Change Order process and a Standard Item Approval process.
- A Sales Configurator allowing the sales engineering people to quickly build the first BOM for costing. Working with a Sales Configurator requires a mature product rationalization.
- Supplier Exchange data management – as many BTO companies work with partners and suppliers
- Service Management – as an extension of item management. Often in this industry the company who Builds the solutions provides maintenance services and for that reason requires another Bill of Material, the service BOM, containing all components needed when revising a part of the machine
- Issues Management – handling issues in the context of PLM gives a much better environment for a learning organization
- Requirements Management – specially for complex products, tracking of individual requirements and their implementation, can save time and costs during delivery
Conclusion (so far):
When you compare these PLM requirements with the previous post around ETO, you will discover a lot of similarities. The big difference however is HOW you use them. Here consultancy might be required as I do not believe that by having just functionality a company in the mid-market will have time to learn and understand the special tweaks for their business processes.
Next post more on configurable products