Product BOMs vs Production Order BOMs in Dynamics 365 Finance & Operations

There’s an important but rarely explained detail about BOMs in Dynamics 365 Finance & Operations that often leads to confusion for manufacturers.

This issue may show up when people on the factory floor wonder why the BOM they use to make an item isn’t the same as the one on the Product record in the system. Or they may be frustrated that changes they made to the previous Production Order have been “erased” for the new Production Order.

This confusion happens because, although Finance & Operations doesn’t make it obvious, the system stores a copy of the Product’s BOM against the Production Order itself, and changes can be made to just that copy.

I’ve helped about ten different manufacturing clients—in industries from sporting goods to technical machinery—implement and troubleshoot their BOM setups. In this article, I’ll explain how BOMs actually work in Finance & Operations: I’ll explain how to use BOMs in the two different contexts, walk through the differences, and give some best practices for avoiding problems in the future.

Table of Contents

• What’s the Difference Between a Product’s BOM and a Production Order’s BOM?
• How to Create a Product BOM
• How to Modify a BOM for a Production Order

Note: Even though most customers, commentators, and consultants still call it Dynamics 365 Finance & Operations or D365 F&O, Microsoft now technically licenses it as Dynamics 365 Finance and Supply Chain Management.

What’s the Difference Between a Product’s BOM and a Production Order’s BOM?

The biggest difference is that the Production Order’s BOM applies to just that one production run, whereas the Product BOM is the default BOM for that Product.

The Product BOM defines how your company typically makes that item. Think of it as the “official recipe.”

The Production Order’s BOM (also called a “production BOM”) on the other hand, is a copy of the Product BOM created for a specific Production Order, at a specific time and in a specific location. It can be modified for that specific Production Order to reflect temporary changes (like substituting a material or adding a one-time component) without affecting the original BOM for the Product.

Example: Let’s say you manufacture skateboards. Your Product BOM includes standard wheels and bearings. But maybe you have to use a different kind of bearings for a temporary production run due to shortages of the original bearings. You’d modify the production BOM on that specific Production Order, leaving the Product BOM unchanged.

When to Use Each

• Use the BOM on the Product when defining how your company normally makes an item.
• Use the BOM on the Production Order when you need to make a temporary or order-specific change.

Important Note: Changes to a Production Order’s BOM Do Not Alter the Product’s BOM Itself

This is the biggest “gotcha.” Users on the shop floor often assume that modifying the production BOM will update the Product BOM itself and therefore alter all future orders. It doesn’t work that way. Any change to a production BOM will be specific to that Production Order.

It’s important to train and remind teams of this fact, because manufacturing floor staff may change production BOMs based on their experience, but without updating the Product BOM or notifying planners. This can lead to confusion and inconsistency instead of improved processes.

So, if your workers find themselves making the same change repeatedly in production BOMs, it may be time to have a discussion about updating the Product BOM itself. This recurring frustration can be a sign that workers on the shop floor know something that other teams in the business don’t about how a product actually gets made, and that’s usually important information that needs to be shared.

How to Create a Product BOM

1. From the Released Product, in the Top Menu, click the Engineer Tab.
2. In the BOM section, select BOM Versions. This is where you can create a Default Product BOM.
3. Create a new BOM Version by clicking New in the upper left corner.
4. Select BOM and BOM Version.
5. Add the items that should be in the Standard BOM for this Product. In my example, I am creating a Bill of Materials for a Standard Speaker. It consists of Wiring Harnesses, Tweeters, and Crossovers among other items.
6. Set the Warehouse where these items can be produced. Note: You can have different Active BOM versions for different Warehouses. If your business has multiple Production facilities where the same item is produced differently per location, the Warehouse is how that is configured.
7. Make sure the Active Toggle is set to Yes. This is what will allow this BOM to be selected for Production Orders at this Warehouse by default.
8. Approve the BOM Version by clicking on the BOM Version tab in the Top Menu.
9. Click Approve.

How to Modify a BOM for a Production Order

When you make a Production Order, it will have a copy of the Product BOM. In a sense, this isn’t another full BOM in the system. It lives only inside the Production Order, and can only be edited there.

As previously outlined above, these production BOMs are essentially new versions of the base BOM for the Product, which are specific to this Production Order. By default, when you create a new Production Order for an item, Dynamics 365 will bring in that item’s default Active BOM for that Warehouse.

It becomes independent of the original Product BOM at this point. You can then make any necessary changes to the production BOM without impacting the original default BOM for the Product.

To do this:

1. Create a Production Order for your item. In our example above that’s a Standard Speaker.
2. Select the Warehouse from the Original BOM, in our example Warehouse 11.
3. This will bring in the default Product BOM for this Production Order.
4. Once created, in the top menu, in the Production Order Tab, in the Order Details section, click BOM.
5. This will take you to the copy of the BOM for this Production Order, which currently looks the same as our default Product BOM.
6. Click New in the upper left corner
7. This will take you to a screen where you can add a new item to the BOM. In my example, I added item A0001.
8. If you navigate back to the production BOM screen you will now see the newly added item.

Note: This change doesn’t impact the original Product BOM, but will now appear in any subsequent picking journals or costing estimates for this particular Production Order.

Final Thoughts

Understanding and managing BOMs correctly is essential for smooth manufacturing operations and good communication between teams.

As a Dynamics 365 Finance & Operations Partner, Encore helps clients with issues like BOM setup and governance. We know that training and support are essential for your team to get the most out of their Dynamics 365 solutions. Learn more about our Finance & Operations support services.

For more walkthroughs of functionality in Finance & Operations, you may be interested in these articles:

• How to Use Product Attributes and Categories in Dynamics 365 Finance & Operations
• Item Arrival Overview in Dynamics 365 Finance & Operations