1. Production Contents: Maintaining bills of material (BOM)
Production process

2. Production: Unit Objectives
At the conclusion of this unit, you will be able to:
Describe the differences between individual bills of material (BOMs)
Carry out a production process for a production BOM

3. Production: Business Scenario
Some of the items in your product range consist of various other items. You assemble these items before they are delivered to the customer.

4. Elements in Production
Bills of Material (BOM)
Sales BOM
Template
Production BOM
Production Orders
(Production BOMs only)
Standard Production Orders
Special Production Orders
Disassembly Production Orders
You use SAP Business One to define bills of material for your products, and to create and maintain production orders.
In the bill of materials for a finished product, you specify the various components that make up that product, and the appropriate quantities of the components. The information in the bill of material is used for planning the appropriate quantities of the components.
Production Order is a command to produce or repair a production item. The Production Order supports the planning and assembly of a production item. It also tracks all the material transactions and costs that are involved in the production process.
SAP Business One supports three Production Order types, Standard, Special, and Disassembly. The Standard Production Order is used for regular production. Standard components are copied from the item’s bill of material. The Special Production Order is used to produce items or performing activities at the shop floor that are not based on the item BOM. The Disassembly Production Order is used to report the disassembly of a regular production item. Standard components are copied from the bill of material for the item.
In some cases, a finished product is the result of an entire production process. In other cases, though, a finished product might simply be a collection of items sold as a unit rather than the output of a production or assembly process.

5. Maintaining Bills of Material: Topic Objectives
At the conclusion of this topic, you will be able to:
Describe the differences between the individual types of bills of material
Maintain bills of material in the SAP Business One System

6. Sales / Assembly BOM V001 PC Set 1 Unit
Category of the Item master records:
Finished product: must be a sales item
Components: can be sales, purchase and stock items.
V001
PC Set
1 Unit
S1008
System Unit
1 Unit
M1007
Monitor
1 Unit
K1014
Keyboard
1 Unit
Sales and assembly BOMs are collections of individual items in a set with a specific price.
They can have more than one level.
The components are items that you can also sell individually.
The Sales BOM and the Assembly BOM represent a finished product that is assembled at the sales stage.
The difference between the assembly BOM and the sales BOM is the following. For the assembly BOM, the finished product appears in the sales order document. For the sales BOM, both the finished product and the components appear as separate items in the sales order document.
For example, the finished product can be a golf set. Use the assembly BOM to define the finished product. The finished product is not stored as an entire set in the warehouse. However, the individual components of the set (for example, golf clubs, golf balls and tees) are items in stock. If a customer buys a golf set, make the set out of the components and sell it to the customer.
For both the sales BOM and the assembly BOM, you do not manage the finished product as an inventory item, but rather as a sales item. The components can be sales items and stock items at the same time.
Assembly BOMs are no longer available for new customers as of Release 2007A.

7. You can not change or delete the components
Sales BOM
BOM Type Sales
Define Bill of Materials
Product No.
PC Set
V001
If there is a price on product- or component- level depends on the Document Settings in the System Initialization
Description
BOM Type
Sales
Item No.
Description
Quantity
Total
Sales Order
S1008
System Unit 1
275
M1007
Monitor 1 50
Customer
C1000
K1014
Keyboard 1 10
Item No.
Description
Quantity
Total
V001
PC Set 1
Parent Product Price
315
S1008
System Unit 1
275
M1007
Monitor 1 50
K1014
Keyboard 1 10
The system displays both the finished product and its components when you create a sales order with a sales BOM.
The system creates a consumption posting for the components when you create the delivery or the invoice.
For sales structures, you can also specify whether the price in the order is calculated from the parent product price or from the components. Choose Administration  System Initialization  Document Settings and choose the General tab page. Then choose For a Sales BOM in Documents, Display: and choose the relevant option.
Total
315
You can not change or delete the components

8. Template Define Bill of Materials Product No. Digital Camera Kit X500
BOM Type Template
Define Bill of Materials
You could change the quantities and prices of the product and the components and you could as well delete components.
Product No.
Digital Camera Kit
X500
Description
BOM Type
Template
Item No.
Description
Quantity
Total
Sales Order
A1005
Case 2
73,80
A1006
Battery 2
99,96
Customer
C1000
A1015
UV Filter 1
21,05
Item No.
Description
Qty
Total
X500
Digital Camera Kit 1
Parent Product Price
A1005
Case 2
73,80
A1006
Battery 2
99,96
A1015
UV Filter 1
21,05
A template is a collection of individual items in a set that can be used as a copy model in a sales order. In that case, the components appear as a list of items in a sales document, rather than a finished product with components.
You can use templates if the composition of the products you sell is generally the same, but can vary slightly. You can make any changes you need to the templates in the sales order. You can delete individual items, replace them with other items, or change the quantities.
Total
194,81

9. Production BOM Skateboard 1 Unit Wheels 4 Units Board 1 Unit Axis
Category of the item master record:
finished product must be an inventory item
Skateboard
1 Unit
Wheels
4 Units
Board
1 Unit
Axis
2 Units
Screws
8 Units
Tire
1 Unit
Rim
1 Unit
Screws
4 Units
The Production Bill of Material represents a finished product made up of different inventory components. During the production process, you turn the components into the finished product.
The Production BOM is the only type used in the MRP run and it is always used in standard production orders.
Components in the Production BOM are physical items (a screw, a wooden board, or a measured quantity of paint) or virtual entities such as work hours.
The item at the head of the Production BOM has its own price.

10. Category of the Item Master Record of the Finished Product for Bills of Material
BOM Type
Assembly BOM*
Sales BOM
Template
Production BOM
Item
Category
Inventory Item
(1.)
Sales Item
(1.)
(1.)
Purchased Item
(1.)
(1.)
* The assembly BOM is only available for customers upgrading from previous versions.
You have to create item master records for the finished products in the system.
Depending on the BOM Type you must have a certain category maintained in the item master record of the finished product:
For the assembly and sales BOMs the finished product has to be a Sales Item.
For the production BOM the finished product has to be an Inventory Item. If you also want to purchase this item, you can define it as a Purchased Item. If you also want to sell it, you can also define it as a Sales Item.
Templates can have each of the three attributes (Purchased, Sales, and Inventory Items).
The components can also have each of the three categories (Purchased, Sales, and Inventory Items), and can also be purchased or sold individually.
The components for Sales BOMs and Assembly BOMs must be sales items.
(1.) optional

11. Phantom Item Skateboard 1 Unit Wheels 4 Units Phantom Item
(does not appear in production orders and only for information in MRP)
Skateboard
1 Unit
Wheels
4 Units
Board
1 Unit
Axis
2 Units
Screws
8 Units
Tire
1 Unit
Rim
1 Unit
Screws
4 Units
A phantom item is a sub-assembly in the BOM that does not actually exist in inventory. It is used to simplify the BOM. Although the phantom item appears in the BOM, the Production Order will show the components needed to make the phantom item rather than the phantom item itself.
An item can be defined as a phantom item in the Item Master Data.
MRP: The MRP will explode the phantom items and create recommendations for its components. The phantom item will be displayed in the MRP result window without recommendations, for information only.
Production Order: The Production order will explode the phantom BOM and display its components in the required order. In the example above, in the production order, the Components tire, rim, and screws will appear, but not the wheels.
The BOM requirements of different departments in the same company can be different. The engineering department could create a multi level BOM to define an engine .The manufacturing department could then include this BOM as single phantom item.

12. Additional Costs in Production
Labor Cost
(Created as non-inventory item master record. Appear in production orders.)
Skateboard
1 Unit
Wheels
4 Units
Board
1 Unit
Axis
2 Units
Screws
8 Units
Labor Cost
for Assembly
Tire
1 Unit
Rim
1 Unit
Screws
4 Units
You have the option to report additional costs such as labor, machinery, or other overheads.
First you create an item master record for the additional costs (e.g. labor cost) as a non-inventory item. The Valuation Method for this item must be Standard in perpetual inventory systems. Set the issue method for the item as backflush.
You create a component for the additional costs in the bill of materials with the item master record for the additional costs. You can do this in both perpetual inventory and non-perpetual inventory systems.
In perpetual inventory systems, you must define Expense, WIP Material and WIP Variance accounts.
The component for the additional costs will be exploded and displayed in the production order.
On the Production Order Summary tab the additional costs will be displayed in the field Actual Additional Cost. If there is more than one additional cost item in the BOM, the cost display here is the sum of all additional costs. This field is updated upon product completion.

13. Creating a Bill of Material
Finished Product
Quantity of the item produced with the components
Product No.
P1001
Quantity 1
Product Description
Skateboard
BOM Type
Production
Price List
Price List High Volume
Price list for determining the component prices
Item No.
Quantity
Unit Price
Total
Sales
A1019 1
22,50
22,50
Production
A1020
Template 4
17,82
71,28
A1021 2
26,10
52,20
Total price of components
Components
Determine price of finished products from component prices
145,98
Product Price
129,99
Update
Cancel
You can create a multi-level bill of material in this window. To do so, you define a main product and specify all the components and raw materials required to produce it, along with the quantities and warehouses involved.
When you create the BOM, you define its BOM type (such as sales, production or template).
The finished product and its components must exist as item master records in the system before you can define a BOM.
You maintain the price for the BOM either by copying the total of the component prices to the Product Price field using the orange arrow above the relevant field, or by entering a different price in the field. This price then applies to the selected price list.
Alternatively, you can maintain the BOM prices for the individual price lists in the item master record for the finished product.
Price of finished product for specified price list

14. Update Parent Item Prices
Price for Child Items in Price List changes
run report
Update Parent Items Prices Globally
Item
New Price
Difference
Current Price
Suggested Price
P1001
129,99
139,99
A1019
A1020
32,50 10
17,82
Update
Remove or
Accept the suggested price for the BOM
Keep the current price for the BOM
If you change the prices for child items in the price list used for creating the BOM the system does not automatically change the price for the parent item.
To change the parent item price, you can run the report Update Parent Item Prices Globally. The system selects all items where the prices have changed and proposes new parent item prices.
Choose Update to enter the new prices in the BOM.

15. Production Process: Topic Objectives
At the conclusion of this topic, you will be able to:
Describe the production process
Carry out a production process for a production BOM

16. Production Order Types
Standard Production Order
Special Production Order
Product
Item A B C X Y Z
Disassembly Production Order
Product
SAP Business One supports three types of production orders: Standard production order, Special production order and Disassembly production order.
The Standard production order is based on the BOM; you use it to produce a regular production item. You manage material transactions of the regular production process. In addition, you can change components at the production stage. When you open a new standard production order, all the components fill in automatically.
Use the Special production order to produce and repair items or to perform activities that are not necessarily Bill of Material items, for example, repair order for customer equipment cards, or repair order for rejected assemblies. You create special production order components manually.
Use the Disassembly production order to disassemble a parent item of the regular product into its components. You disassemble the product into separate parts that can then be put into stock and sold. For example, you can purchase a used car, take it apart, and sell the individual components. A B C

17. Production Process Production Order Production Order Production Order
manually
2.)
4.)
Production
Order
Status: Planned
Production
Order
Status: Released
Production
Order
Status: Closed
1.)
release
close
MRP
Components are committed but stock is not yet affected.
issue the components for production
3a.)
receipt from production and report completion
3b.)
1.) Create production orders either automatically from MRP recommendations, or manually. The Status of the production order is Planned. At this point in the process, components are committed to the production order but no items can be issued until the order is released .
2.) Once you have initiated the production order, change its Status to Released. At this stage, you can begin reporting transactions for the production order. Components can be issued, finished products can be received, and the production order can be completed.
3a.) Issue the components using either the Manual, or the Backflush method.
Use the Manual issue method to issue individual component items to the production order. That enables you to precisely post all components issued to a production order as it is used in the production process. Choose Production  Production Order  Choose the production order in Status Released  Go to menu (or right mouse click)  Issue Components
When you report the completion of the production (step 3b.), the backflush components are issued automatically for the production order.
3b.) At the point you start to report the completion of the production order. You can report the partial or full completion of the production order or you can cancel the order.
For the standard and special production orders, you post the finished product to the stock. For the disassembly production orders, you post the components to stock. There are two ways to report completion : Choose Production  Receipt from Production or Choose Production  Production Order  Choose the production order in Status Released  Go to menu (or right mouse click) Report Completion
4.) Once the manufacturing is over, close the production order. You change the Status to Closed. The Production Order, Summary Tab sums up the order; you can refer to the tab to review the production order details.

18. Production Order: Component Tab Page
Type Standard / Special / Disassembly Due Date
Status Planned / Released / Closed / Cancelled Origin Manual / MRP
Product No. P User Marc Manager
Planned Qty 2 Sales Order …
Warehouse Customer …
Components
Summary
Item No. Base Planned Issued Available Warehouse Issue Method
A Manual / Backflush
A Manual / Backflush
A Manual / Backflush
Base: Displays the quantity of the components necessary to manufacture one product.
Planned: Displays the value of the planned quantity, which is the multiple of the base quantity and the product planned quantity.
Issue Method:
Manual – individual components of a a parent item are issued manually. Backflush – components of a parent item are automatically issued to the production order once you report the completion of the parent item.
Issued: Displays the total quantity already issued for the production order.
Available: Displays the quantity of the item units available in the specific warehouse.
In this window you enter the data for a new production order. However, if the production order is created automatically from MRP, you can update the values of the fields.
Type: Standard (default)– to produce a regular production item. It is a production BOM item. Special – to produce and repair items that are both BOM items, or regular items. Disassembly – to dismantle a parent item to its components. It is a production BOM item.
Status: Planned – the initial production order status. Released – you release the production order to the shop floor for work. Closed – you close the production order when all the planned quantities of the product, including its components, issued. Cancelled – the production order is removed from the list before the production process starts.
Planned Quantity: For manual production orders, enter the planned quantity of the finished product for the production order. The default value is 1. When the production order is the output of the MRP run, the planned quantity value is already displays in the field. However, you can update the quantity for the planned and released production orders.
Origin: MRP – the result of the MRP report recommendation or directly from a sales order. Manual – entered by an authorized user.
Sales Order, Customer: To link the production order to a sales order or a customer.

19. Production Order: Summary Tab Page
Type Standard / Special / Disassembly Due Date
Status Planned / Released / Closed / Cancelled Origin Manual / Automatic
Product No. P User Marc Manager
Planned Qty 2 Sales Order …
Warehouse Customer …
Components
Summary
Costs
Actual Component Cost 80 Actual Additional Cost Actual Product Cost 80 Total Variance
Variance per Product
Variance %
Journal Remark Production Order - P1001
Quantities
Planned Quantity Completed Quantity Rejected Quantity
Dates
Due Date
Actual Close Date
Overdue
On the Summary tab page you have the information that summarizes the production order. The tab displays the information on the released and closed production orders.
Actual Component Cost: Displays the total value of all components issued to the production order.
Actual Additional Cost: Displays the actual additional costs that occur when a component is defined in the Item Master Data as a non-inventory item. This can be, for example, a service or labor cost. If there is more than one additional cost for the item, the cost displayed is the sum of all additional costs.
Actual Product Cost: Displays the total value of all products assembled for this production order.
Total Variance: Displays the value that is the result of the actual components value subtracted from the actual products value. Variance Per Product: Displays the value that is the total variance divided by the planned quantity value. Variance %: Displays the percentage of the variance per product value.
Journal Remark: Displays the product number by default. The value is saved in the General Ledger and is displayed during the General ledger transactions and reports. You can modify the value of the field.
Quantities - Planned Quantity: Displays the total planned quantity of the production order. Completed Quantity: Displays the total completed quantity after you report the production completion. Rejected Quantity: Displays the total rejected quantity of the production order.
Dates - Due Date: Displays the due date of the production order. Actual Close Date: Displays the date when the production order was closed. Overdue: Displays the number of days that the actual close date exceeded the due date.

20. Production Process Postings
Issue For Production
Stock Account
(of components)
WIP Account
100
100
Receipt from Production
Stock Account
(of Product)
WIP Account 90 90
Production Order Close
WIP Variance Account
WIP Account
-10
-10
Several journal entries are posted during a production process:
When you issue the components for the production either manually or automatically (backflush), the system posts the value of the components to the debit side of the WIP account and to the credit side of the stock account of the components.
When you complete the production order, the system creates a receipt from production document and a journal entry that posts the value of the finished product to the debit side of the stock account of the product and to the credit side of the WIP account.
If any variances occur, the system posts these when you close the production order. The system posts the variance as a negative value on the debit side of the WIP account and on the credit side of the WIP variance account.
The system retrieves the WIP account and the WIP variance account from the WIP Account field and the WIP Variance Account field on the Inventory tab of the item master record.

21. Stock Changes for Standard Production Order
In Stock -
Committed +
Ordered =
Available
Status: Planned -
Components +
Production
Standard
Order
Finished Product + +
Completion reported
Components - -
Finished Product + -
In a standard or a special production order, components are issued out of inventory. When the production order is completed, the finished product is received into stock. The details of the stock movements are shown above.
For disassembly production orders the stock effect is reversed. The disassembled finished product is removed from stock and the components are added into the inventory.

22. Production: Unit Summary
You are now able to:
Describe the differences between individual bills of material
Carry out a production process for a production BOM