To successfully operate across multiple enterprises and through n-tiers of external stakeholders necessitates a sufficient understanding of the critical inputs and processes to your supply chain. The key to achieving this is held in the Extended Bill of Resource (see Figure 1: Illustration of the Extended Bill of Resources). By definition, the Bill of Resource captures the materials, parts, and operations required throughout the manufacturing process to deliver a finished product. The Bill of Resource provides the manufacturing company (or ‘Network Sponsor’) with the relevant data needed to (1) translate finished goods production schedules into part/resource schedules (demand plans) for any operation or point along the value chain (where Bill of Resource data has been captured) and (2) aggregate requirements across the entire network for operations or resources in short supply.
Building a model that provides a sufficiently accurate understanding of the parts, materials, capacities and related dependencies that exist at critical points throughout your extended value chain is a powerful tool for managing risk and capturing value/opportunities through collaboration, coordination and control of the extended value chain — opportunities not easily seen beyond the first tier of supply. It allows companies to adopt a proactive approach to managing parts of their supply network, set trigger points for critical variables, monitor volatility and key constraint points, and take the actions necessary in advance to mitigate potential issues.
How is value delivered?
Raw Material Forecasting
The ability to calculate raw material requirements across the extended supply chain based upon a finished goods schedules. Companies can report their requirements at the alloy/composite or even down to the elemental/primary material input level. This provides a basis for pro actively managing raw material price exposure through the development of long-term commercial agreements, the use of futures markets/hedging contracts, or other financial vehicles to cover short positions.
Multi-tier Demand Planning:
The ability to extend a finished goods or part requirements schedule to a company’s sub-tier suppliers, allowing companies to “broadcast” plans that provide visibility to of top-level plans and the implications of subsequent changes to these plans. This eliminates coordination/part shortfall issues, and reduces inventory due to better coordination of activities across n-tiers of supply.
Visibility & Control over Sub-tier Sourcing Decisions
The ability to influence and control critical sourcing decisions made by suppliers. Companies can direct suppliers to approved and preferred parts and materials and part/material sources where they can leverage their demand for commercial benefit, and systematically monitor usage and program compliance
Figre 1: Illustration of an Extended Bill of Resources