Bills Of Materials Setup Document with Costing

PROFILE OPTIONS IN BILLS OF MATERIALS

Profile Option	User	System Administrator				Requirements
	User	User	Resp	App	Site	Required?	Default Value
BOM: Check for Duplicate Configuration	-					Optional	No
BOM: Component Item Sequence Increment	-					Optional	10
BOM: Configuration Item Delimeter	-					Optional	No
BOM: Configuration Item Type	-					Optional	No
BOM: Days Past Before Starting Cutoff of Order Entry Bills	-					Optional	0
BOM: Default Bill of Material Levels	-					Optional	1
BOM: Default WIP Supply Values for Components	-					Optional	Yes
BOM: Hour UOM	-					Optional	1 ?
BOM: Inherit Option Class Operation Sequence Number	-					Optional	No
BOM: Model Item Access	-					Optional	Yes
BOM: Perform Lead Time Calculations	-					Optional	No
BOM: Planning Item Access	-					Optional	Yes
BOM: Standard Item Access	-					Optional	Yes
BOM: Update Resource UOM	-					Optional	No

STEP 1: CREATE LOCATIONS

Define the manufacturing Location

Responsibility: Bills of Materials Navigation: Setup  > Locations

STEP 2: CREATE CALENDAR

Define the manufacturing Calendar

Responsibility: Bills of Materials Navigation: Setup > Calendars

Define Workday Pattern, Shifts & Timings:

Build Calendar:

STEP 3: CREATE MANUFACTURING ORGANIZATION

Responsibility: Inventory Navigation: Setup > Organizations > Organizations

Enter Accounting Information:

Enter Inventory Information:

Create a Standard Costing Organization and assign the manufacturing calendar and enter all the required GL Code combinations in accounts fields.

Enter Receiving Information:

STEP 4: CREATE MATERIAL SUB-ELEMENTS

Responsibility: Inventory Navigation: Setup > Costs > Sub-Elements > Materials

STEP 5: DEFINE SUB-INVENTORY

Responsibility: Inventory Navigation: Setup > Organizations > Sub-inventories

Create the below sub-inventories under the newly created manufacturing organization

STEP 6: DEFINE BOM PARAMETERS

Responsibility: Bills Of Materials Navigation: Setup > Parameters

Note:

If you have not defined the BOM Parameters then you will get the below error message while opening the Bills form

STEP 7: DEFINE EXCEPTION TEMPLATES

Responsibility: Bills Of Material Navigation: Setup > Calendar OR Exception Templates

Query the Manufacturing "Calendar" and click on "Dates"

As per the manufacturing calendar, all Sundays are leave. In case of any business requirement if you would like to make some Sundays as a working day then you can define the Exception Templates and enter those days as a working days

Click on "Exception List"

Click "OK"

As soon as you save the Exception List, it will reflect in your calendar

STEP 8: DEFINE RESOURCES

Responsibility: Bills of Materials Navigation: Routing > Resources

Define one Assembly Machine Resource with Charge Type as "WIP Move"

Define Resource Rates:

After enabling the "Costed" and "Standard Rate" check boxes, click on "Rates"

Save and close this form.

Likewise create one Assembly Person Resource with Charge Type as "WIP Move"

Click on "Rates"

Note:

1. Defined the below Resources

Resource Name	Description	Type	UOM	Charge Type	Rate
DYN_A_MCHN	DYN Assembly Machine	Machine	HR	WIP Move	200
DYN_A_LBR	DYN Assembly Labour	Person	HR	WIP Move	75
DYN_HELPER	DYN Helper	Person	HR	WIP Move	50
DYN_TESTER	DYN Tester	Person	HR	WIP Move	100

2. Various Resource Types:

• Amount - We can use this type when we use money transactions
• Currency - We can use this type when we use USD currency for transactions.
• Machine - We can use this type when the resource is a Machine
• Miscellaneous - We can use this type during OSP or other transactions
• Person - We can use this type when the resource is a Human/Person

3. Various Charge Types:

• Manual - Charges will trigger when we manually move the Resources in Jobs
• PO Receipt - Charges will trigger when we do PO Receipts for OSP Purchase Orders
• PO Move - Charges will trigger when we complete the PO Receipts and do Move Transactions in OSP Operation
• WIP Move - Charge will trigger when we do the Move Transactions in Discrete Jobs

4. When defining the Rates for Resources, we should define the rates using "Pending" Cost Types. Because this is a Standard Costing Organization.

STEP 9: DEFINE DEPARTMENT CLASSES

You can define department classes to group departments and to identify manufacturing cells. This information is for your reference only.

Responsibility: Bills Of Materials Navigation: Setup > Department Classes

Enter the Department Classes and it's Description

STEP 10: DEFINE DEPARTMENTS

You can define departments as areas within your organization where you perform work and/or collect costs.
Responsibility: Bills of Materials Navigation: Routings > Departments

Enter the Department Name and Description along with the Department Class

Assign Resources to department:

Click on "Resources"

Attached two resources for the Department "Assembly"

If you want to enter the Overhead Rates for this Department then you can click on Rates and enter the Amount

Create a Department for Painting and Assign the Resource

Click on "Resources"

Define one more department for QC and assign the resource

Note:

All the department resources are available for 24 Hours. If that department resource is not available for 24 hours then uncheck "Available 24 Hours" check box and enter the timing in "Shifts"

STEP 11: DEFINE STANDARD OPERATIONS

Responsibility: Bills Of Materials Navigation: Routing > Standard Operations

Enter the Standard Operations Code and attach the Department

Assign Resources to Standard Operations:

Click on "Operation Resources" and assign the Resources

Usage & Inverse: If we use the Resource "DYN_A_MCHN" for half an hour (Usage) then we can produce 1 unit (Inverse). Otherwise, if we want 2 Units output then we need to use the resource "DYN_A_MCHN" for 1 hour. At the same time, if we use the resource "DYN_A_LBR" for 1 hour then we will produce 1 Unit.

Likewise create the Standard Operations for Painting

Create on Standard Operation for Quality Checking

Note:

We should use the Painting resource for 2 hours to produce 1 unit. In other words, the painting resource can produce only half unit in 1 hour.

Similarly the tester resource can produce 1 unit in 1 hour.

Usage: How many hours we should use one particular resource to produce 1 Unit?

Inverse: What is the Output of one resource if we use that resource for 1 hour?

STEP 12: CREATE ITEMS

Create the below items and apply the proper item templates and then assign the cost.

Items	Template	Cost
DYN_CAR	Finished Goods
DYN_Engine	Purchased Item	500
DYN_Chasis	Purchased Item	400
DYN_Seat	Purchased Item	75
DYN_Wheel	Sub-Assembly
DYN_Tyre	Purchased Item	25
DYN_Rim	Purchased Item	30
DYN_Axle	Purchased Item	20

Responsibility: Inventory Navigation: Items > Master Items

STEP 13: ENTER ITEM COST

Responsibility: Inventory Navigation: Costs > Item Costs

Click on "New" and enter the Item Code and Cost Type as "Pending"

Click on "Open" and then "Costs"

Likewise enter the costs for remaining items

If you query these items again then, we can see one more record for each and every item in "Frozen" cost type

Note:

For every item will have 2 records. One record will be in "Pending" Cost Type and the another one will be in "Frozen" cost type. Because, this DYN Organization is a Standard Cost Organization. By default the item cost will be defined in "Pending" cost type. Then if we run the "Update Standard Cost" program then the cost will be moved to "Frozen" Cost Type.

STEP 14: DEFINE OVERHEADS

Responsibility: Inventory Navigation: Setup > Costs > Sub-Elements > Overheads

Enter the Overhead Name and select the Cost Element then enter the Overhead Absorption Account

Assign Overhead department and overhead Rates:

Click on "Rates" and enter the Overhead Amount

While entering the Overhead Rates, we need to enter the Department Name as well.

Basis = Item

Means, this Overhead Rate will be based on the item. Whenever we are using the Department "DYN_QC" this Overhead rate 125 USD will be applied.

assign Overhead Resources:

Click on "Resources" and assign that Resource (Whatever the Department you have assigned, assign that department resource to this Overhead.

STEP 15: DEFINE ROUTING

Responsibility: Bills Of Material Navigation: Routings > Routings

Select the Organization as "DYN" and create the Routings for both the Assembly items

First create the Routings for the Sub-Assembly item " DYN_Wheel"

Likewise create the Routings for the End Assembly item "DYN_CAR"

STEP 16: DEFINE BILLS

Responsibility: Bills Of Materials Navigation: Bills > Bills

First, create the Bills for Sub-Assembly item and then create the Bills for Main Assembly Item

Make it the Supply Type as "Push"

Create Common Bills:

This Bill was created in "DYN" organization and it's a manufacturing org. So, we need to create the Bill in Master Organization as well. To create the Common Bill in Master Org, navigate to

Tools > Create Common Bills

Enter the Master Organization and the item

Click on "OK"

"Create Common Bills" program will be submitted automatically

Query this Bill in Master Org "DMO" and it will be available

This completes the Bill Of Materials

STEP 17: UPDATE STANDARD COST:

Responsibility: Inventory Navigation: Costs > Standard Cost Update > Update Costs

Run the "Update Standard Costs" program for "Pending" Cost Type

"Submit" the " Update Standard Costs" program in DYN Organization

Note:

Make sure the Inventory Period is open for our organization "DYN"

STEP 18: RUN COST ROLL-UP

Responsibility: Cost Management SLA

Navigation: Supply Chain Costing > Supply Chain Cost Rollup

Submit a single request "Supply Chain Cost Rollup - Print Report"

Check the Output for "Supply Chain Cost Rollup - Print Report"

Item Roll-up Cost for "DYN_CAR"

STEP 19: COST ROLL-UP CALCULATION:

Material Cost:

Items	Template	Item Cost	Qty Required	Material Cost
DYN_CAR	Finished Goods		1	1385
DYN_Engine	Purchased Item	500	1	500
DYN_Chasis	Purchased Item	400	1	400
DYN_Seat	Purchased Item	75	3	225
DYN_Wheel	Sub-Assembly		1	260
DYN_Tyre	Purchased Item	25	4	100
DYN_Rim	Purchased Item	30	4	120
DYN_Axle	Purchased Item	20	2	40

Resource Cost:

Resource Name	Type	Item	UOM	Charge Type	Usage	Inverse	Rate	Total Amount
DYN_A_MCHN	Machine	DYN_CAR	HR	WIP Move	0.5	2	200	100
DYN_A_LBR	Person		HR	WIP Move	1	1	75	75
DYN_HELPER	Person		HR	WIP Move	2	0.5	50	100
DYN_TESTER	Person		HR	WIP Move	1	1	100	100
DYN_A_MCHN	Machine	DYN_Wheel	HR	WIP Move	0.5	2	200	100
DYN_A_LBR	Person		HR	WIP Move	1	1	75	75
Total Resource Cost								550

Overhead Cost:

Name	Department	Resources	Rate
DYN_OVRHED	DYN_QC	DYN_TESTER	125

Roll-up Cost for Item "DYN_Wheel"

• Material Cost: 260
• Resource Cost: 175
• Overhead Cost: 0

Total Cost: 260 + 175 = 435

Roll-up Cost for Item "DYN_CAR"

• Material Cost: 1385
• Resource Cost: 100 + 75 + 100 + 100 + 175 = 550
• Overhead Cost: 125

Total Cost: 1385 + 550 + 125 = 2060 USD

----- RAJU DEVARAJ

drajudevaraj@gmail.com