A Bill of Materials or BOM is a list that contains all the components that make up a finished product or assembly as well as the quantity or volume of the components required to make the assembly. A BOM can be a hierarchy with a number of levels. The topmost level usually contains assemblies known as Stock Keeping Units (SKUs). SKUs are the items (finished goods) that are sold. Assemblies or SKUs are made up of subassemblies, which comprise the intermediate levels of the BOM. The lowest level consists of the materials that make up the next lowest level of subassemblies.
A bicycle is an assembly that is made up of materials and subassemblies such as the frame, handlebars, saddle, pedals, and wheels. A wheel is a subassembly made up of spokes, a rim, a hub, and a tire. A tire is a subassembly of materials such as rubber polymers and fabric. A BOM for a bicycle includes all these components.
SAP BusinessObjects Profitability and Cost Management allows you to create a Bill of Materials model, which is an extension of a Profitability and Costing model. A BOM model performs activity-based costing to determine cost object costs, but also calculates costs at a lower lever than that of the finished product. For example, you can cost the processes of manufacturing the components that make up the finished product. In a BOM model, the cost of assemblies and subassemblies can be scaled, so that the overall costs of finished goods reflect the consumption of assemblies. This enables businesses to accurately assign overheads to finished goods based on consumption. Other business uses of this model type can include target costing and measuring the environmental impact of production, for example, determining the carbon footprint of products.
Because a BOM model is based on a Profitability and Costing model, the two model types share the same dimensions, screens, grid values, and features in the Model Builder application. However, the BOM model has a number of unique features that affect the following: