Bill of Materials Types 
Production
The Production Bill of Materials (BOM) represents a finished product (parent) comprising different inventory components (child components). During the production process, you turn the components into the finished product. Select the Production BOM to include the product in the MRP run and to process standard production orders.
Components in the Production BOM are physical items, for example, a screw, a wooden board, a measured quantity of lubricant or paint, or virtual entities, such as one work hour.
Sales and Assembly
The Sales BOM and the Assembly BOM represent a finished product assembled at the sales stage, that is, the finished product is composed of its component items only when the parent product is actually sold. The component items are stored and tracked individually in the warehouse.
For both the Sales BOM and the Assembly BOM, you do not manage the parent product as an inventory item, but rather as a sales item. The components can also be sales and inventory items in their own right. When you create the delivery to dispatch the customer order, the components are backflush issued from inventory.
Note
The components for Sales BOMs and Assembly BOMs must be sales items.
Use a Sales BOM where there is a fixed combination of components and the customer needs confirmation of each item. The component items cannot be altered or removed from a sales order. Other items cannot be inserted between the parent and component items in the sales order. However, the quantities of the component items can be modified.
Use the Assembly BOM when you would not expect the customer to check each component in the order, such as a gasket set.
ExampleSharon's Garden Ltd. sells garden tools and outdoor furniture. One of her best sellers is the Metal Table set. This set is composed of one metal and glass table, six metal chairs, and one umbrella.
If she chooses the Sales BOM, the table, six chairs and one umbrella, and the Metal Table set all appear in the sales order. She can sell this set with only four chairs, but she cannot introduce a footstool as part of this set in the sales order.
If she chooses the Assembly BOM, then only the Metal Table set (the parent product) is listed in the sales order.
In both cases, each of the component items is tracked individually in the inventory. When you create the delivery to dispatch the customer order, the components are automatically issued from the warehouse.
End of the example.
Template
The Template BOM is a bundle of items, where the parent product is the first item on the list. It does not act as a BOM once it is added to the sales document, but rather as a list of items brought together at the same time. You can update the quantity of those items, swap items, or delete them in the BOM or the sales order. The components appear below the parent as a list of items in a sales document. Use the Template BOM when you require flexibility in selecting components for a product.
Example
Computers can be sold as a standard unit, in which case the Production or Sales BOM is appropriate. However, to customize a sales order, use the Template BOM to allow for DVD burners, speakers, ergonomic keyboards, and so on.