Supercharged Supply Chains

CHAPTER 4Bill of Material: A Solid Foundation

The Bill of Material is another critical input to Material Requirements Planning as shown in Business Excellence Planning, Figure 4.1. Our focus in this chapter is the accuracy required to create a valid (accurate and achievable) plan.

FIGURE 4.1 Business Excellence Planning

Dr. Joseph Orlicky introduced Material Requirements Planning (MRP) at J. I. Case in 1961, based upon the concept of Dependent Demand, which would lead to “matched sets” of components using a Bill of Material (BOM). With an accurate BOM, regardless of how many parent‐component levels are within that BOM, the planning system's MRP function calculates how many units of each component are needed to produce the number of end items scheduled, resulting in matched sets of components to produce that product. For instance, if you wanted to build a car, the bill of material would include four tire assemblies, which would drive down to the next BOM level showing four tires, four wheels, and 20 lug nuts. Since a car has only one engine, the BOM would drive down from one engine to the next level showing one machine block, eight pistons (assuming eight cylinders), eight rods, two heads, and so forth. From there it would drive down from the machine block to the next level showing a block casting, eight rod forgings, and so forth. Most cars have thousands of parts and some ...