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…