August 2, 2011 7:30 AM

In our previous ERP planning tip, we covered time and quantity order-based modifiers to back-schedule supply requirements from demand. This previous tip dealt with the “when” and “how much” questions of planning. In this week’s tip, we cover the “what” questions of planning, which is represented by the bill of materials, or BOM (there is also an element of “how much” in BOMs).

For planning purposes, the BOM is important because it acts as a bridge between manufacturing’s production requirements and order requirements.

In a nutshell, the BOM defines the structure of components that collectively make up a final product, assembly, or sub-assembly. BOM views may be single level or multi-level. A single-level BOM shows only those components that are directly required to make the assembly. A multi-level, or indented, BOM shows multiple levels of breakdown. So, an assembly is broken down into components, some of which may be sub-assemblies that are themselves broken down into components. An example of a multi-level BOM is set out in the Appendix below.

Now that we have defined a general BOM, it becomes important to distinguish between an engineering bill of materials (EBOM) and a production bill of materials (PBOM). The distinction is important because the PBOM – and not the EBOM – is relevant for manufacturing and planning purposes.

Let’s start with the EBOM. When engineers design products, they explode the product into its component parts. This explosion is captured in an EBOM. For various reasons, EBOMs can be revised before the design makes its way to production and after it is already in production. Once a new revision is complete, the EBOM is handed off to production and becomes the new PBOM.

Manufacturing engineers then review the PBOM and adapt it to support the physical manufacturing process. The resulting PBOM is effectively a supplemented EBOM. Items included in a PBOM and that would be omitted in an EBOM can include shop supplies such as screws, nuts and paint as well as other items (see the below Appendix for a comparison of a sample EBOM and PBOM).

At a minimum, the PBOM should include the following line items:

The point of the story is this: a PBOM must accurately reflect the product design, build requirements and routings. From a planning perspective, the PBOM represents the actual demand requirements that the planning engine relies upon to generate supply recommendations.

Too often, companies feed inaccurate PBOMS into their planning engines. The result is poor recommendations that are either:

1. Ignored;
2. Or, if acted upon, lead to problems with inventory, lead times and scheduling.

In next week’s tip, we will discuss the final element of planning data accuracy – the manufacturing routing.

Appendix 1: Comparison of Multi-Level EBOM and PBOM for Bicycle

*this simplified example does not include more detailed BOM fields

Your POV (post comments below)

•  What organizational measures do you take to ensure that your BOMS remain accurate?
• How has your organization transitioned from using manual planning tactics to using MRP effectively?
• What's your organization's biggest challenge to maintaining accurate BOMs?

Blogger Profile: Jonathan Gross
Jonathan manages ERP selection projects drawing upon his experience as a commercial lawyer and his M.B.A. education to help clients select the right-fit ERP systems and negotiate the best deal. He is an industry analyst and advises boards of directors on issues relating to business, strategy and law.

Posted by Sue Ansell at August 2, 2011 7:30 AM

Categories: Enterprise Resource Planning (ERP)

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