Question 106 - CPIM-Part-2 discussion

A product family is a group of products that share common characteristics, components, or functions, and that satisfy a similar customer need or market segment1.A bill of material (BOM) is a list of all the materials, components, and subassemblies required to manufacture a product2. A BOM can have different levels, depending on the complexity and structure of the product. The most common levels are:

Final assembly level: This is the highest level of the BOM, where the finished product is shown as a single item.This level contains the basic information about the product, such as its name, description, quantity, and unit of measure2.

Subassembly level: This is the intermediate level of the BOM, where the subassemblies or modules that make up the final product are shown as separate items.A subassembly is a group of components or parts that are assembled together to perform a specific function within the final product3.This level contains the information about the subassemblies, such as their names, descriptions, quantities, units of measure, and relationships to the final product2.

Component level: This is the lowest level of the BOM, where the individual components or parts that make up the subassemblies or the final product are shown as separate items.A component is a basic element or material that is used to manufacture a subassembly or a final product4.This level contains the information about the components, such as their names, descriptions, quantities, units of measure, and relationships to the subassemblies or the final product2.

The most appropriate level of the BOM to forecast for a product family depends on several factors, such as the demand variability, production lead time, inventory cost, and customer preference of each level5.However, in general, it is advisable to forecast at the highest possible level of aggregation that still meets the customer requirements and expectations5.This is because forecasting at a higher level can reduce the forecast error and uncertainty, improve the forecast accuracy and reliability, and simplify the forecasting process5.

Therefore, for a product family that consists of 46 items, each having 5 features available and 6 options available, it would be most appropriate to forecast at the final assembly level items. This is because forecasting at this level can capture the overall demand pattern and trend of the product family, without getting into too much detail or complexity.Forecasting at this level can also allow for more flexibility and responsiveness in meeting customer needs and preferences by using postponement strategies6.Postponement strategies involve delaying some aspects of production or customization until after receiving customer orders6. For example, instead of forecasting and producing each item with each feature and option in advance, which would result in 46 x 5 x 6 = 1380 different combinations, the company can forecast and produce only 46 items at the final assembly level and then add features and options later according to customer orders.

The other options are not as appropriate as forecasting at the final assembly level items. Forecasting at the subassembly level items may be too detailed and complex for a product family with many features and options available. Forecasting at this level may result in higher forecast error and uncertainty, lower forecast accuracy and reliability, and more complicated forecasting process. Forecasting at this level may also reduce flexibility and responsiveness in meeting customer needs and preferences by committing resources too early in production. Forecasting at the component level items may be even more detailed and complex than forecasting at the subassembly level items. Forecasting at this level may have all the disadvantages mentioned above, as well as increase inventory cost and risk by holding too many components in stock.