Creating a Bill of Material in ERPNext

A Bill of Materials is a list of items and sub-assemblies with quantities required to manufacture an Item.

A Bill of Materials (BOM) is at the heart of the Manufacturing system and the most important document that will help to create other document types like Work Orders and Job Cards.

Before using the Bill of Materials, the following masters need to be set up:

• Item - Item is a product or service offered by a company. These are raw materials or components of products yet to be produced.
• Workstations: These are the production lines you use were you assign each production run, e.g. “plastic assembly station 1”. This is used to calculate the cost of manpower, electricity and other consumables during a manufacturing run depending on how long the work happens and how much quantity was outputted. Data regarding the operation cost, rent, electricity will be configured in the workstation.

Operations: These are the steps taken in the manufacturing process (for example: "Mixing", "Melting"). An Operation refers to any manufacturing operation performed on the raw materials to process it further in the manufacturing path. Operations need to be defined and included in the BOM in order to calculate the costs incurred at the workstation during manufacturing.

Setup the Item

1. Log into your ERPNext account.
2. Click on Manufacturing>Item.

3. To create a new Item, click on New.

4. Enter an Item Code. Item Name will be the same as Item Code unless you update it. Item Name is helpful as it serves as a description as well.

5. Select an Item Group. Item Group helps classify what the item is.

6. Enter an opening stock and standard selling rate. Opening Stock is the amount of items that a company has available for sale or use at the beginning of an accounting period. Selling rate is the price of an item available for sale.

7. Click Save.

Setup the Workstations

1. Log into your ERPNext account
2. Click on Manufacturing.

3. Under the Bill of Materials Heading, click on Workstation

4. To create a new Workstation, click on New.

5. Enter a name for the Workstation. Optionally, you can expand the Description section and provide a short description about the Workstation. This is useful if you have many Workstations to track.

6. Under Operating Costs, enter the following cost items as applicable:

• Electricity Cost
• Rent Cost
• Consumable Cost
• Wages

Setup the Operations

1. Log into your ERPNext account

2. Click on Manufacturing.

3. Under the Bill of Materials Heading, click on Operation.

4. Enter a name for the Operation (example: “melting”) under Operation Name.

5. Select the Default Workstation where the Operation will be performed. This Workstation will be fetched in new BOMs and Work Orders.

6. Add a Description to describe what the Operation involves. This is particularly helpful if you have a lot of operations to define.

7. If everything is in order, click on Submit or press CTRL+S to save.

Creating the Bill of Materials

1. Log into your ERPNext account

2. Click on Manufacturing>Bill of Materials

3, Under the Bill of Materials Heading, click on Bill of Materials

4. Click on New to create a new Bill of Material.

5. Find and select the item being manufactured under Item

6. Enter the quantity that will be outputted based on this BOM (default is 1) under Quantity

7. Tick the "With Operations" as we will need to include Operations applied to the item being manufactured in order to calculate the manufacturing cost

8. Under the Materials table, select the raw materials (Items) required to manufacture the Item. Then proceed to:

• Select the quantity of Raw Material used in order to produce the Quantity of the output item defined earlier
• Enter the valuation rate of the raw material being used
• Set an Item Operation here to be fetched in Work Orders later.
• Select the Source Warehouse where the item is typically issued from. Don’t worry, this can be changed later in case it will be coming from a different warehouse location.

9. Under the Operations table, select the operations used to manufacture this item

• For each row, add the operations that need to be performed to manufacture this particular Item.
• For each operation, you will be asked to enter a Workstation where the Operation will be performed. A default Workstation will be loaded if already defined
• Enter the Operating Hourly Rate (defined in the default Workstation), Operation Time in minutes. The Operating Cost will be calculated based on these values

10. Under Transfer Material Against, choose either Work Order or Job Card

• If you choose Work Order, you will be able to create an STE (Stock Transfer) from the Work Order immediately
• If you choose Job Card, you will be able to create the STE from the Job Card

11. Click Save or press CTRL+S to save the document. Note that this does not finalize the document yet. Instead, it saves the BOM form in draft status.