Chapter 1: Bill of Materials Overview

CHAPTER 1: BILL OF MATERIALS OVERVIEW

Objectives
The objectives are:

• Define a Bill of Material in Microsoft Dynamics AX 2009

• Explain the main BOM features and its structural elements
• Describe the different BOM forms
• Describe the standard BOM creation process

Introduction
This course introduces some of the main elements and concepts that pertain to
the Bill of material (BOM) functionality in Microsoft Dynamics® AX 2009.

BOM is one of the most important documents in a manufacturing company. Like

the recipe for a cake, it is a comprehensive list of all the ingredients required to
make or assemble a finished item. These ingredients are the components, parts,
and raw materials that are used.

In addition to a review of key features and concepts, this course presents a brief
description of levels and lines in the BOM tree structure. It also describes the
forms that are used to work with BOMs and presents an overview of the common
steps to perform when users create them.

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Scenario
A new product designer at the Contoso Entertainment USA Company has
requested an overview of BOM functionality in Microsoft Dynamics AX 2009.
The product designer does not want an in-depth training at this point, only an
introduction.

General Concepts
BOMs define the relationship between the components and the finished product
or sub-assembly. A clear definition of this relationship is important for:

• Scheduling
• Defining production runs
• Creating work orders
• Costing

Every item that has to be financially accounted for in inventory or in the costing
phase must be included in the BOM. The level of detail for this is determined by
the company's production and accounting needs. For example, items such as nuts,
bolts, screws, and nails are frequently not included in BOMs because the cost of
tracking these items is higher than their actual value.

Although BOMs define the components and their relationships, they do not
define the sequence of steps to take to produce or assemble the finished item.
These steps are defined on the Route. Routes are discussed in the Production
course.

Types of Items Used in BOMs

BOMs can contain three different types of items in Microsoft Dynamics AX
2009, depending on whether the item is purchased, produced in-house, or defined
as a service.

The BOM item types are as follows: Item, BOM, and Service.

• Item: An item in a BOM defined as type Item is purchased from an

outside source and used frequently in the manufacturing of the final
product.
• BOM: An item in a BOM defined as type BOM is produced in-
house. It contains the components that are required to manufacture
the finished product and is used in the Production module.
• Service: An item in a BOM defined as type Service represents and
quantifies a service that is a part of the manufacturing process. It can,
for example, be an hourly rate for services performed during the
manufacturing process.

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Lines, Configurations, and Versions

A BOM can have a BOM version which is a specific configuration of a bill of
material to include an item. BOM items can be allocated an unlimited number of
versions. Versions allow items to be associated with many different BOMs. At
least one BOM version must be created when working with BOMs. Zero or more
BOM versions can be valid or active for any item at any given point in time.
However only one version can be applied, the applied version is selected based
on time, site or quantity.

Users can also attach component items to a BOM as lines and specify
configurations for the item on the line. BOM items usually consist of several
BOM lines, each with its own dedicated BOM number.

FIGURE 1.1 BOM STRUCTURE

For planning, calculation, and consumption purposes, each BOM line must
specify whether the item has any configurations. A configuration is a standard
component combination, such as a satellite speaker and a subwoofer, that can be
specified for a BOM item during the ordering process.

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Using BOMs/Routes in Multisite Production Environments

A site is a grouping of business resources, such as warehouses and production
facilities, which share interrelated transactions and are located at a particular
geographical location. The site entity, which is implemented in Microsoft
Dynamics AX 2009 as an inventory storage dimension, plus the enhancements to
the existing dimension framework provide the structural foundation for the
multisite functionality.

When multisite is activated in Microsoft Dynamics AX 2009, users can create

and configure a general BOM for all sites and site specific BOM/routes, that is, a
different BOM /route for each site. In multisite production environment this
feature ensures that an appropriate BOM is created, produced and stored at the
same site.

Production at multiple sites may involve a BOM whose component items can be
produced at and moved between different sites, and the sites share common item
numbers. BOM versions for the component items must be structured to support
the mandatory site dimension. Warehouse operations that support material
consumption and item storage must also be aligned by site.

When planning materials and resources in an environment with multiple

production sites, the system selects the BOM version and the route version to use
based on the site of the requirement, a valid date interval, and the quantity.

BOM Features and Elements

The main conceptual features and structural elements of BOMs in Microsoft
Dynamics AX 2009 include:

• Overview of BOM Features

• BOM levels
• BOM lines
• BOM line types

Overview of BOM Features

Microsoft Dynamics AX 2009 supports the BOM features, shown in the
following table.

Feature Description
Version control Version control enables ongoing changes to be made to
the item and different configurations to be employed
depending on the manufacturing circumstance. Version
control also supports phasing out of old components so
that new components can start to be produced or bought.
Graphical BOM The BOM designer lets the user choose to work with the
BOM structure in a graphical format.

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Feature Description
Sub-BOM Sub-BOMs can be independently sold, revised, or planned
control in alignment with the parent production.
Subcontracting If a BOM component is supplied by a subcontractor, a
support purchase order BOM list is shipped to the supplier. If
necessary, a list of all components bought from the
contractor can also be created.
Quantity Quantities on BOMs can be used to control which version
dependent BOMs of the BOM is used in production. For example, if less
than 500 pieces of a BOM item is ordered, version 1 is
used; when more than 500 pieces are ordered, version 2 is
used.
Multisite A finished product can be set up so that part of it can be
BOM/routes made at a different production site. This is done by using
the different levels in the BOM structure to assign where
the components are to be produced. When multiple sites
share inventory that have the same item number, the BOM
and the route can be set up so that the components of these
items can be produced at a different site. When this
feature is used, the corresponding routes must also be
defined based on site.
Phantom BOMs Phantom BOMs can be used to construct the BOM
without requiring that the product be manufactured to
inventory or scheduled. This feature is used when users
are calculating material requirements

BOM Levels
BOMs can consist of as many levels as necessary, depending on the type of
product being produced. That is, any given component in a BOM can also
contain a BOM of its own.

For example, adult bicycles consist of two wheels, a seat, handlebars, and a
frame. All these components are reflected in the bicycle BOM. However, the
frame also consists of several discrete items (three or four tubes welded
together). Therefore, the frame has a BOM of its own, which is known as a sub-
BOM.

Complex BOM items frequently have several sub-BOMs. The number of levels,
or sub-BOMs, a BOM has depends on how the item is managed. Generally, an
item needs its own level in the BOM if, at a particular stage, the item must be:

• Tracked
• Stored
• Sold

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The more levels a BOM has, the better the control and the more accurate the
costing and forecasting can be.

Example of BOM with Multiple Levels

To use the previous example of the bicycle, assume that a BOM is created to
assemble bicycles. The following items are set up as the item type Item. These
item types are used in the BOM and do not require assembly:

• Wheels
• Seat
• Handlebars

However, the bicycle frame is assembled in production. This part of the process
is set up as the item type BOM. It is a sub-BOM that includes the following
items:

• Tubes
• Welding wire
• Brackets/brace

FIGURE 1.2 A BOM WITH MULTIPLE LEVELS

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Example of BOM at Multiple Sites

Company A is a midsize manufacturer of bikes with five production sites located
throughout the United States. Four of the sites are general-purpose production
sites producing bikes for several (non-overlapping) states in their vicinity. The
fifth site manufactures highly specialized sports bikes with carbon frames that are
sold nation-wide. The sales force is associated with the production site in their
area, and is not allowed to place orders with other sites. Orders for the carbon-
framed sports bikes are placed with the local production sites which act as a
distribution center for the fifth plant.

FIGURE 1.3 A BOM AT MULTIPLE PRODUCTION SITES

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BOM Lines
The lines in the BOM are the individual items (or components) that make up the
BOM. Each item has its own BOM line. There can be an unlimited number of
lines (or items) that make up the BOM.

FIGURE 1.4 BOM LINES

There can be four types of BOM lines in Microsoft Dynamics AX 2009:

• Item
• Phantom
• Production
• Vendor

BOM Line Types

The line type determines how the line is managed when the BOM is produced, or
when the item is planned in production.

Line Type Use when

Item The item is a raw material or semi-finished item that has to be
picked from inventory. It is also used when the item is of type
Service.
Phantom An item is a transient (non-stocked) BOM item. A phantom
BOM represents an item that is assembled, but frequently not
stocked in inventory until it is actually needed in the
manufacturing process. Phantom BOMs enable the Material
Requirement Planning (MRP) logic to calculate requirements
for the needed components, even though the item is only
occasionally used in the manufacturing process. The Phantom
line type can only be specified for items of type BOM.

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Line Type Use when

Production Select Production when you want to create a sub production for
any BOM items that are contained in the BOM line.
Vendor The production is conducted using a subcontractor.

The choice of a line type in the BOM calculation influences both the cost
calculation and the Material Requirement Planning (MRP).

The calculations assume the use of the standard order quantity for manufactured
items, which provides the basis for calculating component quantities, for
determining the relevant BOM versions and route versions when users apply
quantity-sensitive BOMs and routes, and for amortizing constant costs. The
assumption does not apply when a manufactured component has a BOM line type
of production or vendor, or when users apply a make-to-order explosion mode
for BOM calculations, because quantities will reflect the specified calculation
quantity.

Production/vendor versus item line type imply that MRP triggers a specific sub
production or order to supply the needed quantity to the parent order, regardless
of the inventory level.

Costing on the BOM

Bills of material (BOM) calculations use data from several sources to calculate
the standard costs of a manufactured item. The sources include information about
items, routings of bills, indirect cost calculation formulas, and the costing
version.

The purchased item information that is used in a standard cost BOM calculation
includes cost, cost group, and warning conditions.

The manufactured item information that is used in a standard cost BOM

calculation includes standard order quantity for inventory and warning conditions
that are embedded in the item's BOM calculation group.

The bill of material information that is used in a standard cost BOM calculation
includes the BOM version, BOM line item quantity, BOM line item scrap, BOM
line item valid dates, BOM line item type of production, sub-BOM for a
manufactured component, sub-route for a manufactured component, operation
number, the impact of operation scrap percentages, and ignore BOM line item in
cost calculations, if required.

The costing version information that is used in a standard cost BOM calculation
includes costing type, mandated fallback principle, blocking flag for pending
costs, specified site, and the start date. For more information about Costing on
the BOM, refer to Microsoft Dynamics AX 2009 online Help and BOM
Calculation material.

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BOM Form Overview

The forms described in this section are the base forms that are used when
working with BOMs in Microsoft Dynamics AX. Other forms that might be
needed are described in the content that is specific to its functionality.

BOMs can be created from two locations in the Inventory management module.

• Items, the Item form

• Bills of Materials, the BOM form

Typically users can create BOMs from the Item form and view them in the BOM
form. Frequently users apply the BOM form to work with BOMs that are not yet
assigned to any items.

Create BOM lines in the BOM designer or the BOM line form.

Item Form
When users apply the Item form to create a BOM, they can also set up or change
the associated item(s) at the same time. After users create a BOM item in the
Item form, they can attach versions and component items in the BOM line form
which they access by clicking BOM > Lines.

FIGURE 1.5 ITEM FORM, BOM ITEM SELECTED

There is no limit to the number of BOM versions that can be created and attached
to an item. An item can have several active BOM versions attached to it, as long
as different dates, sites or quantity intervals are defined for each version.

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BOM Form
The user can create a BOM that is not associated with an item in the BOM form.
Here, the user can also modify existing BOMs regardless of whether they are
attached to any items.

FIGURE 1.6 BOM FORM

The Overview tab contains two sections:

• The upper section lists BOMs, with the name, site, item group, and
identification of an employee who approved the BOM.
• If one or more items are linked with the BOM, the lower section lists
the items, stating the item number and version start and end dates.
The user can also verify here if the version is active and approved.

Individual items link to the BOM as versions. The Overview tab is where the
information is managed, pertaining to the date of validity, whether it is active,
and who approved the BOM. Here the user can create multiple BOMs with
different versions based on the same item for different sites.

On the Overview tab, users can manage the active version of the BOM and, at
the same time, work on a new version that can be activated later.

As soon as the user creates a BOM in the BOM form, component items are
attached in the BOM line form, accessed by clicking Lines.

BOM Line Form

Users apply The BOM line form to create and edit BOM versions and their
related BOM lines. They can access the form from either the Item form or the
BOM form; the form looks and functions differently depending on where users
open it from.

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In the BOM line form, it is possible to assign material consumption for the BOM
line to the work center. The work center refers to a production unit that defines a
picking warehouse. Assigning material consumption to the work center is useful
when the BOM version does not refer to a particular site but is valid for all sites.

BOM Lines from the Item Form

The BOM line form contains two sections, when the user accesses it from the
Item form:

• The upper section shows BOM versions associated with the BOM
item in the Item form. In this section, the user can link new BOM
versions and edit existing ones. At least one BOM version must be
associated with a BOM item.
• The lower section displays the BOM lines that make up the BOM. In
this section, the user can create and edit BOM lines.

FIGURE 1.7 BOM LINE FORM, FROM THE ITEM FORM

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BOM Lines from the BOM Form

When it is accessed from the BOM form, the BOM line form displays the
component lines for the BOM selected on the Overview tab.

FIGURE 1.8 BOM LINE FORM, FROM THE BOM FORM

If a version is attached to the BOM, click Lines to open the version related BOM
line form.

BOM Designer Form

The BOM designer lets users graphically create new BOM versions, change
existing versions, organize routes, and assign items and sub-BOMs to operations.

FIGURE 1.9 BOM DESIGNER FORM, FROM THE ITEM FORM

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The BOM designer can be accessed from either the Item form or the BOM form.

The BOM designer enables users to do the following:

• Drag items to add them to BOMs, edit items, or delete them from
BOMs.
• View a list of items from the Item form so that you can filter or sort
to find BOM components.
• Link items or sub-BOMs to specific operations on the route.
• Use the button panel to complete principle tasks, such as print,
delete, and calculate.
• Set up selection criteria for BOM lines and Route display to
customize the view.

BOM Designer Accessed from the BOM Form

When the BOM designer is accessed from the Item form-as shown previously-all
features of the BOM designer are available.

However, when the BOM designer is accessed from the BOM form, not all
functionality is available. BOM versions can be created and edited, but route or
operations information is unavailable. This is because BOMs created in the BOM
form are not linked to any items.

FIGURE 1.10 BOM DESIGNER FORM, FROM THE BOM FORM

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Bill of Material Creation Process Overview

The following table provides an overview of the typical steps of creating BOMs.

Bill of Material Creation Process

Step Procedure
Create all Create all items included in all BOM versions that include the
items BOM item itself in the Item form.
Create BOM Create a new BOM through the Item form or in the BOM
form.
Create BOM Create BOM version(s) in the BOM line form, approve, and
version(s) activate the BOM version. This is performed either before or
after the component items are added. However, because
versions are required when the BOM is created from the Item
form, if a version has not been created, it must be added from
the BOM form.
Add items Specify which items to include in the BOM. This is
performed in the BOM designer or in the BOM line form:
• BOM designer: Drag the items to be included in the
BOM from the Item form which is also displayed in the
BOM designer.
• BOM line: Add a new line for each item by pressing
CRTL+N and selecting an item.
Create If it is necessary, set up any configurations and associated
configurations rules for the BOM.
Create Site- Create site-specific BOMs and routes to allow for the
specific automatic selection of the correct BOM and route version, as
BOM/routes well as the item dimensions, when working with multiple
sites. The site for a new BOM version is set up in the BOM
form and in the BOM line form accessed from the Item
form. All BOM lines must be associated with the same site
that is defined on the corresponding BOM version.

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Summary
Some of the essential elements in the Bill of Materials (BOM) functionality
include:

• BOM versions, levels, configurations

• BOMs at multiple sites
• BOM designer
• Typical steps of creating BOMs

This overview gives users the necessary tools to gain some of the basic
knowledge necessary to understand how to work with BOMs. Subsequent
courses will provide more detail in this regard.

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Test Your Knowledge

Test your knowledge with the following questions:

1. What does a BOM define?

2. How many levels can BOMs consist of?

3. Which form provides a graphical overview of a BOM?

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4. What are BOM lines?

5. Which of the following is not the item type used in BOMs?

( ) Item
( ) Phantom
( ) BOM
( ) Service

6. What are the two forms in Inventory management from where BOMs can be
created? (Select all that apply.)
( ) Item
( ) Designer
( ) BOM line
( ) BOM

7. What are the purposes of having version control with BOMs? (Select all that
apply.)
( ) It allows users to independently sell, revise, or plan sub-BOMs in
alignment with the parent production
( ) It allows users to make ongoing changes to the item and to use different
configurations depending on the manufacturing circumstance
( ) It keeps history of all BOM versions created
( ) It supports phasing out of old components so that new components can
start to be produced or bought

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Quick Interaction: Lessons Learned

Take a moment and write down three key points you have learned from this
chapter:

1.

2.

3.

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Solutions
Test Your Knowledge
1. What does a BOM define?

MODEL ANSWER - A BOM defines the relationship between the

components and the finished product or sub-assembly.

2. How many levels can BOMs consist of?

MODEL ANSWER - BOMs can consist of as many levels as is necessary,

depending on the type of product being produced.

3. Which form provides a graphical overview of a BOM?

MODEL ANSWER - The BOM designer lets users graphically create new

BOM versions and change existing versions.

4. What are BOM lines?

MODEL ANSWER - The lines in the BOM are the individual items (or

components) that make up the BOM.

5. Which of the following is not the item type used in BOMs?

( ) Item
(•) Phantom
( ) BOM
( ) Service

6. What are the two forms in Inventory management from where BOMs can be
created? (Select all that apply.)
(√) Item
( ) Designer
( ) BOM line
(√) BOM

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7. What are the purposes of having version control with BOMs? (Select all that
apply.)
( ) It allows users to independently sell, revise, or plan sub-BOMs in
alignment with the parent production
(√) It allows users to make ongoing changes to the item and to use different
configurations depending on the manufacturing circumstance
( ) It keeps history of all BOM versions created
(√) It supports phasing out of old components so that new components can
start to be produced or bought

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