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278 CHAPTER 8 The Material Planning Process

Times can be lot size independent or lot size dependent. Lot size inde-
pendent times remain the same regardless of the amount of material being
procured. In contrast, lot size dependent times vary according to the lot size
or quantity. Examples of lot size independent times are setup time, in-house
production time, and the GR processing time. In contrast, processing time is
typically lot size dependent.
The lot size independent in-house production time is an estimate of the
total time required for production including the setup, processing, and interop-
eration times. Although the processing time normally depends on the number
of units being produced, the lot size independent in-house production time is
used when (1) the lot size is fi xed, so that processing time is constant, or (2) the
processing time is very short compared to the setup and interoperation times.
When the processing time is large in comparison to the setup and interopera-
tion times or when the quantity of material to be produced varies, a lot size
dependent in-house production time is calculated using the three time ele-
ments (setup, processing, and interoperation).
Because companies utilize these various time estimates in the planning
process to schedule procurement and production, inaccurate values will cause
signifi cant problems. Inaccurate schedules require manual intervention, and, if
users fi nd they can’t trust the data in the system, they will learn to ignore them
and create their own workarounds. Thus, it is imperative that an organization
carefully analyze and monitor its processes for determining scheduling times.

Planning Time Fence
The material planning process often has to adjust the quantities and sched-
ules it creates for procurement proposals. For example, the consumption of
a raw material may be unexpectedly high because of higher-than-expected
demand. In such cases the planning process may increase the quantities of
existing planned procurements, or it may schedule them so the materials arrive
earlier. Changes in procurement proposals far into the future normally are not
a major concern, but changes to proposals in the near future can cause prob-
lems because other departments or processes in the organization may have
incorporated the original proposals into their planning. For this reason, com-
panies establish a period of time in which the ERP system is not allowed to
automatically change procurement proposals. This time period is known as the
planning time fence. If the planning time fence is 30 days, for example, then
no purchase requisition that is dated 30 days or less from the current date can
be changed automatically by the system. If changes are necessary, they must be
made manually.

BOM Selection Method
Recall from Chapter 6 that a bill of materials (BOM) identifi es the materials
needed to produce a fi nished good. In some cases a single material can have
multiple BOMs. For example, a company might use different BOMs for differ-
ent plants or different lot sizes. Companies also generate multiple BOMs when
they update their products. For example, if GBI plans to upgrade the touring
bike model with a new tire beginning January 1, then it must create a new BOM
for the bike in advance with a beginning validity date of January 1. At the same
time, it must set the ending validity date of the current BOM to December 31.

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