00:00:00 Hierarchical nature of bills of materials
00:02:00 Comprehensive planning with bill of resources
00:02:39 Financial losses from production delays
00:03:36 Need for quick optimization tools

Summary

In a recent discussion, Conor Doherty highlights the critical differences between a bill of materials (BOM) and a bill of resources (BOR) for effective scheduling in manufacturing and repair operations. While a BOM lists the raw materials needed for production, a BOR includes not only these materials but also the necessary tools and skills. Doherty emphasizes that neglecting any component of the BOR can lead to production delays and increased costs. He argues that a comprehensive understanding of both BOM and BOR is essential for optimizing efficiency and minimizing financial risks in industrial processes.

Full Transcript

Conor Doherty: A critical step in manufacturing and repair processes is knowing exactly what you need and in what quantities in order to complete every single step. However, we cannot optimize the process until we first understand the differences between a bill of materials and a bill of resources. So today, I will ask and answer three simple questions: one, what is a bill of materials; two, what is a bill of resources; and three, why should you care? Let’s get started.

A bill of materials is a detailed list of raw materials and their quantities needed to manufacture, assemble, or repair a product. Now, BOMs are hierarchical, with the finished product at the top and its components below. Each of these components can feature subassemblies of their own, with each subassembly having a BOM of its own. This naturally produces something of a Russian doll effect, where smaller subassemblies combine into larger and larger parts.

A good example is a commercial aircraft. The BOM starts at the top with the finished aircraft and then breaks down into its major sections, for example, the fuselage, the engines, and the wings. Now, each of those major sections further divides into subassemblies. For example, the engine will feature turbines, fuel systems, and electronic controls. Each of those subassemblies will have BOMs of their own, thus requiring incredibly precise inventory management to make sure that they and the aircraft overall are efficiently produced.

Now, we’ve covered BOMs on this channel before in great detail, so I will simply leave a link to that video in the description beneath this video. Unlike a BOM that focuses purely on physical parts, a bill of resources refers to the three classes of resources involved in every repair and manufacturing process. The three classes are parts, tools, and people.

As you can see, a bill of resources is a much more comprehensive planning concept as it includes not only the physical parts involved in a process but the necessary tools and skills required to complete any given step. For example, to produce this aircraft, you don’t need only parts. Rather, you also need tools and skilled technicians in order to make sure that the plane is produced on time.

Crucially, you need every single part of your bill of resources to be simultaneously available in order to complete any given step in the process. For example, missing a single part, tool, or technician at a critical moment means that the production of this aircraft stops immediately. This obviously produces immediate financial losses through delays, wasted salaries, and the extra costs needed to find extra tools, parts, or people at the last minute.

Now, the probability that you will be missing a critical resource when you need it is actually much higher than people think. For example, let’s say you need 20 parts, five tools, and two technicians to repair one of these engines. This, of course, reflects the three classes in your bill of resources. Now, if you set 99% service levels for each of these resources, you still actually only have a 76% chance that all those resources will be available at the moment you need them. In other words, there’s still a 24% chance, or one in four, that you will experience delays in your repair process.

Now, bear in mind, no company would set 99% service levels for their entire bill of resources because of how insanely expensive that would obviously be. Thus, the probability of experiencing delays in that repair process is actually much higher than I’ve described. Therefore, you need an optimization tool that is able to perform quick rescheduling calculations to reflect a missing resource.

In conclusion, thinking purely in terms of a physical bill of materials leaves you exposed to increased levels of financial risk. This is because you might well have every physical part you need to create this aircraft but still lack a critical tool or necessary technician at an important moment. Now, to learn more about your bill of resources and how we can optimize it, subscribe, follow us on LinkedIn, and send us an email at contact@load.com.