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In a highly customizable manufacturing environment, forecasting finished goods can be a complex and challenging task. The sheer number of possible end products increases dramatically when numerous components are interchangeable. Traditional MRP systems often require forecasting each individual finished product, which can be unrealistic or even unmanageable. To address this challenge, many advanced solutions introduce the concept of a “Planning BOM,†allowing companies to forecast at a higher level in the production process. In this article, we’ll explore how Epicor Kinetic’s Planning BOM functionality can be enhanced with Smart IP&O to improve demand forecasting, even in the face of complex product configurations.
**Why Use a Planning BOM?**
Traditionally, each finished product or SKU has a rigidly defined bill of materials. When planning based on forecasted demand, the system would typically push that demand down through the BOM to determine component requirements. However, for businesses offering highly configurable products—such as smartphones, where customers choose from various screen sizes, storage options, and colors—this approach becomes impractical. Forecasting demand for every possible configuration is not only time-consuming but also often inaccurate.
For instance, a smartphone manufacturer might sell thousands of units annually, but the demand for each specific combination of features (e.g., 128GB storage, black color, 6-inch screen) could be very low or even one-time. This makes forecasting at the finished product level nearly impossible. As a result, many companies resort to managing inventory at the component level, reacting to firm orders rather than proactively planning based on forecasts.
**Introducing Planning BOMs**
This is where Planning BOMs come into play. They allow businesses to forecast demand at a higher level—such as the model level—rather than for each unique configuration. For example, a company might forecast demand for a particular phone model and then use the Planning BOM to allocate that demand across different configurations based on historical trends or business knowledge. If 60% of customers usually choose 128GB storage, 30% go for 256GB, and 10% prefer 512GB, the Planning BOM can distribute the forecast accordingly.
This approach simplifies forecasting while still accounting for variability in customer preferences. It allows companies to focus their efforts on high-level planning and ensures that the right components are available when needed.
**The Role of Accurate Forecasting**
Of course, even with a well-structured Planning BOM, the quality of the initial forecast is crucial. Epicor Kinetic can import forecasts, but it doesn’t generate them automatically. Many businesses rely on manual Excel-based forecasting, which can lead to inaccuracies, missed patterns, and poor decision-making. Without a reliable forecast, even the most sophisticated MRP system will produce unreliable results.
That’s where Smart IP&O comes in. It offers a comprehensive solution that integrates seamlessly with Epicor Kinetic to enhance both demand planning and inventory optimization.
**Smart IP&O: A Powerful Integration**
Smart IP&O provides two key tools:
- **Smart Demand Planner**: This built-in forecasting application helps generate statistical forecasts for your products. Planners can adjust these forecasts, incorporate sales or customer input, and track accuracy over time. The resulting forecast is then imported into Epicor Kinetic, where MRP uses it to plan material requirements based on the finished good level and the Planning BOM.
- **Smart Inventory Optimization**: This tool helps set optimal min/max and safety stock levels for both finished goods and raw materials. It leverages job usage data, supplier lead times, and sales orders to ensure efficient inventory management. The bidirectional integration with Epicor Kinetic ensures that all demand inputs are considered accurately.
By combining Smart IP&O with Epicor Kinetic’s Planning BOM, businesses can achieve more accurate demand forecasting and better inventory control, even with complex product configurations.
**Conclusion**
Leveraging Epicor Kinetic’s Planning BOM capabilities alongside Smart IP&O’s advanced forecasting and inventory optimization tools enables companies to meet customer demand efficiently and accurately. This powerful combination not only improves forecast accuracy but also enhances overall operational efficiency, helping businesses stay ahead in a competitive market. Whether you're managing high-volume, low-variety products or highly customizable items, integrating these solutions can make a significant difference in your planning and execution processes.
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