How is pegging defined in Advanced Planning?

Pegging in Advanced Planning is specifically defined as an evaluation that is ordered by the Bill of Materials (BOM) structure and represents relationships between components and finished products. This evaluation allows planners to track which specific components are needed for particular finished goods and provides insight into how changes in one part of the supply chain affect others.

By utilizing a BOM structure to trace component requirements, pegging plays a vital role in understanding the dependencies in production processes. This is crucial for effective inventory management, as it helps identify which materials are required for production at any given time and how they relate to different end products. This method of linking components to demand through the BOM ensures that production is aligned with actual customer orders and helps mitigate issues such as stockouts or excess inventory.

Understanding pegging also assists in managing lead times and ensuring that component parts are available when needed, improving overall production efficiency. In summary, pegging allows for a systematic evaluation of relationships within the production hierarchy, enabling better decision-making and planning in the manufacturing process.