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Technique 038

Bill Of Materials Simplification

An aircraft manufacturer who, (as you can probably appreciate), had a large Bill of Material for an aircraft, unfortunately, also had a significant problem in sorting the wheat from the chaff on MRP output reports. On one occasion a Bill of Materials error which specified one engine, instead of the two required, meant that when they came to kit the aircraft for assembly they discovered that whilst they had all of the short lead-time fastenings they were short of an engine which was a little late to satisfy the customer required due date. Simply dealing with the volume of output from MRP is a common problem where MRP systems are used to plan materials, which results from cluttering Bills of Material with unnecessary complexity.

A manufacturer of automotive axles had a great debate over whether to include oils and greases as a Bill of Materials item. Again it was decided in this case that it was best to treat these as consumables. The main reasons for this were:

• They used replenishment systems for ordering oils and greases not MRP
• They were unlikely to kit oils and greases as they might other components
• They had no requirement to provide lot traceability for oils and greases
• They were not interested in the capacity required to produce oils and greases

Now oils and greases were a significant cost item in the product which you might have expected would drive the argument in the opposite direction because some axles used more oil and grease than others, so that apportioning oil and grease cost was not a great way to arrive at an accurate costing. But that is a story for a future article.

This is the result of confusing the roles of the Bill of Materials, Drawings, and Operation Instruction Sheets. It can be solved by simply removing from the Bill of Materials those items which can be better managed in another way. This means removing from the Bill of Materials some, or all, of the following:

• Common usage items (therefore with low risk of obsolescence, more suited to replenishment systems, and less suited to kitting)
• Short lead-time items such as commodities, where long term forecasts are not vital
• Low cost items
• Items with simple requirements for lot traceability
• Items which do not consume significant capacity which requires forward planning
• Items which have relatively stable usage such that capacity loadings can be assumed to be a constant, and material requirements are easy to predict
• Items where the consequences of incorrectly forecasting demand are inconsequential, such as items which are readily fabricated, or substitutes are readily available
• Items where selective assembly is used (where the item may or may not be used in particular units). This occurs in electronic assembly where some components are selected from a range of available components based on test requirements, or shims where the space being filled determines which shim will be used. It can also occur in glass making where variable amounts of cullet can be used, or smelting where variable amounts of scrap can be used.

It is very typical for fastenings or other commodity items to fall into these categories. Our research shows that the above items can often account for more than 50% of the items in a typical BOM. Can you imagine 50% of your MRP exception report disappearing overnight?

Structure Flattening

The second major method of simplifying Bill of Materials (BOM) is to flatten the product structure. Effectively making a single level BOM and not a multi-level BOM. This process was first described to me by a young consultant working on a factory control system simplification, who said he had found a method to reduce the number of work orders processed in the factory to final assembly only. The diagram below shows an illustration of the original BOM.

The diagram below shows an illustration of how he had produced a "Flat BOM". He had substituted a full multi-level BOM with a single BOM for the final assembly with all of the raw materials hanging off it!

To which I said, "well I can see why you might not need to produce work orders for the sub assembly which occurs on the assembly line as part of final assembly, but how are we now going to schedule the component manufacturing or stock components now?"

It is possible to remove unnecessary levels from BOM's but it is rarely possible to remove ALL levels. The consequences of doing this are as follows:

• This level can no longer be scheduled separately (could be a problem if this process is a bottleneck)
• Work orders will not be produced for the item
• Lot traceability cannot be operated at this level
• This level item can no longer be stocked or controlled at that level within an MRP system. (It can be controlled at that level using other methods)
• Independent demand cannot be specified at this level (could be a problem if this level item is also sold as a spares item)

The criteria for identifying redundant levels in a BOM and therefore a candidate for removal are therefore as follows:

• This level is never stocked
• This level is not needed for reporting output (e.g. bottleneck output reporting)
• This level occurs as part of doing the next stage in the process without interruption in processing (such as occurs in some sub assembly processes which occur on the final assembly line, as part of final assembly)
• This level is not needed for spares
• This level does not include critical process reporting for quality control purposes (such as in a safety critical process)

Methods of Flattening BOM's

The first method was used by my young consultant who simply removed the intermediate levels in the BOM and connected the lowest level directly to the highest level.

If a level in a BOM is totally redundant it can obviously be simply removed. However there are two further methods of implementing a "flatter" BOM. Both methods use a feature called a "phantom". However there are two types of phantom:

1. A phantom item
2. A phantom structure

1. A Phantom Item

The following illustration shows that item A is made by processing item B, and item B is a sub assembly of items C and D. If we now say that item B is a phantom item then effectively it is ignored by the MRP system completely in MRP calculations, kit lists and costing outputs as shown below.

Original Product Structure

Item B Ignored by MRP

Typical view of a kit list for item A where item B is a phantom

However you now have to decide what to do with the operations which are necessary to create the phantom from it's subordinate items. The method most often used is to simply allocate these operations to the first few operations of the level above. In the example above the operations used to convert "C" & "D" into a "B" are added to the final assembly item "A".

2. Phantom Structures

In the illustration above the item B is a phantom in whichever structure it appears. Some MRP systems support in addition to "Phantom Items" a "Phantom Structure", which using the above illustration relates only to the paired relationship A to B. So if B is used in two different products and in one Item A you want it to be a phantom but in the second product you want it to appear as normal it is possible to specify that only in the structure A-B is item B a phantom. In any other structure item B may not be viewed as a phantom but appear as a normal item.

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Speed of Beneficial Impact

Short term

Type of benefits

• Less Work in Process control
• Less shop floor paperwork
• Less tracking / kitting type transactions necessary
• Can lead to reduced lead-time by avoiding unnecessary stores movements of intermediate levels

Ease of Implementation

Easy

Prerequisites

None

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Further Information on this topic can be found in the following articles:

The following public training courses and in-house workshops cover Bills of Materials Simplification

There are many more articles you can request from our archives at "Previous Best Practices of the Week", "Previous Question of the Week", "Previous Malpractices of the Week", "Previous Techniques of the Week", or from the links below.

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© SM Thacker & Associates (Consultancy and Training Specialists) April 2009