When we talk to companies who are just starting their classification journey, we provide them with the best practice framework focused on obtaining the most value from their classification project. All too often this work is done in only one division or it becomes an “engineering searchability” project which limits the value of the project.
When making an investment in classification, the budget for this program should come from these sources:
Person responsible for direct material spend – VP of Operations, CFO, or CPO
ERP or PLM Deployment budget
7 Best Practices for a Parts Classification Project
Target high value parts for classification – high spend, proliferation, too many vendors, shared across programs, etc. Start with the 10 top categories using this criterion.
Pull all the parts from each organization for each category – this is the biggest bang for the buck approach.
Assign one (1) Engineering SME and one (1) Purchasing Category owner for each commodity – they will approve structure and data. You don’t want too many cooks in the kitchen.
For each part – provide part number, part description, MFG Part Number and MFG Name, drawing or specification.
Obtain the commercial data for each part – provide pricing, supplier names, buying org and volumes.
Clustering – once each category is complete, look for clustering opportunities – this will expose cost savings for procurement spend rationalization. Clustering will expose parts with higher prices compared to other similar parts with lower pricing.
Load classification data to PLM - make sure to validate the data against the PLM systems rules. This saves time dealing with load issues.
The advantage of taking this approach is that you only go into each category once. You don’t want to have to go into each category multiple times. This will allow you to have a much better chance of finding cost savings. Lastly you will be in a better position to prepare the data for your global PLM system. You don’t want to have to keep updating your PLM system with changes. The video below describes the process to prepare your classification data for cost savings and sourcing cost savings.