$40,000 scrap charge and a four-week delay: is that a huge failure at your shop, or just another Tuesday? The job was 60% complete when engineering issued a change order. There’s nothing unusual about that.
But that change was connected to three components, two of which procurement ordered six weeks ago based on the original BOM. One is a standard part that can be returned. The other one is a custom fabrication that will be scrapped. The third is a long-lead item that was never ordered because no one in procurement knew it was on the revised BOM until the change order appeared in their inbox, three days after engineering issued it internally.
So you pay the scrap charge and the expedited freight bill for the replacement part and apologize profusely to the customer. And wonder what happened.
The problem is, nobody did anything “wrong.” Engineering was trying to solve a design problem, procurement was following the BOM it had, and production was building according to the plans. The failure was the structural gap between those functions — the lack of a live connection between engineering changes and procurement follow-up.
Why Procurement is Disconnected from Engineering
In the ETO world, procurement is not a standalone function. There are no order-and-forget-it projects. ETO projects are always in motion, with procurement linking engineering to production and vice versa. Everything engineering does ripples through procurement. BOM revisions, change orders, and scope adjustments impact what procurement has and will order. If procurement is proactive, thousands of dollars of stock may already be sitting on the shop floor, ordered according to an out-of-date BOM.
However, procurement often seems to be out of the loop, working with yesterday’s information. It’s like driving a car by looking in the rearview mirror. The lack of visibility between the engineering BOM and the procurement process leaves procurement scrambling to get the job back on track.
Over the 6- to 18-month timeline of an average ETO project, the BOM will likely change multiple times. For the engineers, that’s just another day at the office. But if procurement is not connected to real-time changes, they will always be working from the wrong information. Disconnected systems and ad hoc communication leave procurement running behind.
How Procurement Fails the BOM
Unlike other manufacturers, ETO shops can’t lock down the BOM before production begins. Engineering development continues during fabrication, and customers may request modifications along the way. Suppliers may change or discontinue items, leading to last-minute BOM updates. Engineering changes are not an exception in ETO; they are the norm.
Typical ETO projects encounter two core procurement failures in coordinating with engineering on the BOM.
Late identification of long-lead items. Long-lead delivery items are identified too late to order and deliver in time to meet production schedules. Engineering may wait to “finalize” the BOM before notifying procurement, which, in an ETO project, may never happen. Delays pile up while waiting for delivery. The irregular nature of ETO projects prevents economies of scale in purchasing, so there’s little opportunity to keep inventory on hand.
Change orders that arrive after orders are placed. Procurement buyers may receive updates after they’ve placed an order, which can result in restocking fees, transportation costs, and delays in receiving the updated items.
The Real Cost of ETO Procurement Failure
Your company’s procurement discipline may be on target. Yet you’re fielding supplier escalations, approving expedite fees, and explaining delivery delays to customers, often for the same job at the same time.
Reactive procurement can get expensive fast: a rushed replacement order can trigger premium freight, a late engineering change can leave procurement stuck with material that can’t be returned, and custom parts may turn into pure scrap or rework. The project stalls with weeks of delay that no department intended.
All of these costs are largely preventable with better information flow.
What Engineering-Connected Procurement Looks Like
In a proactive procurement environment, procurement keeps pace with engineering. No more costly surprises.
Buyers are alerted to long-lead items during engineering, not after the BOM is released. Change orders trigger automatic review of open purchase orders. Supplier lead times are mapped to the project schedule rather than managed in a separate spreadsheet. Procurement buyers are not hit with unexpected change orders or timeline updates. The right products arrive at the right time at the right place.
Managers see the spend for premium freight and order cancellation fees drop, as projects are delivered on budget and on time.
With the BOM as a living document shared among all departments, information moves freely and consistently throughout the organization.
The result is delivery confidence and a procurement function that is ahead of the job, not behind it.
How The Novobi ETO Blueprint Solves Procurement Issues
Novobi is a Gold-level partner for Odoo, an open-source ERP designed to connect all core business functions into a single, connected system. Odoo’s unified architecture supports the complexity and flexibility inherent in ETO manufacturing.
The Novobi ETO Blueprint addresses ETO communication gaps by creating a single source of truth between the engineering BOM and the procurement process. Changes propagate automatically, and buyers act on current information.
The outcome for engineering-connected procurement is not just lower expediting costs. It is internal and external confidence in the process. The company demonstrates the ability to make and keep commitments to customers because procurement is aligned with the actual state of the job, not a snapshot from six weeks ago.
Book a consultation with Novobi to see how the ETO Blueprint applies to your operation.
DISCLAIMER: The information in this article reflects the views and opinions of Novobi, based on publicly available information, and is intended for informational purposes only. It is not legal or financial advice. All trademarks are the property of their respective owners.
