Bill of Material in SAP S/4HANA – A Brief Overview

What is the Bill of Material in SAP?

A Bill Of Material in SAP is a detailed list of components with their quantities that you require in SAP Controlling. You need these components to manufacture X units of a Product.

Header & Components

The products that are manufactured are called the SAP Bill Of Material Headers. Likewise, the input materials are called the SAP Bill Of Material Components.

Component Scrap

You can also specify a “Component Scrap” in the BOM, differently for each component. Scrap% has the impact of increasing the input quantity required. For example, Component quantity is 100 KG in BOM and scrap is 2%. The net quantity you require will be 102.

Costing related Important aspects in BOM

There are some key aspects that you should look into BOM from a costing perspective. These are:

1. Based on Quantity (Lot Size): This is the lot size for which you need to mention the BOM components.
2. Component scrap %: As I already explained above, it has an impact on increasing input quantity.
3. Costing relevancy: Whether the component is relevant to costing or not
4. Surely, you can have a separate BOM for production and costing.

Routing

In the SAP Controlling Cost of Production area, there is one more important concept is Routing. Though it is a separate concept but still it has a relation with BOM. This is, these both are integrated with controlling for the cost of production calculation.

On the one hand, the BOM defines a list of materials included in the cost of production. Whereas Routing defines a list of activities involved in the cost of production calculation.

Related: Changes in SAP Controlling in S/4HANA

Functions of Routing

1. A Routing contains a list of operations that we perform in order to convert the raw/input materials into an SFG or FG.
2. You assign each operation to a work center and also lays down the resources consumed during the operation i.e Labor, machine electricity, etc. The system represents the resources with category 1 activity types.
3. Further, each work center is turn assigned to a cost center.

Related: Detailed Guide to SAP Material Ledger

Who should learn the Bill of Material in SAP?

The Bill of Material in SAP is an important part of the cost of production.

Hence, getting knowledge of this subject is important for SAP HANA Consultants.

Though it is mainly important for S/4HANA logistics consultants. But it is good to have a fair knowledge for SAP controlling consultants or SAP S/4HANA Finance consultants too. So it is good to learn and understand this topic in depth.

Also Read: Cost Elements in SAP ERP – Types & Steps

Watch Video: SAP Product Costing | Standard Costing | COGS