Production BOM

Production Orders can only be planned for items that have a Production Bill of Materials. A Production BOM defines each step of a production operation, its duration, and the components and resources required to complete each step.


A Production BOM is an essential feature for resource Capacity planning and Scheduling production operations correctly. 


For simpler, single-step assembly/disassembly operations (e.g. assembling T-shirts into a multipack, assembling items into a gift box), users can use the simpler Assembly BOM. The difference between the Production BOM and Assembly BOM is that Assembly involves only one operation and Production involves many operations. The Assembly BOM lists products and service items but does not take into account resource capacity and operation scheduling.


Prerequisites

  • Set up Factory Calendar (required)
  • Set up Products (required)
    • Component products must be created so they can be added to the Production BOM. In the case of semi-finished goods, the semi-finished product needs an entry AND its component products need entries.
  • Set up Work Centres (required)
  • Set up Resources (required)


Table of Contents


Add a Production BOM to a product

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A Production BOM is added to a product and defined from the product details screen (Inventory → Products → [selected product]). 


NOTE: Before adding a Production BOM to a product, the component products must already be created in DEAR. Resources and Work Centres must be defined in the Production Settings. 


NOTE: Costs for components are estimated on the BOM screen from the Average Cost (an average of all purchase costs for this item). Sometimes this can lead to costs being estimated wrong on this screen, or displaying as 0 (e.g. if there was no last purchase price in the system). This will not make the production incorrect. See Resources for how costs are calculated for resources.

The actual cost of finished goods will be calculated using the costing method of each individual component allocated to an assembly. Actual costs associated with finished goods can be viewed using the Finished Goods Analysis Report.

  1. Select Production BOM from the Bill of Materials drop-down list in the product document header.



  2. This will activate the Production Bill of Materials tab below where the Production BOM can be defined. 
  3. Enter the product output quantity and manufacturing buffer time. You can optionally include a URL for assembly instructions. See Manufacturing Buffer for more information. 
    • Example: We are making a Production BOM for a Chair. The Production BOM defines the resources and components required to make 1 chair.
  4. Select to Ignore cumulative lead time or set a lead time for products. See Production BOM Settings for more information about this setting.
  5. You can either add a new Production BOM to a product or clone an existing Production BOM (see below). Adding a new BOM will add the operations and resources/components one by one.
  6. Press the +Operation button to start. An operation is a single step in the production process.


  7. Enter the operation Name, Cycle Time and Units per Cycle for the first operation. You can edit the operation sequence if required; by default, the field will be filled with the next number in the sequence. Operations that take place simultaneously should be given the same sequence number.
  8. Select the operation type. There are two options available:
    • Manufacturing – the operation type during which finished goods are produced. Cycle time for the operation depends on the quantity of finished goods to produce. 
      • E.g. Production BOM Qty is 1, Cycle time for a manufacturing operation is 15 minutes, Units per cycle is 1. In the case of a Production Order for 10 items, the operation time will be 150 minutes. 10 x Quantity of Items = 10 x Cost.
    • Setup  time taken to set up a manufacturing operation. Cycle time for this operation is fixed and is NOT changed depending on the quantity to produce. Units per cycle is set to N/A for this operation type.
      • E.g. Cycle time is set to 3 min in the Production BOM. A Production Order is raised for 30 finished goods, but Cycle time for the operation remains 3 minutes. Cost is constant no matter the number of items produced. 
      • For Components in Setup Operations availability will be calculated a little bit differently from Manufacturing operations:
        1. When Production Order is Released (without Runs) - no allocation will be created for components in Setup operations
        2. Once Production Run is created for this Production Order - allocation will be created for components in Setup Operations
        3. When 2nd Production Run is created - again new allocation will be created for Components

          Allocation will take place only if Production Run operation with type = Setup is not started/completed

  9. Select a Work Centre for the operation. 
    • Example: The first operation in our Production BOM is Fabric Cutting. The operation Cycle time is 1 hour – it takes 1 hour to cut enough fabric. The Units per cycle value is 1 – enough fabric is cut for 1 chair. 
  10. Next, it is time to add components and resources for this operation. Click Add more items next to the operation number to open the components and resources table. The Operation should contain at least one Component or Resource.
  11. First, select the Type of entry. This can be a Component, Resource, Note or Attachment. 
    • Notes have a limit of 200 characters. 
    • Attachments have a limit of 32 MB. 
    • Component can be a simple product, an assembly product or a production product. 
    • Resource (e.g. tools, machines, people) must be defined in order to be selected.
  12. Enter the other grid fields (SKU, Quantity, Wastage %/QTY if the Type is Component; SKU, Quantity if the Type is Resource). See Production BOM settings below for a detailed explanation of each field. 
    • NOTE: Position of Production BOM elements can be changed by dragging and dropping each line.
  13. Once the operation is complete, click Add operation to add the next step – repeat until the Production BOM is defined.
  14. Save your changes to finish.



Total Cost is a read-only field that will be automatically calculated from the approximate cost of resources and components required for the operation.

  • Average Cost (an average of all purchase costs for an item) is used on the BOM page to estimate component costs. The actual cost of finished goods will be calculated using the costing method of each individual component picked for production. Actual costs associated with finished goods can be viewed using the Finished Goods Analysis Report.
  • Resource costs are taken from the sum of all service products assigned to each resource. 


NOTE: Components, resources and quantities of a Production BOM can be edited in a Production Order if required. 


Production BOM containing semi-finished products (Nested Production BOM)

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Finished goods (from Production or Assembly) can be included as components in a Production BOM. When a Production Order is authorised for a finished good that contains produced components, the nested Production Orders will be created and authorised. 


NOTE: Assembly Orders are not created automatically upon Production Order authorisation. If a Production Order/Production BOM contains assembled components, these must be assembled manually by the user.


Production BOM Settings

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Product output quantity from the components in BOM 

This is the quantity of the finished good that can be produced from the quantity of the components listed on the BOM. This quantity depends only on the components and does not take into account any resource capacity.


Manufacturing buffer time 

Manufacturing buffer is a value set in the Production BOM to protect the production process from breaking the deadlines; it is used for scheduling. It is set in % as the ratio of work time to buffer time. 


Production Instruction URL

Enter a URL showing production instructions for the product, if applicable.


Ignore cumulative lead time

When this box is left unchecked, the lead time for component replenishment is calculated from the values set on the Suppliers tab of the Product page. See Product and Service Management for more information on configuring the lead time for replenishment. Production BOMs containing semi-finished products will calculate the cumulative lead time for the whole order.


When this box is checked, an additional field will appear when you can specify the lead time manually in days.



Operation sequence

This is the operation's sequence number. By default, it is filled with the sequence number in order starting from 1. Simultaneous operations should use the same number. 


Operation type

There are two options available:

  • Manufacturing – the operation type during which finished goods are produced. Cycle time for the operation depends on the quantity of finished goods to produce. 
    • E.g. Production BOM Qty is 1, Cycle time for a manufacturing operation is 15 minutes, Units per cycle is 1. In the case of a Production Order for 10 items, the operation time will be 150 minutes. 10 x Quantity of Items = 10 x Cost.
  • Setup  time taken to set up a manufacturing operation. Cycle time for this operation is fixed and is NOT changed depending on the quantity to produce. Units per cycle is set to N/A for this operation type.
    • E.g. Cycle time is set to 3 min in the Production BOM. A Production Order is raised for 30 finished goods, but Cycle time for the operation remains 3 minutes. Cost is constant no matter the number of items produced. 


Name

Name of the operation. Character limit is 200. 


Cycle time

Specify how long the operation takes to produce some number of units. This is the minimum time required to produce some number of finished goods.


Units per cycle

Set the maximum number of finished goods that can be produced per cycle time of an operation. For an operation, this is the minimum time taken to produce enough operation output for one unit of the BOM product.


Work Centre

This is a mandatory drop-down selection to assign a Work Centre to the operation.


SKU: Component

A component or resource is added by selection from a drop-down list with search ability. 


Quantity

This is the quantity of components required to produce the finished good. This quantity should reflect the components required to manufacture the full amount specified in the Quantity to Produce field. 


In the case of resource, the quantity defines how many individual resources are required to produce the finished good. 


Wastage % and Wastage Quantity

Wastage % and Wastage Quantity are mutually exclusive. If some of the components are wasted during assembly, use these fields to include that information. 


Cost per unit

This auto-filled field displays the current average cost of the selected component. For resources, the cost is set up in Resource per Unit of Time. 


Total cost 

This read-only auto-calculated field is used to display the total cost. If the line is a resource or component line, this will show the total cost of that component/resource for the operation duration. If the line is an operation line, this will show the total cost of all components/resources for that operation.

It is calculated as: Quantity x Cost per Unit. As for the resource, the total cost is calculated based on cost per unit and cycle duration: Operation Cycle time in min / Resource Cycle duration in min x average Default Cycle cost x Qty of Resource.

  • Average Cost (an average of all purchase costs for an item) is used on the BOM page to estimate component costs. The actual cost of finished goods will be calculated using the costing method of each individual component allocated to an assembly. Actual costs associated with finished goods can be viewed using the Finished Goods Analysis Report.
  • Resource costs are taken from the sum of all service products assigned to each resource and are calculated as Cycle time / Unit of Time x Total cost for Unit of Time.


IMPORTANT NOTE: The average cost for components is a reference value only. The average cost in DEAR does NOT affect your P&L statement. All COGS calculations are done using accounting costing methods such as FIFO or FEFO. Costs are distributed to products upon purchase invoice authorisation. COGS journal entries are generated when the Ship tab of a Sale is authorised. 


Clone an Existing Production BOM

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Once a Production BOM has been created for a product, it can be cloned to other Production products to save time during setup.


  1. On the Production Bill of Materials tab, from the drop-down list, select the Product whose Production BOM you wish to clone. 
  2. Click Clone BOM.
  3. Make any changes to resources, components or operations. 
  4. Save your changes to finish. 



Step-by-Step Example Production BOM

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We want to create a Production BOM for a dining chair. 


Preliminary Steps

Components

This chair requires the following components. These should be created as products before setting up for the Production BOM.

 

  • Birch lumber
  • Fabric
    • Suede seating fabric
    • Quilt batting
    • Urethane lining
    • Dust cover
  • High-density foam
  • Upholstery staples

The item Dining Chair should also be created as a product.


Resources

We will need the following Resources to produce one chair. These should be defined in Production Settings → Resources before setting up the Production BOM.


  • Labour: Woodwork
  • Labour: Fabric
  • Labour: General
  • Machine: Coping Machine
  • Machine: Sewing Machine
  • Machine: Overlock Machine
  • Machine: Pneumatic Stapler
  • Machine: Sander
  • Machine: Jigsaw

Costs are assigned to each resource using service products. See Resources → Set up Services for more information. 


Work Centre

Our Shop floor location has several Work Centres.


  • Lumber Store
  • Wood Workshop
  • Cutting Tables
  • Sewing Machines
  • Upholstery and Assembly Workshop
  • Testing Workshop

These should be defined in Production Settings → Work Centre before setting up the Production BOM. 


Setting up the Production BOM

Now that the preliminary steps are complete, we can set up the Production BOM for the dining chair. 


  1. Go to Inventory → Products → [dining chair name] to open the product details screen. 
  2. Select Production BOM from the Bill of Materials drop-down list in the product document header. This will activate the Production BOM tab below.
  3. We start by entering:
    • Product output quantity – this BOM is for a batch of 1 chair.
    • Manufacturing buffer time – we allow 20% manufacturing buffer time in case of problems during production. 
  4. Continue by adding operations, resources and components until the production process is fully defined. You can see that the Total Cost for the produced good is calculated automatically.


Editing a Production BOM

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Lines with added objects (components, resources, notes, attachments) can be dragged and repositioned within an operation. 

  • Objects can be dragged from one operation into another.
  • Operations can be dragged and dropped above or below another operation to change the sequence numbering. 


Operation values (Operation sequence, Name, Cycle Time, Units per cycle time and Work Centre) can all be edited. Edited values will be applied to Production Orders and Production Runs that have not been completed. Production Runs in progress are not affected. Changing these values will not cause changes in capacity planning or scheduling. You will receive a notification informing which orders are affected. 


Editing component/resource quantities, replacing components/resources

Editing component or resource quantities or replacing components and resources causes changes in Production Orders, Production Runs, Capacity Planner and Scheduler.


Replanning is possible only for Production Orders in Planned status. A user needs to Reload updated BOM into the order to cause re-planning.


Editing the Quantity field causes the re-planning of the component/resource. Replacing a resource or component means that this resource or component is deleted from the Production BOM, and a new resource or component is added. In both cases, the following changes are executed:

  • Capacity/resource availability is checked to see if the newly added component/resource is available for the Production Order. 
  • Reversed allocation of the new components/resources is executed and reflected in the corresponding reports (Availability report, Capacity Planner, etc.).
  • Production Order operations involving the new and removed resources are re-scheduled. 


It is possible to replace the component/resource in already started operations. Changes will affect all operations going forward. Production Runs already in progress will not be affected. We recommend that the user checks the Scheduler to ensure production deadlines have not been broken for affected orders. 


Editing wastage %, wastage quantity and cost

It is not possible to change the cost per unit for components/resources from the Production BOM. Cost per unit should be edited in the corresponding component or resource. 


Wastage %, Wastage quantity can be changed only for components. Changes in Wastage % or quantity increase/reduce the demand on component allocation: i.e. if wastage is increased – more components should be allocated and vice versa. It is the same process as for changing the quantity of a component. 


Deleting components/resources

Deleting of components is the same as for editing. The user should reload the BOM to the Production Order. However, reloading a BOM (and thus editing the BOM) is possible only for Planned orders. Thus, it is not possible to edit the BOM for orders in Released or Work in Progress status. Reversed allocation of the new components/resources is executed and reflected in the corresponding reports (Availability report, Capacity Planner, etc.). You will receive a warning message notifying you which orders are affected.

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