Picture this.
Jackson is the Supply Chain Planner for Central Warehouse - Personal Care Division. As a Planner, the responsibility to ensure the right stock, gets to the right place, at the right time. In order to do that, all the items that Jackson plans for needs to have the correct Inventory policy applied.
One of the fastest selling items in the business is called Rose Shampoo, which is shampoo with a rose fragrance, packaged in a plastic bottle. The BOM structure for this item would look something like the below:
Top row - Pure finished goods i.e. only finished items you would like to apply a policy override to this group of items only. The semi-finished / sub-assembly items are used to produce the finished product, being Bottled Rose Shampoo.
Middle rows - Semi-finished goods i.e. only sub-assembly items. Raw materials are used to form the semi-finished / sub-assembly items Rose Shampoo Bulk and Shampoo Bottle.
Bottom row - Pure raw materials. The ingredients 1, 2 and rose fragrance which is used to produce the Rose Shampoo Bulk is supplied by an external supplier. The plastic, dye and barcode sticker which makes the Shampoo Bottle is also supplied by an external supplier.
Since this item is the fastest seller, as well as being one of the most expensive items, it falls in the AH bucket of the classification matrix. Currently, the policy settings for the AH bucket is a replenishment cycle of 30 days, and a target fill rate of 97%.
Note: depending on your App access level, this setting can be found under Settings → Policy defaults.
When Jackson reviews the policy settings, he determines that the target fill rate for the Rose Shampoo should in fact be 99%, because it brings in a lot of money and is a fast-mover. However, he knows that increasing the target fill rate will increase his level of safety stock (the below curve can be found on an item Inquiry screen, by clicking the three dots on the Safety stock panel).
Therefore, instead of increasing the target fill rate for all of the AH items, Jackson decides to increase the target fill rate to 99% just for the finished goods. In order to do that, he will have to go to the policy override settings and create a new rule. He will follow the below process:
Choose the filter under the Bills-of-material tab to include “Only finished items”
Choose to include only the A items for this policy override to prevent the target fill rate of 99% to be applied to the finished goods in the B and C categories, thus preventing the safety stock level from rising too high unnecessarily.
Choose to include only the High velocity items for this policy override to prevent the target fill rate of 99% to be applied to the finished goods in the Medium and Low categories, thus preventing the safety stock level from rising too high unnecessarily.
By choosing these filters, Jackson can apply a policy override of 99% target fill rate to just the finished good items in the AH bucket.
According to the Quality department, the shampoo bulk is at risk of losing its scent if not bottled immediately. When looking at the warehouse space, the plastic bottles take up a lot of shelf space. That is the case for all of the semi-finished goods in the Central Warehouse. Therefore, Jackson decides that the sub-assemblies should not have any safety stock, and should not be kept on shelf. He decides that applying a zero policy stocking indicator to the sub-assemblies would be most suitable. In this case, he can apply a policy override to all the sub-assemblies (only) but choosing the below filter.
Note: a zero policy item is a variation of a non-stocked item. Like a non-stocked item, a zero policy item won't be held in inventory. However, a zero policy item will allow the sub assembly's sales forecast to flow down to raw materials and components to influence the purchasing recommendations without holding additional stock. See article: How is the model stock level calculated for non-stocked and zero policy items?
Recently, there had been some quality incidents at the Central Store where the plastic bottles were found to be out of spec. Bulk overflowed due to the bottle being smaller than normal. Upon investigation, it was found that Supplier ABC’s plastic bottles were issued to the line for fill bulk, instead of the plastic bottles produced in-house especially for the Rose Shampoo. To prevent this incident from occurring again, Jackson chooses to put another policy override in place. This time, the policy override stipulates that the source of supply for any sub-assembly item and finished item, should only be from the Central Store itself. To do this, Jackson chose the below filter to include both sub-assembly items and finished good items in the policy override:
This article serves to guide you through the thought process behind which filter to choose for new policy overrides for BOM items.
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