BOM (Bill of Material) and KIT concepts are widely used in manufacturing and trading domains and hence are offered by all major ERP systems. Concept of BOM and KIT are widespread with various verticals and has a process involved for having them defined in the system.
In this Blog both BOM and KIT are differentiated with simple examples to understand their basics.
It is often considered and it seems obvious to consider BOM and KIT to be manufacturing process, though they are not.
Both BOM and KIT fall into a different process all together. In simple words, Bill of material is an Inventory concept whereas KIT is a concept which comes in sales process.
It is also important to understand that BOM Constitutes to become a Finished Good and is a Stocking Item, Pricing is done on Finished Good whereas KIT is an assembled bunch of Finished Goods where KIT is never considered to be Stock Item and pricing is done on each Finish Good and grouped together.
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To further simplify KIT we take an example. In this example an ABC Corporation is a manufacturer of Shaving Gel, Shaving Razor and Razor Blades. When company sells its products; it sells Shaving Gel, Razor and Razor blades as a KIT1 and sometimes it sells without Shaving Gel as KIT2. So Rather than selling items separately it is sold in a Bunch.
From the above example we understand that KIT is, multiple items grouped together at the time of Sales.
Taking forward the same example we can simplify the concept of BOM. When ABC Corporation has to manufacture a Shaving Razor it needs following components, 5 Nos. of Blade, 1 Nos. of Plastic handle and 2 Nos. Rubber Grip. These components are assembled together and then sent for Production. The Shaving Razor is manufactured and sold as an Item. Here we understand BOM is a detailed list of components which are assembled to produce a single unit of Finished Good.
Now that we understand the basic difference between BOM and KIT, we can understand their significance and role in the system with few points amongst a vast list of pros and cons.
BOM:
As we understand from the above example BOM is a presales process and an inventory concept. It helps us have a control over the items that are involved in the production without affecting their pricing, currency. We can also track inventory lot wise and also link the serial numbers back.
Where production is done in phases and item is assembled in stages to complete a production, a multi-level BOM can be defined; Where Routing can also be defined for a BOM.
There is no control on manipulating item configuration, like changing their quantity or components during sales. The master/BOM has to be predefined which helps in defining a firm process.
Components used to manufacture the Finished Good are not visible with their Serial/Lot number on any documents as in Packing Slips, Delivery Slips or Sales Invoice which are printed however details can be fetched on demand.
KIT:
Everything can be tracked at component level with their Serial Number/Lot Tracking number. This information can also be printed on documents.
Being a concept during the sales process manipulation of quantities and configuration can be made.
As the items are sold in bunch as a single item there is no need to insert multiple line items. A single line item entry is made.
The items cannot be assembled on a multi-level basis and prior to sales.
An internationally acclaimed ERP system like Sage 300 ERP incorporates these and many more features of Kitting and BOM with similar requirements for business processes over the globe. These features are designed to cater various industry based requirements to reduce manual intervention and redundant data entry. The automation also helps in better production planning and helps maintain optimum inventory reorder levels to implement practices like JIT among others.
We must understand that BOM and KIT have their individual significance, and one has to identify which suits best to the business process before implementing any one of them.
Also Read:
1. Custom Fields for Bills of Material in Sage 300 ERP
2. Generate BOM and Kitting items on the fly from Order Entry screen in Sage 300 ERP
3. BOM Setup for Manufacturing Company in Sage 300 ERP
4. Using BOM and Assembly to Convert Items in Sage 300 ERP
5. Material Required to Assemble FG on order – Report