Quick Summary: A practical, scenario-based walkthrough for applying Policy Overrides in complex Bill of Materials hierarchies to ensure changes target only the intended items.
For necessary background, please preread Policy Overrides for BOM Items Explained before proceeding with this article.
The Scenario: Personal Care Division
To demonstrate how Policy Override filters behave inside a Bill of Materials structure, consider the case of Jackson, the Supply Chain Planner for the Personal Care Division. Jackson manages the Rose Shampoo product line and must ensure that the right inventory policy is applied to the correct level of manufacturing without unnecessarily increasing costs.
The BOM structure contains three levels:
Finished Good (Top Row): Bottled Rose Shampoo, the product sold to customers
Sub assemblies (Middle Rows): Rose Shampoo Bulk and Shampoo Bottles, both created internally
Raw Materials (Bottom Row): Ingredients, fragrances, plastics, dyes, and labels supplied by external vendors
Each scenario below illustrates how Jackson uses different BOM filter selections to target specific levels in the hierarchy.
Scenario 1: Targeting High Service Levels for Finished Goods
The Goal: The Rose Shampoo finished good is an AH item with high velocity and high financial impact. The default policy for AH items is a target fill rate of 97 percent. However, because this product is a flagship item, Jackson wants a higher target fill rate of 99 percent.
The Problem: Increasing the target fill rate increases safety stock. Jackson cannot apply this setting to all AH items because he does not want higher safety stock for sub-assemblies or raw materials.
The Solution: To achieve a targeted increase, he creates a Policy Override using:
Bills of materials filter: Only finished items
Classification filter: A
Velocity filter: High
Target fill rate: 99
The Result: The system applies the 99% Target Fill Rate only to the final bottled shampoo. The sub-assemblies and raw materials remain on their standard, lower-cost policies.
Scenario 2: Managing Space Constraints for Sub-assemblies
The Problem: The warehouse has limited space. Empty Shampoo Bottles are bulky and difficult to store, and Rose Shampoo Bulk loses its scent if stored too long.
The Goal: Jackson wants these items available for production, but he cannot afford to hold safety stock for them.
The Solution: Jackson decides to apply a Zero policy stocking indicator. A Zero policy item behaves like a non-stocked item. It is not held in inventory, but its forecast still flows down to raw materials so that purchasing recommendations remain accurate.
Jackson applies a Policy Override with:
Bills of materials filter: Only sub-assembly items
Stocking Indicator: Zero policy
The Result: This sets the stocking indicator to Zero policy for the Rose Shampoo Bulk and the Shampoo Bottle items, preventing unnecessary safety stock accumulation while allowing raw material planning to continue.
Scenario 3: Enforcing Sourcing Rules
The Problem: Quality issues arose when incorrect plastic bottles were sourced from an external supplier. To prevent this from happening again, the organisation requires that all manufactured items be sourced internally from the Central Store to ensure quality control.
The Goal: To enforce this rule, Jackson must apply a Policy Override to all levels of manufactured items in the BOM hierarchy, including finished goods and sub-assemblies.
The Solution: He creates a Policy Override using:
Bills of materials filter: All manufactured items
Source of supply filter: Central Store
The Result: This ensures that both the finished good (Bottled Rose Shampoo) and the sub-assembly (Shampoo Bottle) must source exclusively from the Central Store.
💡 Tips
Zero-policy: Use the Zero policy stocking indicator for bulky or perishable sub-assemblies so you avoid unnecessary storage without disrupting raw material planning.
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