The Effects of Inaccurate Bills of Materials on Business Process Efficiency
Once of the most significant master data elements of any manufacturing ERP environment is the Bill of Material (BOM) master. The BOM defines the parent item and component item relationship for the manufactured item in your business. An inaccurate BOM can have impact on departmental efficiency. Also it can have impact on the end product sold and shipped to the customer and ultimately affect customer satisfaction.
A purchasing department’s workflow dependent on MRP messages for purchase order requirements can result in the following conditions:
Condition: Wrong Component Quantities
Impact: Component Inventory Levels either are understated resulting in stock outs in manufacturing or inventory levels that are overstated require addition use of cash.
Condition: Missing Component on the BOM.
Impact: Manufacturing cannot create the required end item impacting the manufacturing schedule and ultimately performance to the customer.
These conditions above can be easily remediated by putting a feedback loop in places to correct the BOM inaccuracies.
Financials results are impacted with inaccurate BOMs. Standard Gross margins are not accurately stated. The manufacturing cost of the item in not fairly stated and can result in management decisions to change Mix of sellable items to achieve profit targets.
Implementing a business process to create, release and maintain bills of materials, will have positive impacts are your business efficiency and ultimately reduce your overhead costs thereby increase bottom line profit.
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