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The Finished Goods Series
from E/Step Software Inc.
  Component Safety Stock
Inventory Module
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Replenishment Planning

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What is the lead time of Finished Part A in this bill of materials?

Bill of Material

27 Weeks:

That would be 26 weeks for the longest lead time component plus one week for the parent's assembly lead time.  If the safety stock of the parent part has to cover for forecast error over the cumulative lead time of 27 weeks, it is going to be expensive.

2 Weeks:

You must be expecting that you will have enough of Raw Material 3 in stock.  How much should you keep?  Determining that accurately used to be impossible because there was no error associated with the dependent demand.  To complicate things even more, Component 3 also goes into 20 other finished products.  Yet if you were assured of extremely high service on Raw Material 3, you would gain huge flexibility to meet unexpected demand (and changes in the product mix) when your 27 week lead time is cut to just 2 weeks.  With our new Component Safety Stock facility, FGS drives the error down the bill of material, and then accurately calculates the component safety stock at any level in the bill of material.  The inventory savings at the top level far outweigh the added component inventory (which is lower cost).

Key to LEAN manufacturing

Component Safety Stock was developed by working closely with our users and has been used at a truck parts distributor (kitting), an appliance manufacturer (kitted service parts), a chemical processor (intermediate processing and packaging of bulk product), and an electronics manufacturer (purchased components and manufactured subassemblies).  This facility is essential to optimize any implementation of Lean Manufacturing.

Read more about it

New Tool for Inventory Management: Component Safety Stock Reduction, IOMA's Management Library.