Manufacturing Company’s ROI on BOM Project Estimated at 115%
By Lance Gilbert, Managing Partner, Net Results Group, LLC
A food manufacturer was struggling to identify which MRO parts/materials in their storerooms were associated to their equipment/assets within their plants, which consisted of five manufacturing buildings on one campus. They solicited proposals to assist them in creating bills of materials (BOMs), specifically the need to assign item master parts to asset numbers. During the proposal stage, feedback from Net Results Group stopped them from moving forward with a very expensive implementation and ineffective project plan (as the plans proposed by various providers were incomplete).
The company was ready to embark on developing BOMs with toxic and unstandardized data in their MRO item master and it lacked an organized asset hierarchy for its plant assets parent-child relationships.
The company’s goals for this project included:
- Identifying every MRO part that was tied to their assets and the quantity of each part per asset.
- Determine which parts were not assigned to a BOM or no longer required and obsolete those parts, with a plan to optimize the value of obsolete parts through an organized parts dispositioning program.
- Better understand the true cost of running an asset, down to the lowest tier of the asset’s level.
- Provide a more efficient work order process to eliminate unproductive maintenance time that was wasted by not being able to identify the right part assigned to an asset and the asset’s location in the plant.
By moving ahead with their initial plan, the company would have taken over 27 months to complete the BOM exercise and would not have had accurate data records for its parts and assets. In addition, the company would not have been able to standardize the descriptions of its parts and assets across the campus, making it difficult to identify where sharing of parts throughout the different plants would have reduced demand purchases.
The company took a step back from the initial project and engaged Net Results Group to create and facilitate a planning session with the company’s key project stakeholders. This planning session not only identified an effective project plan complete with detailed implementation steps and timeline, but Net Results Group also identified with the stakeholders measurable key performance indicators that enabled us to create a business plan that identified a return on investment for the project of over 115%.
During implementation, the company utilized Net Results Group’s professional services and MRO3iTM application that reduced the timeframe to just over 13 months, mainly due to the efficiency of using the MRO3i application. The full scope of the project went from what was initially only to create BOMs to a three-phase project:
- Develop asset hierarchies for each manufacturing building on the campus. This included standardized terminology for each level one through eight in the asset hierarchy and updating P&IDs for the plant equipment.
- Cleanse, standardize and enrich the MRO parts in the item master to ensure all items met the standardization criteria. It also eliminated duplicate items (items with the same manufacturer part number but with different item master numbers in their system). This enabled the company to reduce inventory values and lower the cost of annual purchases of MRO parts.
- Create BOMs by assigning the parts to the lowest level in the asset hierarchy (child level) along with quantities of each part required for each asset.
The company’s production lines are running more efficiently with higher uptime, and they are able to track costs of operating each asset, making it more accurate for them to perform ROIs for asset replacements.
Maintenance became more productive, work order information became more informative, Engineering was extremely pleased to have updated drawings on equipment, Finance was ecstatic to have the ability to better monitor costs of operations and lower inventory values, and finally Purchasing now had visibility into better purchasing insights, enabling them to attain stronger purchasing power with vendors.