The impact of engineering change on materials planning

Journal article, 2006

Purpose – The purpose of this paper is to increase the understanding of the impact of engineering changes on the materials planning process. Design/methodology/approach – This study is based on a conceptual discussion and empirical data from a case study of a supply chain in the automotive industry, including end producers (two OEM companies) and first, second and third tier suppliers. Findings – A framework comprising the situational dimensions of the engineering change was derived from the conceptual discussion and described in terms of product, supply, manufacturing, demand and materials planning characteristics. The empirical study shows the characteristics of the engineering change in the case company and how these have both positive and negative, as well as direct and indirect, influences on the materials scrap, administrative and transport/handling costs. The impact of the actual materials planning strategies is also shown. Another finding was that different engineering change situations exist within the same company. Thus, it is necessary to distinguish between them and to use different planning strategies for each situation. The paper discusses how such differentiated strategies could be developed in the case companies and in general. Research limitations/implications – The case study focused on a specific product and materials planning situation in the automotive supply chain. Other products and materials planning situations resulting from the same engineering change would have different characteristics and should, therefore, be planned and controlled accordingly. However, the developed framework is a general one. Practical implications – The appropriateness of a materials planning strategy differs between different engineering change situations. This calls for differentiated materials planning strategies based on the engineering change situation and materials planning characteristics. The framework developed in this paper describes the entire materials planning environment in engineering change situations in order to understand when and how to differentiate materials planning strategies. Originality/value – This paper fulfils a need for a framework that describes the impact on materials planning from an engineering change perspective. This framework is the first step in the designing of a normative guideline for differentiated materials planning strategies in an engineering change situation.