The concept of a Planning Bill of Material (PBOM) has been around for many years to manage the relationships between independent and dependant demand items. Planning BOMs are used to forecast demand for components and options available for configured products. For example, a configured laptop may have an option for a wireless card that is either specified at order entry or purchased as part of an end item off the shelf. In this case, the attach rate is a function of how often the wireless card is purchased when a laptop is purchased. Another example might be the RAM option for a computer. In this example, RAM is included in all laptops, however, the consumer has an option to select a certain quantity of RAM (e.g. 128, 512, 1.2…). In the case of RAM, the attach rate represents the percentage of time each quantity of RAM is selected when a laptop is purchased and the attach rate for the different options of RAM must add to 1.
One of the advantages using PBOM is the ability to streamline and reduce complexity in the planning process so that rather than plan for multiple end items and components, planners can focus there attention on forecasting more aggregate level platforms or product groups and use attach rates to forecast the component level details associated with the platforms. Another benefit of using a PBOM is to improve the overall accuracy of the forecast. In many cases the actual demand level for component/options may be relatively low which makes it difficult to accurately forecast demand. Forecast accuracy at the aggregate level tends to be higher compared to component/option levels since volumes are relatively larger which results in higher accuracy using statistical methods. Once the aggregate level is determined, attach rates can be used to predict the component/option level demand which improves the forecast accuracy for the component/options or mix.
While the use of PBOMs offer several advantages for planning component/option level detail, there are several limitations to the approach. (1) The accuracy of the component and option level forecast is greatly impacted by planned attach rates (2) Attach rates tend to be static and not reflect trends in the market (3) Manual tracking and managing of the attach rates can be unwieldy (4) Updating attach rates based on trends and actual demand data is typically not feasible. Systems that employ Planning BOMs expect a user to maintain the percentage (ratio) relationships between the Parent items and Component items in order to accurately assign demand values. With thousands of records to maintain, this is a huge effort, typically behind schedule, and overly generalized, resulting in poor product mix accuracy.
One of the key differentiators for the Steelwedge application is its Statistical Bill of Materials or SBOM. While the SBOM builds on all the advantages of the PBOM, the S-BOM automatically calculates the attach ratios as frequently as nightly for every new sales order line booked, using By managing these ratios at the detail level, very accurate aggregations can be presented at the customer, region, product family, etc. levels that drive a very accurate product mix prediction, and the ability to achieve higher customer service levels while maintaining lower overall inventory levels. Manual overrides at any level can be used to manage new product/option/component introductions, end-of-life, supersession, and cannibalization. In addition, the SBOM looks at trends and dynamically updates and plans for trends in the future using time-phased assumptions versus the typical static assumptions used in a PBOM.
Steelwedge jointly developed its SBOM technology based on customer input in industries that manage complex products. In addition, to helping companies that manage complex products, the SBOM technology can help customers streamline their planning process and improve accuracy by allowing planners to focus on planning at a group or category level and using the SBOM to determine detailed level SKU forecast and product mix decisions.
