Concept of using 3 Types of Bill of material (SAP PEO)

The propose of the Blog is to explain in detail about the concept behind the using of 3 types of Bill of Materials for the same product in SAP.

It’s always the question that why 3 types of Bill of Materials are required and why not one. The simple and complete answer to this question lies behind the engineering and production execution process in the company. It completely depends open the process followed when new design or a product is introduced.

Let’s proceed further with a simple example so that it will be easy for me to explain and for you to understand every type of Process which can be used in an industry. I will try to explain it as elementary as possible.

We have two types of Combination which can be used i.e two different types of scenarios.

1. Working with all BOMs (Engineering BOM + Planning BOM + Manufacturing BOM)
2. Working with 2 BOMs (Engineering BOM + Manufacturing BOM)

Let me explain the Engineering to Design Process in more detail and how it is worked open in an industry.

• The requirement for a new product is given to the Engineering Department via a sales order.

• The engineering Department works on the new design builds it and sends to SAP

• At this point in SAP the planner starts working on the Procedure or Routing on how to assemble each and every component.

• Once the Routing information is provided by the planner, MRP is executed and subsequently Purchase and Production proposals are generated.

• The Purchase proposals will have high lead time as it is a new product so some components will be new in the product.

• Once the product are there then the manufacturing of the Product will continue and rest are the same as in SAP PP cycle.

Working with 2 BOMs

• Here as stated and explained earlier, the BOM which is built in the system based on the Engineering Data Provided by the engineering department is stated as Engineering BOM (EBOM). This has the same fields and structure as a normal BOM.
• Now when it comes to Planning Department the Planner coverts it into and Manufacturing BOM (MBOM).
• After converting the planner works on the shop floor routing details. As mentioned in my earlier Blogs. Shop floor routing is more in detail and more operator specific, so the planner has to plan the components in more detailed form.
• Once the Shop Floor routing is completed a production version is created for the MBOM and SF Routing combination and MRP is carried out.
• MRP leads to generation of Purchase orders with long lead times.
• Once the Purchased components have been procured then the Manufacturing Execution can be started.
• So the Activities mentioned in the Shop Floor Routing is performed and the Product is built.

So the question arises what’s the problem here in this Process that we use 3 BOMs. The answer to that is there are two Bottle Necks in this process with long lead time.

1. Planning by the planner (Creation of Shop Floor Routing). Since it is a new product so subsequently new routing has to be created due to the new design of the Product. And as Shop Floor Routing is in more detail so a detailed routing has to be maintained which is time consuming activity.
2. Long lead time of Purchase Order : As it is new design so in some situations we would be having some new parts or assemblies being used in the product. To Procure these parts will consume a lot of time as the planner has to search for the vender and evaluate and then the Order is processed.

The only disadvantage of this Process, of using 2 BOMS is that both the Bottlenecks are being performed in series, i.e There is a huge time gap between Design and Production of the components.

So now comes the second solution

Using all the 3 BOMs

• An EBOM is created in SAP System.
• Now when it comes to Planning Department the Planner coverts it into Planning BOM and Manufacturing BOM (MBOM).
• The planning BOM is used for performing MRP only. We can maintain minimum routing and run MRP for the planning BOM.
• Once MRP is done the purchase orders and production orders are created which will trigger the procurement cycle for the new components.
• Meanwhile the components are being procured the planner works on the shop floor routing details with the reference of Manufacturing BOM.
• Once the Purchased components have been procured then the Manufacturing Execution can be started.
• So the Activities mentioned in the Shop Floor Routing is performed and the Product is built.

So here in this scenario as it is visible the two Bottlenecks are being performed in parallel, so the time taken is reduced with by a great amount.

When to use 2 BOM structure and when to use 3 BOM Structure.

This completely depends upon the complexity of the component.

If the complexity of the component is not much I.e there are not much deviations from the normal standard product, at this point of time we can use 2 BOMs

If the vendor from which the new material or assembly to be procured is known, we can use 2 BOMs structure as well.

But when the new product is complex and with many new components then as the time for procurement is long, it is advisable to use 3 BOMs structure.

This was a brief description of the BOM structure which is used in SAP PEO and th reason behind it. Please let me know if I was unclear at any point.

Source: https://blogs.sap.com/2020/02/21/concept-of-using-3-types-of-bill-of-material-sap-peo/