Figure 1: Critical path lead time for master scheduled item.
Reply: Time fences are points along a planning horizon that indicate where various zones of flexibility/inflexibility in scheduling begin or end. For example, you probably are familiar with the phrase, "frozen schedule." If a master production schedule (MPS) is considered frozen four weeks out, this means that there is a time fence at week four on the planning horizon. No order inside the fence is supposed to be changed. The intent is to limit costly disruption of already-launched operations for dependent demand orders linked to the MPS order.
There is more than one kind of time fence, each limiting a specific type of change. The two most commonly mentioned fences are demand time fence (DTF) and planning time fence (PTF). The planning horizon is the span of the MPS into the future, e.g., 12 to 18 months. The cumulative or critical path lead time for a master scheduled item (see Figure 1) defines where the PTF is located. Assembly lead time (LT) or order entry-to ship lead time defines where the DTF is located. Now let's explore the kinds of change which are controlled by these fences.
Figure 1: Critical path lead time for master scheduled item.
The DTF prevents changes to already launched MPS orders inside the fence (in Zone A) and the "projected available balance" calculation is based on actual customer orders, ignoring the forecast.
The PTF splits the remainder of the MPS planning horizon, where some combination of actual demand and forecast are used to calculate "projected available balance." In Zone B, firm planned orders are used to limit change triggered by the system alone. In Zone C, planned orders generated by the system are used.
Realistic changes to an MPS must account for lead times, availability of materials and capacity. The time fences implement management policy to help assure that these factors are considered in change decisions. Outside the PTF, in Zone C, all short-run factors are flexible-planned timing, material quantities, and capacity can all be changed relatively easily and changes are "made" automatically by the planning system.
Between the DTF and the PTF, in Zone B, dependent demand actions along the critical path are under way. Timing may still be somewhat flexible through expediting or working overtime, etc. However, significant changes in material quantities or capacity may not be feasible without adding noticeable costs, including the possible disruption of work on other customers' orders. Changes in Zone B usually must be authorized by the master scheduler.
Within the DTF, in Zone A, final- (and sometimes sub-) assembly occurs. All necessary components and timed capacity are supposed to be available. Changes in timing, quantity or capacity in this zone will be disruptive, elevating production costs and affecting service levels of other orders. Typically, changes in this Zone are authorized only by management under conditions where the "bullet must be bitten."
Some items subject to time fences are not master scheduled. This usually involves component lead times and engineering change orders.
Reading about time fences is contained in the following references:
Reply: According to the APICS Dictionary, 8th Edition, a planning bill of material is "an artificial grouping of items or events in bill-of-material format, used to facilitate master scheduling and material planning." Planning bills were developed to simplify sales forecasting, the setting of safety stocks, and final assembly scheduling (Smith 1989, p. 186). Sari (1982, p. 324) argues that the above is a generic definition; one must be acquainted with several types to appreciate the range of uses of BOMs in planning. Among the several types of planning bills are super bills, modular bills, and common parts bills.
Super BOMs are at the top of the structure and link together modular bills (and maybe a common parts bill) to define a product or product family. The "quantities per" in super bills are percentages, indicating the relative proportion of total demand forecast for each module. For example, assume total demand for a product or family is estimated to be 100 units (at the super bill level). If there are three modular bills (A, B and C) one level below the super bill, the quantities per unit in the super bill for the modules might be forecast as 10 percent, 35 percent and 55 percent, respectively. These would translate to module level forecast usage of 10 As, 35 Bs and 55 Cs.
Modular BOMs are arranged in product modules or options, which also are master scheduled. These bills tend to be used where products have numerous optional features. The modules are groups of items unique to an option or common to all configurations (see common parts BOMs, next). Common parts BOMs contain, in one BOM, all the common components for a product or product family.
Now that we have some working definitions, let's revisit the rest of the question: ... how can a planning BOM be used in a new product environment? In several ways.
In the new product environment, there are several concurrent objectives. One is to get to market quickly. Another is to fill the pipeline with the right amount of the right things. Still another, pertaining to custom or assemble-to-order (ATO) products, is to be responsive to orders which contain product variety. Planning bills can help with each of these objectives.
One way to get to market more quickly is to practice operation overlap in design and materials. If long lead time materials and components can be specified early in the design process, planning bills can be created with these items (unique-to-option as well as common to product or family). These can be shared with the materials organization for planning and early order action while design continues.
Extensive notes may accompany these bills to alert purchasing about limitation of initial lot quantities, early reservation of capacity or yet-to-be-machined castings, use of particular vendors, etc. Full activation of items in the bills can be contingent on receiving final documentation and the activation can be controlled by an effectivity date mechanism.
As the design develops further, the shorter lead time components can be added to these planning bills, smoothing the workload in support organizations. The overall effect of this overlapping of functions should be to shorten the total lead time from initial development to initial shipment.
Use of planning bills may also improve forecast accuracy, which affects the amount of safety stock required to buffer a product launch. When planning bills are used, forecasts focus on demand for the modules. There are many fewer modules than there would be unique end products if modular bills were not used for planning. As a consequence, there are many fewer final product forecasts to develop and many fewer items requiring safety stock. There also is an "aggregate demand" effect from modularizing (i.e., more demand per module than per unique end product). Historically, aggregate forecasts are more accurate than those for unique items which have small, highly variable volumes. Thus, there is much less forecasting effort, and safety stocks associated with demand for modules should be relatively lean for a given level of service.
Planning BOMs can simplify final assembly scheduling, too. This is because the "few" modules are master scheduled fairly regularly and stocked in modest quantities. These can then be pulled into final assembly on short notice to create a responsive assemble-to-order (ATO) environment.
I hope you find these thoughts useful concerning the applicability of planning BOMs in the new product development environment. Reading on the subject of BOMs and planning bills is in the following sources. Sari's article illustrates several important considerations in the use of planning bills.