Enterprise Resource Planning (ERP) software is a the business management tool that integrates various functions such as finance, sales, manufacturing, and supply chain management. One of the critical functions of ERP software is the Where Used function for buyers, which helps in managing product data and inventory. Bill of Material (BOM) is a crucial document in procurement that lists all the materials, parts, and components required to manufacture or assemble a product. It is a detailed list that specifies the quantity, description, and unit of measure of each item.

The “Where Used” function is a feature of ERP software that allows users to track the use of a particular component or material across different products, assemblies, and sub-assemblies. It provides a complete view of where a particular component or material is used and how it is related to other parts and products. The Where Used function enables users to answer questions such as:

• Which products use a particular component or material?
• How many times has a particular component or material been used?
• Which assemblies or sub-assemblies use a particular component or material?
• What is the impact of changing a particular component or material on other products or assemblies?

Here are some of the benefits of the Where Used function for buyers in ERP software:

Improved Inventory Management: The Where Used function helps in managing inventory by providing a clear understanding of the components and materials required for production. It enables buyers to track the use of materials and components across different products, assemblies, and sub-assemblies. This helps in managing inventory levels and avoiding stock-outs or overstocking.

Better Product Data Management: The Where Used function helps in managing product data by providing a complete view of the relationship between components, materials, products, assemblies, and sub-assemblies. It enables buyers to track the use of components and materials across different products and assemblies, ensuring that product data is accurate and up-to-date.

Faster and More Accurate Change Management: The Where Used function helps in managing changes to products and assemblies by providing a clear understanding of the impact of a particular change on other products and assemblies. It enables buyers to identify the products and assemblies that are affected by a change, ensuring that the change is made quickly and accurately.

Improved Cost Management: The Where Used function helps in managing costs by providing a clear understanding of the components and materials required for production. It enables users to track the use of materials and components across different products, assemblies, and sub-assemblies, identifying cost-saving opportunities by finding alternative components or materials that can reduce the cost of production.

Bill of material (BOM)

BOM plays an essential role in procurement as it provides a foundation for purchasing and inventory management. The Bill of Material (BOM) is an integral and comprehensive document in the procurement and manufacturing process. It serves as a complete list of all materials, parts, components, and assemblies required to create a product. Essentially, it acts as a recipe or blueprint for production.

Key Elements of a Bill of Material

• Detailed Item Description: Each item in a BOM is precisely described, including its specifications and technical details, to avoid any ambiguity during procurement.
• Quantity and Unit of Measure: The BOM indicates the exact quantity needed for each item, along with the unit of measure (e.g., kilograms, meters, pieces), ensuring accurate ordering and inventory management.
• Part Numbering: Each component listed in the BOM usually has a unique part number, which helps in tracking and referencing throughout the procurement and manufacturing process.
• Hierarchy: A BOM typically has a hierarchical structure, with the finished product at the top, followed by assembled or sub-assembled components, and then individual materials or parts at the lowest level.
• Source Information: It often includes information on where each component can be sourced, whether internally or from external suppliers, aiding in strategic sourcing decisions.

Importance of BOM in Procurement

• Cost Estimation and Budgeting: The BOM allows procurement professionals to accurately estimate the costs involved in acquiring the necessary materials, aiding in budget planning and cost control.
• Inventory Management: With a detailed BOM, procurement teams can efficiently manage inventory levels, ensuring that the right materials are available at the right time without overstocking.
• Supplier Management: A BOM helps in identifying critical components and their suppliers, enabling procurement teams to focus on supplier relationship management, especially for crucial parts.
• Quality Control: By specifying detailed item requirements, the BOM ensures that the procurement team sources materials that meet the desired quality standards, which is crucial for the final product’s quality.
• Production Planning: The BOM is essential for production planning and scheduling. It ensures that all necessary components are available when needed, preventing production delays.
• Change Management: In cases of product modifications, the BOM is updated to reflect changes in materials or components, which helps in managing the change effectively across the supply chain.

An ERP (Enterprise Resource Planning) system uses the Bill of Material (BOM) to calculate future demand of products included in the BOM through several key steps:

1. Demand Forecasting: The ERP system forecasts (with the help of a planner) future product demand based on historical sales data, market trends, and customer orders.
2. BOM Analysis: It then breaks down each product into its individual components as specified in the BOM, identifying all the parts and materials required.
3. Material Requirements Planning (MRP): The ERP system performs MRP calculations to determine the quantities of each component needed to meet the forecasted product demand. This involves considering lead times, current inventory levels, and any scheduled receipts.
4. Procurement Planning: Finally, the ERP system generates procurement plans and production schedules to ensure that all necessary components are available when needed, optimizing inventory levels and reducing shortages or excess.

By integrating BOM data with demand forecasting and MRP, the ERP system efficiently plans for future product requirements, streamlining procurement and production processes.

Summary

In essence, the Bill of Material is more than just a list; it’s a critical tool for effective procurement and manufacturing management. It bridges the gap between the design of a product and its actual production, ensuring efficiency, cost-effectiveness, and quality control. Understanding and effectively managing the BOM is vital for procurement professionals to ensure smooth production processes and successful product outcomes.

In conclusion, the WWhere used function for buyers is a critical feature of ERP software that enables users to track the use of components and materials across different products, assemblies, and sub-assemblies. It helps in managing inventory, improving product data management, facilitating faster and more accurate change management, and managing costs. Therefore, it is essential to use the Where used function for buyers in ERP software to ensure smooth and efficient business operations.

Learn more about the operative buyer’s responsibilities in the bundle Basics for an Operative Buyer.

Note: Illustration to the blogpost “Where used function for buyers and Bill of Material (BOM)” was created by Chat-GPT on June 14, 2024.

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