
March 2021 | ISE Magazine 45
In the challenging oil and gas industry, small process im-
provements can have a big impact on profitability. Any
efficiency that saves time and money contributes to the
economics of a project for manufacturers, suppliers, con-
tractors and clients, encouraging personnel to continuously
seek ways to streamline operations.
Since the 1960s, companies in diverse industries have relied
on enterprise resource planning (ERP) software from globally
recognized providers such as SAP, Oracle, SYSPRO, NetSuite,
Cetec and others to make their business processes run smoothly.
But as the technology has developed, so has the array of avail-
able programs. With innovation, some excellent systems that in-
corporate APICS inventory and production management prin-
ciples may fall out of use as warehouse managers seek to keep up
with the newest tools.
One program that should be in every manufacturing supervi-
sor’s virtual toolbox is the phantom assembly or phantom bill of
material (BOM), defined as representing an item that is physi-
cally built but rarely stocked before being used in the next step
or level of manufacturing. The lead time is set to zero and the
order quantity to lot-for-lot.
Identifying the problem
How does a phantom assembly fit into the inventory workflow?
As illustrated in Figure 1, imagine we have a bill of material for
part A, which is a part made from parts B and C, but C needs a
subassembly made of parts D and E. In theory, to manufacture
material A, you will need to have parts B and C already built
and in-stock, but this raises these issues:
• You will require more warehouse storage space to accom-
modate bin locations for the assembled parts C, D and E.
• You will be adding another part number/material to your
inventory, and this will have to be counted either through
cycle counts or in the yearly physical inventory depending on
how your company has set up their inventory policy.
• The consumption of part C will in most cases depend on
demand for A, which could lead to excess stock if you build
a quantity of C to meet orders that may subsequently be can-
celed.
Compounding these problems, the administrative work and
the subsequence processes that the subassembly will have to pass
through to make it to produced stock lengthens the cumulative
lead time for building part A.
The solution for these issues is the phantom assembly tool,
which enables you to simultaneously build material A and sub-
assembly C.
Configuring the tool
For this example, the following figures depict the SAP tool for
illustrative purposes. While specific codes and steps may vary
with different software providers, conceptually the tools are
aligned around APICS principles and the efficiencies gained
with the phantom assembly.
In Step 1, first, we must configure the material master. Us-
ing our bill of material from Figure 1, we identify material C
as the subassembly so the system will recognize it as a phantom
assembly.
As depicted in Figure 2, we use transaction code MM02, set
up the procurement type as E and designate the special procure-
I
FIGURE 1
Bill of material
The subassembly matrix leading to creating material A.
How IISE defines phantom assembly
The Terminology page on the IISE website includes more than
12,000 entries of industrial engineering terms and phrases
common in ISE fields and grouped by general topics.
The definition of phantom assembly, also known as a
transient bill of material, appears under the section Operations
& Inventory Planning & Control. The description reads: “A bill
of material coding and structuring technique used primarily
for transient (non-stocked) sub-assemblies. For the transient
sub-assembly item, lead time is set to zero and lot-sizing
is lot-for-lot. This permits MRP logic to drive requirements
straight through the transient item to its components but
retains its ability to net against any occasional inventories of
the sub-assembly. This technique also facilitates the use of
common bills of material for engineering and manufacturing.
Syns: phantom bill of material, blow through.”
To find more, visit the Terminology page at iise.org/
terminology.