In this article
Calculation Process for Component
A bill of materials (BOM) is a product that consists of multiple items, and these items which are needed to create the BOM are known as components. In the food and beverage sector within the hospitality industry, a BOM is more commonly known as a recipe and the components are the ingredients that make up the recipe.
You can perform the replenishment calculation of the BOM and components with a two-step approach by using the BOM Replenishment Journal and Component Replenishment Journal. Below is the process flow:
- The demand of the BOM items will be calculated in the BOM Replenishment Journal.
- The system calculates the replenishment quantities of the components in the Component Replenishment Journal, based on the demand of the BOM and the number of each component needed to assemble the BOM.
Calculation Process for BOM
In the BOM Replenishment Journal, the demand of the BOM items is calculated similarly to standard items in the classical Replenishment Journal. The BOM Replenishment Journal supports the following calculation types:
For more details on their calculation process, click the above links to see the help for each calculation type.
While the calculation of the BOM items are generally the same as the standard items, there are a few differences:
- Lead Time calculation is not considered in BOM Replenishment Journal as the Purchase Orders and Transfer Orders are not yet created at this stage.
- Lowest Price Vendor is not considered as vendor selection is irrelevant in the BOM Replenishment Journal.
- The Purch. Order Delivery setting of the BOM item, which determines if an item will be delivered to a warehouse or to the stores, is irrelevant in the BOM Replenishment Journal.
- The BOM Replenishment Journal processes all BOM items with valid Replenishment settings, regardless of their warehouse configurations.
Calculation Process for Component
Components are the materials required to assemble a BOM. In the second step of the calculation process, the Component Replenishment Journal processes the sales demand of the BOM that have been pre-calculated in the BOM Replenishment Journal, and breaks them down into the demand for each individual component.
Effective Inventory
The system calculates the inventory that is going to be used in the rest of the calculations.
Effective Inventory =
Inventory
+ Quantity on Purchase Order
- Quantity on Sales Order
+ Quantity in Transfer In
- Quantity in Transfer Out
+ Quantity in Assembly Header
- Quantity in Assembly Line
Note: It is possible to set up which document types (Purchase Order, Sales Order, ...) should be considered in the calculation. This can be done in the Replen. Setup page, in the Effective Inventory FastTab.
Component Quantity
The Component Quantity is the quantity of the components required to fulfill the demand of the BOM. If multiple BOM items are sharing the same component, the Component Quantity will be an aggregation of the demand from all the BOM items.
For example, the demand for the BOM items Chicken Sandwich and Signature Sandwich, as well as their components (Bread) for the next 7 days are calculated as below.
Demand for Chicken Sandwich = 35 portions, where each portion requires 2 slices of Bread
Demand for Signature Sandwich = 49 portions, where each portion requires 3 slices of Bread
Component Quantity = Total slices of Bread required for 35 portions of Chicken Sandwich and 49 portions of Signature Sandwich
= (35 * 2) + (49 * 3)
= 217 slices of Bread
Suggested Quantity
The system suggests the quantity that the warehouse or the store needs according to the following formula:
System Suggested Quantity = Component Quantity - Effective Inventory
The lead time is calculated as the latency between the submission of a Purchase or Transfer Order and the receipt of the items in the warehouse or store. The Sourcing Location Lead Time is used for transfer replenishment and Vendor Lead Time is used for purchase replenishment. For items having Lead Time Calculation enabled, the System Suggested Quantity is calculated based on the Projected Effective Inventory, instead of the Effective Inventory.
Below is the calculation formula when a component is purchased to the warehouse with Lead Time Calculation enabled.
Lead Time = Vendor Lead Time
The system calculates the Lead Time Sales Quantity, which is the estimated sales quantity over the lead time coverage period.
Lead Time Sales Quantity = Lead Time * Component Daily Sales
The Projected Effective Inventory is the total estimated inventory after the lead time coverage period.
Projected Effective Inventory = Effective Inventory - Lead Time Sales Quantity
System Suggested Quantity = Component Quantity - Projected Effective Inventory
In case the Projected Effective Inventory becomes negative after deducting the Lead Time Sales Quantity from the calculated Effective Inventory, it will be adjusted to zero. However, if the Effective Inventory is already negative, the Projected Effective Inventory will have the same value as the Effective Inventory without being adjusted.
If the System Suggested Quantity is less than zero, the System Suggested Quantity is set to zero.
If the Effective Inventory or Projected Effective Inventory is greater or equal to the System Suggested Quantity, the System Suggested Quantity is set to zero.
Component Daily Sale
The daily sale for the component is derived from the Average Daily Sale of the BOM, based on the number of each component needed to assemble the BOM. If multiple BOM items are sharing the same component, the Component Daily Sale will be an aggregation from all the BOM items.
For example, the Component Daily Sale of Bread, which is a component for the BOM items Chicken Sandwich and Signature Sandwich, is calculated as below.
Average Daily Sale for Chicken Sandwich = 5 portions, where each portion requires 2 slices of Bread
Average Daily Sale for Signature Sandwich = 7 portions, where each portion requires 3 slices of Bread
Component Daily Sale = Total slices of Bread required daily for 5 portions of Chicken Sandwich and 7 portions of Signature Sandwich
= (5 * 2) + (7 * 3)
= 31 slices of Bread
Reorder Point
If the field Reorder Point is greater than zero and System Suggested Quantity is less than the Reorder Point, the System Suggested Quantity is set to Reorder Point and Decision is set to Brought up to Reorder Point.
Maximum Inventory
If the field Maximum Inventory is greater than zero and the sum of System Suggested Quantity and Effective Inventory does not equal Maximum Inventory, the System Suggested Quantity equals Effective Inventory subtracted from the Maximum Inventory. The field Decision is set to Brought to Maximum Inventory.
Condition:
- System Suggested Quantity + Effective Inventory <> (not equal to) Maximum Inventory
Result:
- System Suggested Quantity = Maximum Inventory – Effective Inventory.