- Feature
- Account for sub-BOM and sub-route in forecast reduction
- Availability
- Generally available in Supply Chain Management 10.0.49
- Industry focus
- Configurable industrial machinery and equipment
Manufacturers of compressors, pumps, generators and other industrial equipment rarely build one fixed product. They build variants: a different motor for a different voltage, a stainless option for food plants, an alternative routing when a work centre is busy. Many of those variants are handled with alternative bills of materials (sub-BOMs) and alternative routes (sub-routes) rather than separate item numbers.
The industry challenge
These manufacturers usually plan with a demand forecast, which is then reduced as real sales orders arrive so that demand is not counted twice. The forecast drives component and capacity requirements through the standard BOM and route.
The problem appears when an actual order specifies a sub-BOM or sub-route. If forecast reduction does not take that into account, the plan can end up with a distorted picture of dependent demand: components for the standard version still forecast, components for the variant actually ordered under-planned, and capacity requirements on the wrong work centres.
Planners compensate with manual overrides and safety stock, which ties up working capital in some components while others still run short. For long-lead parts such as motors, castings and control panels, the consequences are late deliveries and expedited purchases.
What Microsoft delivered in Supply Chain Management 10.0.49
Supply Chain Management 10.0.49 updates forecast reduction in Planning Optimization so that sub-BOMs and sub-routes are taken into account. When actual demand uses a sub-BOM or sub-route, forecast reduction reflects that rather than assuming the default structure.
The plan's view of components and capacity therefore lines up better with what is actually being built.
Where the value shows up
| Business area | Impact |
|---|---|
| Material planning | Component requirements that reflect the variants customers actually order |
| Inventory | Less excess stock of standard-version components and fewer shortages of variant parts |
| Capacity planning | Load on the right work centres when sub-routes are used |
| Planner workload | Fewer manual overrides to correct forecast distortions |
| Customer delivery | Better on-time delivery for configured equipment |
A worked scenario
(An illustrative example.) A manufacturer of industrial air compressors forecasts demand for its main product family. Around a third of orders call for a premium motor and stainless pipework, set up as a sub-BOM, and those orders are often built on a dedicated assembly line set up as a sub-route.
Previously, the plan kept forecasting standard motors even as premium-motor orders arrived, while premium motors were under-planned, so buyers expedited them regularly. With sub-BOM and sub-route awareness in forecast reduction, the plan shifts component and capacity requirements as variant orders come in. The buyer of long-lead motors sees a more accurate requirement, and the dedicated line's load reflects the orders it will actually build.
Adoption considerations
- Check your structures. Make sure sub-BOMs and sub-routes are set up consistently and used on orders where relevant.
- Confirm you use Planning Optimization. The improvement applies to Planning Optimization; review your planning engine and migration status.
- Review forecast reduction settings. Validate reduction keys and principles with your planning team.
- Compare plans. Run planning before and after in a sandbox to see how requirements change.
- Revisit safety stock. As plans become more accurate, buffers built to compensate may be reduced.
The bottom line
For configurable machinery makers, the gap between the forecasted product and the product actually ordered is where planning goes wrong. Accounting for sub-BOMs and sub-routes in forecast reduction narrows that gap, improving component availability and capacity planning without more manual effort. An experienced Dynamics 365 Supply Chain adviser can help you review product structures and planning settings to get the full benefit.
Source: Microsoft: What's new or changed in Dynamics 365 Supply Chain Management 10.0.49