Stock - Bills of Materials (BOMs) and Works Orders

Bills of Material (BOM) and Works Orders have been designed to support enterprises that manufacture and sell finished products. The formula or recipe is defined in a Bill of Material. A works Order is used to launch a quantity to be produced and recorded as stock for subsequent sale.

The works order process also manages the stock accounts of the components of the BOM; in essence the component stock accounts are reduced by the consumptions specified in the BOM. See a Summary Process Flow Chart for using BOM's.

This guide addresses the following topics.

Entering a Bill of Material (BOM)

Bills of Material can be developed both off-line and entered in full or within the system, as is convenient. It is, however, the user's responsibility to ensure that any BOM that is actively being used has been accurately set up and reflects the user's desire.

Once all the necessary Units of measure and stock items have been set up a bill of material can be entered. A BOM is entered via the relevant stock item.

Stock - Manage Stock - Stock Items - Stock Item - ADD BOM

A screen is presented to allow component stock items to be called into the BOM together with the quantity required and any wastage factors. It is important to remember that the quantities of the components must be the amounts necessary to make a single Unit of Measure of the BOM Stock Item.

The wastage factors relate to any processing losses incurred during manufacture. The waste factor 'grosses up' the quantity by the percentage to give a consumption amount; if the wastage percentage is 5% then the quantity is divided by (1.00 - 0.05). So for a quantity of 100 and wastage of 5% the manufacturing consumption will be 105.26316.

Information is entered as described below. As a stock item could have multiple BOM's, the BOM must be given a BOM Name. The Valid From and Valid To dates define an effective date range that may be set for this BOM. If no Valid To date is set then the BOM is permanently valid. This feature may be useful if two or more BOM's can substitute or update for one another depending on dates. The user must ensure that dates do not cross over; a warning symbol is displayed if there is a conflict.

Click ADD ITEM and select the first stock item for the BOM formula from the Stock Item dropdown. If a required stock item is not present then it is necessary to leave the BOM process and set it up.

Enter the Quantity and the Wastage %.

A Sort Code can be added to the stock item. Stock Items with the same sort code will be grouped together both on the screen display and in printed reports. The sort code can be left blank if preferred. The sort code can be alphanumeric of single or multiple characters and is conventionally ordered.

An effective date range may be set for a Stock Item in a BOM. If no date range is set then the stock item is permanently valid for the BOM. This feature may be useful if two or more stock items can substitute or be updated for one another depending on dates. Important; all items with no dates or valid dates will be included in the BOM and will be impacted when a works order is run. If some items should be mutually exclusive, but have mistakenly been given valid dates they WILL ALL BE included. The user must ensure that validity dates do not cross over.

When the line item is complete, click SAVE ITEM. Use UNDO ITEM to start the line again.

To add the next ingredient click ADD ITEM again, continue until all required stock items have been added. When ready to store the BOM click SUBMIT button. The DELETE button will delete the BOM.

The BOM is now available to be used in a works order process to manufacture stock. The standard cost for the BOM will be calculated by the system. To edit a BOM return to the Stock Item Listing and click the VIEW BOM button on the relevant stock item line. Note that the View button is only displayed when a BOM already exists. If no BOM has yet been created then only the Add BOM button is displayed. A screen similar to the screen used to construct the BOM originally is displayed with a cost breakdown shown.

If necessary the BOM can be edited, click on VIEW BOM and make changes as necessary. Tick the 'Update Standard Cost?' button for the BOM to be recalculated after clicking the SUBMIT button.

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BOM's, Standard Costs and Accounting

In the first instance that a new BOM is entered and submitted a standard cost is computed and stored for the stock item. If the system has a record of any physical stock a journal posts the stock value to the stock account as follows:-

It is the user's responsibility to make any further adjustments to ensure the trial balance is correct. For instance if there are existing summary stock accounts and it is the details that are now being entered than a further journal entry may be necessary to eliminate the figure in the Stock Value Adjustment Account to those existing stock accounts. Or may be it is a full opening balance sheet being entered; in which case, eliminate the figure in the Stock Value Adjustment Account to suspense to match with other opening balances.

Subsequent amendments to the BOM will not change the standard cost when SUBMIT is clicked unless the Update Standard Cost box is ticked or a general update of standard BOM's is initiated; under Stock Management. It is the user's responsibility to manage when standard costs are updated. If a BOM is amended but the standard cost is not recalculated, then when a works order is made (see below) the component stock movements will reflect the new amended physical consumptions and be evaluated at their current standard cost. For the stock made however the physical stock amount is evaluated at the existing standard cost (i.e. not updated) and any value discrepancy is posted to a rounding account in P&L.

When a standard is updated the accounting transaction is as follows:

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Setting up and making a Works Order

Once a BOM for a stock item is available a works order can be set to make a quantity of the item.

Stock - Add Works Order or
Stock - Works Order - ADD WO

A Works Order Maintenance dialogue screen is presented. Select the relevant BOM from the BOM Name dropdown. Enter the quantity to be made in the Quantity box.

Enter a Make Date, the date on which the user wishes to record the making. A Memo can be entered if desired. Click SUBMIT to store the order.

At this point the Works Order is stored ready to be launched. Navigate to the Works Order Listing screen.

Stock - Works Orders

A list of open works orders is presented, if desired, closed status WO's can also be listed.

Launch the Works Order by clicking on the MAKE button. If it is necessary to reverse the making simply click on the REVERSE button; all stock item movements made by the making are reversed.

Note that the Make Date is the date given to the stock movement transactions; the making does NOT automatically run on that date, the user is still responsible for launching the making.

The Print button provides a hardcopy works order summary report. This could be used to provide instructions both for internal and external purposes.

Physical quantities of the component stocks are reduced by the consumption specified by the BOM multiplied by the WO quantity; and the made stock item is increased by the quantity of the Works Order. The accounting impact of a Works Order making is as follows:

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