Fixed BOM versus Configurable Products

With configurable products, customers mix and match features to customize the product they want to buy. This results in a very large number of configurations that can change year over year – as many as 30% to 50% of the configurations produced in a year may never have been ordered before.

Fixed configuration (also called fixed BOM) products have an established number of configurations (SKUs) from which customers can select. With fixed BOMs, growing demand for feature choices inevitably leads to model and product proliferation (more SKUs).

Customers don’t configure a fixed BOM product, but in trying to stimulate customer demand manufacturers offer so many configurations that the product behaves like a configurable product. It is not uncommon for a fixed BOM product to have thousands of SKUs, including many low-volume configurations taking up the lion’s share of a product portfolio.

Cell phones are a good example of this phenomenon. While cell phones aren’t configurable, phone manufacturers produce and offer a huge selection of models and features. Customers choose whichever model offers the features they want. The number of features and services has grown so much that cell phones now have more product complexity than computers! Motorola and many others have had to wage numerous wars on complexity due to product and parts proliferation and sourcing challenges^†.

^†The Incredible Payback, Dave Nelson, Patricia E. Moody, Jonathan Stegner, pp. 66-67.