BOM Design for Routing-Based Subcontracting with Variable Process Loss (Fasteners Manuf. Comp)

[ketanAmrutkar]

I am currently implementing a scenario for a fastener manufacturing company involving a routing-based subcontracting process.

In this process, the purchase order unit is Each (EA), while the pricing unit is Kilogram (KG). For every subcontracting PO, the finished product quantity remains constant in EA, but the actual received weight in KG varies depending on the processing outcome.

The client records the process loss as the difference between the issued component weight and the received finished product weight, both in KG.

🔹 Example:

1st PO

• Order Unit: EA

• Price Unit: KG

• Weight per Unit: 1.69 grams

• Issued Quantity: 10,000 EA = 16.9 KG

• Received Quantity: 10,000 EA = 15.9 KG

• Process Loss: 1 KG

2nd PO

• Order Unit: EA

• Price Unit: KG

• Weight per Unit: 1.69 grams

• Issued Quantity: 10,000 EA = 16.9 KG

• Received Quantity: 10,000 EA = 16.1 KG

• Process Loss: 0.8 KG

🔹 Requirement:

Since the process loss varies with each PO, how can we define the BOM to support this scenario while ensuring proper component consumption tracking and accurate cost posting?

[Lakshmipathi]

Use standard weight per unit (e.g. 1.69 grams) in BOM to define component quantity. Maintain issued quantity as EA × standard weight (converted to KG). In the BOM, define the input components in KG rather than EA. This allows easier reconciliation with actual weight issued and received. Turn on backflushing during goods receipt so the system auto-consumes components based on the received quantity and BOM proportions.
Record the actual weight received in KG at the time of GR (Goods Receipt). This becomes the basis for calculating consumption and process loss. Add a variable scrap percentage field in BOM or routing, if supported by system. If this is not flexible, track actuals via production order confirmation or GR records. Use standard reports to compare issued quantity (planned from BOM) vs received quantity (actual from GR). If precise traceability is needed, batch tracking of component issuance and product receipt can help map losses at batch level. If your system allows, use actual component consumption posting based on measured weight during production. This removes the dependency on theoretical BOM quantities and makes process loss transparent and dynamic.