Bill of Materials (BOM) in Production Planning

 

An incorrect BOM can lead to a massive headache, loss of revenue and inventory issues.

Definition:-

Bill of Material (BOM) is part of the Production Planning Master Data. One should have to create a Bill of Material (BOM) for every in-house manufacturing / production material down the level.

BOM can also be used in discrete manufacturing.

An easy definition of a Bill of material (BOM) will be “the components required to manufacture or produce a product with their required quantities as per the “Base Quantity” of product.

Here, Base quantity is very important because requirement and consumption of all components of a BOM are determined as per the Base Quantity of a Bill of Material (BOM).

Bill of Material is also used in standard cost estimation of the products.

There can be multiple alternative BOM for the same product, so that you can consider and use different assessments for the same product. You can also check comparison of cost estimates for same product using different alternative BOM.

BOM Structure:-

For instance, you are creating a Bill of Material (BOM) for a Product “ABCD”

Let’s create a list of details required to create a BOM of “ABCD”:

• Product code (ABCD)
• It’s unit of measure (let say Kilogram “KG”)
• The Base Quantity of Product (consider 10 KG in this case)
• The components (A, B, C & D), components can be of following types.

1. Ingredients (with positive quantities)
2. By-Products (with negative quantities)

• Required quantity of components in unit of measures to produce the Base Quantity of “ABCD” (10 KG)

Following are the specific features used in process industries to create a Bill of Material (BOM).

• The BOM is created and edited directly from within the master recipe for which it is required.
• By creating BOM separately and combine with the master recipe in a Production version. The components of the alternative BOM can then be assigned to the operations or phases of the master recipe.

Steps of creating BOM within the master recipe of “ABCD”:-

• Open a transaction C202 and enter your Material and Plant (you should have Master recipe already defined/created for “ABCD”).
• Go to the “Materials” tab.

• Click on “BOM” button.

• Enter the components with their required quantities.

• Go to the Header. 

• Set the Base Quantity (in this case it is 10 KG)
• Back screen
• Assign phase / operation to each component of BOM

Now you have a BOM of “ABCD” and its assignment with Master Recipe, which will be used in cost estimation and process orders.