Bill of Materials > BOM Processes > Cost Implosion

Cost Implosion

You use this program to re-cost stock items from raw material level through to the finished product.

The program also checks for more than 15 levels in a product's structure to identify inadmissible parent/component/parent loops.

Toolbar and menu

Field Description
Start Processing Begins the cost implosion process.

Structure on/off dates are validated against the current run date.

FieldDescription
Use route '0' when no operations or components exist against the selected route?This is displayed if you selected a route other than Route 0. If you select Yes, then the program reverts to using Route 0 for items where no components or operations exist on the current route being processed. These entries need to be removed before updating the live data.
A range of stock codes or warehouses may corrupt some costsThis is displayed if you did not include all stock codes and warehouses in the calculation and you enabled the Warn about cost implosion not being completed setup option (Bill of Materials Setup). This merely indicates that you have not selected to run a full cost implosion and therefore the costs of the excluded items may not be correct.
Print Prints the information currently displayed in the Report pane.
Save Form Values This option is only enabled in Design mode (see Automation Design). Your selections are saved and applied when the program is run in automated mode.

Information

Field Description
Processing options  
Cost based on Since the implosion begins at the lowest level (i.e. raw materials) you must decide on the basis of the costs to be used for each of the raw materials and the rate to charge for labour and overheads.
FieldDescription
Inventory

Uses the current inventory cost of bought-out items as the basis for the implosion. All other costs for a raw material (i.e. labor, fixed and variable) are set to zero. The inventory cost held against the default warehouse to use field is used.

This program always assumes that a made-in item's BOM costs are calculated from attached materials and operations. Only Bought out or By product items update their BOM costs from the Inventory costs.

Although you can select this option if FIFO or LIFO costing is installed (Inventory Setup or Browse on Warehouses) the weighted average warehouse cost of the item based on open FIFO/LIFO buckets is used for the implosion.

If you have enabled the Apply warehouse BOM costs setup option (Inventory Setup) then the warehouse defined against the Bill of Materials component is used to obtain the component cost when Inventory is used. When the option is not enabled, then the warehouse against the Bill if Materials component is ignored and the Inventory cost is always obtained from the warehouse to use for bought out items (i.e. the Inventory cost for a bought out item is always obtained from the warehouse to use when BOM Costs are not held at warehouse level).

Last costUses the last cost used for bought-out items as the basis for the implosion.

If you have enabled the Apply warehouse BOM costs setup option (Inventory Setup) then the warehouse defined against the Bill of Materials component is used to obtain the component cost when Last cost is used. If the option is not enabled, then the warehouse against the Bill if Materials component is ignored and the last cost is always obtained from the warehouse to use for bought out items (i.e. the last cost for a bought out item is always obtained from the warehouse to use when BOM Costs are not held at warehouse level).

What-ifUses the current what-if cost as the basis for the implosion. All other costs for raw materials are set to zero.
BOM

Uses the current BOM material cost of bought-out items as the basis of the implosion. For raw materials, the bill of material labor and overhead fields are set to zero.

If you have enabled the Apply warehouse BOM costs and Costing by warehouse setup options (Inventory Setup) then the BOM costs against the warehouse is used (Warehouses for Stock Code) and not the BOM costs against the stock item (Stock Code Maintenance).
Costs to update
[Warning]

Since existing information will be overwritten, please ensure that you make the correct selection here.
Field Description
BOM

Overwrites only bill of material costs by the costs specified at the Base new costs on field.

This program always assumes that a made-in item's BOM costs are calculated from attached materials and operations. Only Bought out or By product items update their BOM Costs from the Inventory costs.

[Note]
BOM and What-if

Overwrites both the bill of material costs (i.e. labor, material and overheads) and what-if costs by the costs specified at the Base new costs on field.

If you enabled the Costing by warehouse and Apply warehouse BOM costs setup options (Inventory Setup) then the BOM costs against the warehouse are updated (Warehouses for Stock Code) and not the BOM costs against the stock item (Stock Code Maintenance).
What-if Overwrites only what-if costs by the costs specified at the Base new costs on field.
Routing Indicate the specific routing that must be used for the implosion.

If you select a route other than Route 0, then you are prompted to indicate whether you want to use the costs of the components and operations from Route 0 if no components or operations exist on the route you selected.

[Note]

  • You can only access this field if you enabled the Alternate routings required setup option (Bill of Materials Setup).

  • You can only change the routing if you selected What-if at the Cost to update field.

  • If you enabled the Apply warehouse BOM costs setup option (Inventory Setup) then the routing defaults to Use route on warehouse. If this option is not enabled, then the routing defaults to Route 0. In addition, you cannot process the cost implosion by warehouse (Component Where-used).
Update unit run times Select this to recalculate and update the BOMOPS file with the calculated run time for Block and Rate type work centers based on the time taken and quantity fields.

If this option is not selected, then rounding differences between the values displayed in the various costing programs such as Cost Analysis for Stock Code, Costing Query and Costing Report could occur.
Stock code selection Indicate a selective range of stock items that must be included in the cost implosion.
Warehouse selection

Indicate a selective range of warehouses that must be included in the cost implosion.

This option is only available if you are using Costing by warehouse and you enabled the Apply warehouse BOM costs setup option (Inventory Setup).
Options  
Update non-current Revision/Release Applies the rolled-up costs to non-current and archived revisions/releases.

Although the actual non-current and archived revisions/releases are not changed, the updated costs are saved in the ECC cost file. These saved costs are then used when a job is created using a non-current or archived bill of material.

[Note]

This option is not available if you selected What-if at the Costs to update field
Accumulate mass to parent Accumulates the mass against each component up to the parent item to calculate the mass of the parent item.

Scrap percentages/values defined against components are ignored. Therefore the mass for the parent item is calculated based on the quantity per parent part and excludes any scrap percentage or quantity defined against the components.
Accumulate volume to parent Accumulates the volume against each component up to the parent item to calculate the volume of the parent item.

Scrap percentages/values defined against components are ignored. Therefore the volume for the parent item is calculated based on the quantity per parent part and excludes any scrap percentage or quantity defined against the components.
Product classes Indicate a selective range of product classes according to which items will be selected for inclusion in the cost implosion.
Suppliers Indicate a selective range of suppliers according to which items will be selected for inclusion in the cost implosion.
Buyers Indicate a selective range of buyers according to which items will be selected for inclusion in the cost implosion.
Planners Indicate a selective range of planners according to which items will be selected for inclusion in the cost implosion.
Job classifications Indicate a selective range of job classifications according to which items will be selected for inclusion in the cost implosion.
After processing completed These options are displayed within programs that can be automated. They enable you to indicate the action you want to perform once processing is complete (see Automation Design).

Report

The results of the processing function you selected are displayed in this pane, unless you selected to close the application after processing is completed.

The Level column (which can be added to the listview using the Field Chooser option) indicates whether the error encountered was a warning (processing continued) or an error (processing was aborted).

Calculations

The implosion starts from the lowest level upwards, therefore, you should only use the Stock Code Maintenance program to change bill of material labor and material costs for low level parts.

For subcontract operations, the subcontract unit value is accumulated as a material cost onto the parent, provided you have not enabled the Split subcontract operation costs from material costs setup option (Bill of Materials Setup).

If a made-in parent item includes a by-product that is defined as a negative material allocation, then the by-product's cost is deducted from the parent's total material cost.

If you have enabled the Apply warehouse BOM costs setup option (Inventory Setup) then the warehouse defined against the component is used to obtain the component cost when Inventory or Last cost is used. If the option is not enabled, then the warehouse against the component is ignored and the inventory or last cost is always obtained from the warehouse to use for bought out items (i.e. the inventory or last cost for a bought out item is always obtained from the warehouse to use when BOM costs are not held at warehouse level).

The Cost Implosion program uses all 6 decimal places in calculating mass and volume accumulated to the parent. However, for co-products, the unit mass and volume of the co-products is worked out using the quantity per field for co-products which is only 3 decimals.

The mass and volume for the parent item is calculated based on the quantity per parent part and excludes any scrap percentage or quantity defined against the components.

Example 1:

Assume you have the following:

Parent item
EBQ 10
Component 1
Quantity per 10
Scrap percentage 10%
Scrap quantity 2
Mass 2
Volume 1
Total per (including scrap) ((Qty per + (Qty per * Scrap percentage)) + (Scrap quantity / Parent EBQ)

((10 + (10 *0.10) + (2 / 10) = 10.1 + 0.2 = 11.2
Mass Component Qty per * Component Mass

10 * 2 = 20
Volume Component Qty per * Component Volume

10 * 1 = 10

The cost held against the stock item (Stock Code Maintenance) is used, unless you have enabled the Apply warehouse BOM costs setup option and selected Costing by warehouse (Inventory Setup) in which case the costs held against the warehouse (Warehouses for Stock Code) are used.

Example 2:

Assume you have the following:

Parent item
EBQ 10
Component 1
Quantity per 10
Scrap percentage 25%
Operation 1
Unit run time 2
Scrap percentage 25%
Create a job for 10 Parent items
Gross quantity to make 13.333

The program calculates this according to the operations defined in the bill of material for the parent part (i.e. the material allocations linked to the operation are inflated to cater for any scrap values).
Net quantity to make 10
Quantity required for the component (10 + (10 * 25%) = (10 + 2.5) = 12.50

However, to make 10 (net) of the parent, you require 13.333 (gross) of the parent.

Therefore, you need 13.333 * 12.5 = 166.6625 total components for the job.

Taking 166.6625 divided by 10 = 16.66625 (rounded to 16.663) gives the quantity required of the component to make a single parent item.

  

Material costs

Material costs are established by accumulating the results of the following calculations:

  • The quantity per is increased by the scrap percentage factor, and by the result of dividing the scrap quantity by the economic batch.
  • Multiply the cost of each first level component by its recalculated per and add the costs of all the operations on the part. If the economic batch quantity is zero the program automatically assumes a quantity of 1.

Operation costs

Operation costs are established by accumulating the results of the following calculations:

If the economic batch quantity or productive units are zero (or between zero and 1) the startup value, setup value, teardown value, fixed overhead value and variable overhead value will always assume 1 if less than 1 when calculating a unit value.

If the economic batch quantity is less than the startup quantity x productive units, then the startup quantity x productive units is used as the economic batch quantity.

  • Run value {run time x run rate x [EBQ - (startup quantity x productive units)]} divided by EBQ

  • Setup (setup rate x setup time x productive units) divided by EBQ

  • Startup (startup rate x startup time x productive units) divided by EBQ

  • Teardown (teardown rate x teardown time x productive units) divided by EBQ

  • Fixed overhead (fixed overhead rate x ((run time x (EBQ - (startup quantity x productive units))) + (setup time x productive units) + startup time x productive units) + (teardown time x productive units))) divided by EBQ

  • Variable overhead (variable overhead rate x ((run time x (EBQ - (startup quantity x productive units))) + (setup time x productive units) + startup time x productive units) + (teardown time x productive units))) divided by EBQ

  • Operation costs of soft phantom components (Inventory Setup) are not included in the cost of the parent.

Cost Implosion with Costing by Warehouse

The following example indicates the effect of holding BOM costs by warehouse:

Assume you have two manufacturing warehouses:

  • JO – Located in Johannesburg

    This warehouse can handle 50 000 liters per job.

  • DU – Located in Durban

    This warehouse can only handle 15 000 liters per job.

Therefore:

  • the EBQ required for each site is different

  • the manufacturing time for different quantities may still be the same.

    For example, setup costs will be the same, as they both take the same time to set up the machines even though different quantities are being manufactured. In this example, the processing cost in Durban is higher than in Johannesburg.

In addition, assume that some of the materials required for the job are imported through Durban harbour, reducing the transport costs for Durban. Johannesburg, however must carry the cost of the transport from Durban to Johannesburg, which increases the material costs for Johannesburg.

The following two options in Inventory Setup enable you to cater for this scenario:

  • Costing by warehouse - when selected enables you to set the costing method by individual warehouse.

  • Apply warehouse BOM costs - when selected will calculate and store the Bill of Materials costs per stock code/warehouse combination.

    [Note]

    If this option is not selected, then the Cost Implosion calculates and stores the BOM costs against the item itself on Route 0.

    If this option is selected then:

    • the Re-order quantity defined against the stock code/warehouse (Warehouse Maintenance for Stock Code) is used as the Economic Batch Quantity (EBQ).
    • the Cost Implosion applies the Route (if alternate routing is required) and the component warehouse to use defined for the warehouse (Warehouse Maintenance - Options for cost implosion and suggested).

Returning to the example, assume we have:

Warehouse Route to Use Component Warehouse EBQ (Re-order quantity)
JO (Johannesburg) 0 J1 50 000
DU (Durban) 1 D1 15 000

The structure to manufacture Part A on both Route 0 and Route 1 is as follows:

Component Quantity Warehouse R1 Warehouse R2
X 2 10.00 8.00
Y 10 (Fixed) 10.00 10.00
Z 1 10.00 12.00

The routing and rate on Route 0 and on Route 1 is the same and has a single operation - Op1:

Setup Time Setup Rate Runtime Runtime Rate
10.00 200.00 1.00 50.00

The Cost Implosion results are as follows:

  • JO (Johannesburg)

    Components:

    Component Calculation Result
    X 2 * 10.00 20.00
    Y 10 * 10/50 000 (remember this is fixed) 0.002
    Z 1 * 10.00 10.00

    The total material cost is 30.002

    Operation:

    Op1 = (10 * 200.00 / 50 000) + 50 = 50.04

  • DU (Durban)

    Components:

    Component Calculation Result
    X 2 * 8.00 16.00
    Y 10 * 10/15 000 (remember this is fixed) 0.006667
    Z 1 * 12.00 12.00

    The total material cost is 28.006667

    Operation:

    Op1 = (10 * 200.00 / 15 000) + 50 = 50.133333

Other areas where costs will be different are rate and block operations as well as fixed and variable overheads.

Co-products

Co-products manufactured via a notional part can be defined multiple times against a notional part, so the quantities and percentages against the co-product are accumulated.

For example:

A notional part has the following co-products:

Stock code (co-product) Quantity Material % Labor % Subcontract %
A 4 25 25 25
B 1 25 40 0
C 3 0 35 50
A 1 50 0 25

The program checks the notional part to obtain its EBQ (economic batch quantity).

Using the notional part, the operations and components are extracted and the unit costs for the notional part are calculated. Each of these costs is multiplied by the relevant percentages.

[Note]

The material percentage apportionment is applied to labor, subcontract and overheads attached to a component. The labor and subcontract percentages are only applied to labor attached to the notional part.

The cost rollup takes the apportionment defined in maintenance and calculates the costs of the co-products according to the cost method defined against the notional part and route (simple or detail). See BOM Co-products.

[Note]

The EBQ, etc for cost rollup and lead time calculation is associated against the notional part. The cost is then apportioned according to the percentages and then divided by the quantity to get a unit cost.

Simple Costing

Example:

The following bill of materials was created:

  • Notional part N (qty per 1) with three co-products attached: co-product A - qty per of 1, co-product B - qty per of 1 and co-product C - qty per of 2.

    • Operation Op 1 (6 hours)
    • Operation Op 2 (4 hours)

    • Component C1 (qty per 3)

    • Component C2 (qty per 1)

    • Component C3 (qty per 6)

    • By product Z (qty per -1)

If simple cost is in use then, using this example, the following percentages of cost are allocated:

Co-product Qty per of N Material Apportionment % Labor Apportionment % Subcontract Apportionment %
A 1 33.334 33.334 33.334
B 1 33.333 33.333 33.333
C 2 33.333 33.333 33.333

Note that because of the requirement that the percentage must equal 100% for all the elements the first entry is rounded up.

This is much simpler to maintain than the current method of maintaining proportional bills against the negative allocations.

The program rolls the costs up to the notional part (as is done currently) and then applies the apportionment percentages and updates the co-products costs.

Detail Costing

Detail costing enables you to apportion costs to the co-products by individual materials and labor.

For example:

In the plastic injection molding industry it is not uncommon for a number of similar items to be produced sequentially (one after the other) to cater for different colors. Whilst this is a single job, the costs of materials and labor need to be apportioned. Example of detail costing: A plastic injection mould manufactures 4 co-products ‘CLEAR, WHITE, RED, BLACK’. These are set up as follows:

Co-product Qty Offset Material % Labor % Subcontract %
CLEAR 1 1 20.000 25.000 25.000
WHITE 1 2 20.000 25.000 25.000
RED 2 3 30.000 25.000 25.000
BLACK 1 4 30.000 25.000 25.000

The materials attached to he notional part are:

Component Qty per Offset Operation Cost per Unit Total
PLASTIC 4 2 10.00 40.00
WHITEDYE 1 3 20.00 20.00
REDDYE 1 4 15.00 15.00
BLACKDYE 1 5 10.00 10.00
      TOTAL: 85.00

The cost of the material ‘PLASTIC’ is apportioned evenly with all the co-products. The dyes (WHITEDYE, REDDYE, etc.) are associated with individual co-products.

The operations attached to the notional part are:

Operation Number Operation Time Cost per Unit Total
1 SETUP 2 20.00 40.00
2 CLEARRUN 1 10.00 10.00
3 WHITERUN 1 10.00 10.00
4 REDRUN 1 10.00 10.00
5 BLACKRUN 1 10.00 10.00
6 CLEANUP 2 10.00 20.00
      TOTAL 100.00

As with the materials operations, 1 (SETUP) and 6 (CLEARUP) are equally apportioned against all the co-products but operations 2 through 4 (WHITERUN etc.) are associated with individual co-products.

The new detail costing files would contain the following information (excluding notional part and route) and are populated when the job is created:

Co-product Type Comp/Op Percentage
CLEAR M PLASTIC 25.00
WHITE M PLASTIC 25.00
RED M PLASTIC 25.00
BLACK M PLASTIC 25.00
WHITE M WHITEDYE 100.00
RED M REDDYE 100.00
BLACK M BLACKDYE 100.00
CLEAR O 1 (SETUP) 25.00
WHITE O 1 (SETUP) 25.00
RED O 1 (SETUP) 25.00
BLACK O 1 (SETUP) 25.00
CLEAR O 2 (CLEARRUN) 100.00
WHITE O 3 (WHITERUN) 100.00
RED O 4 (REDRUN) 100.00
BLACK O 5 (BLACKRUN) 100.00
CLEAR O 1 (CLEANUP) 25.00
WHITE O 1 (CLEANUP) 25.00
RED O 1 (CLEANUP) 25.00
BLACK O 1 (CLEANUP) 25.00
[Note]

If no detail cost entries are defined for a material or operation, then the system applies the 'simple' cost apportionment percentages defined against each co-product entry.

For example: If the PLASTIC material does not have apportionment records defined then the program splits the costs 20% to CLEAR, 20 % to WHITE, 30 % to RED and 30 % to BLACK.

The resultant costs for the co-products are as follows:

CLEAR - Total cost = 35.00:
Material 25 % * PLASTIC

(25% * 40) = 10.00
Labor (25 % * SETUP) + (100 % * CLEARRUN) + (25 % * CLEANUP)

(25 % * 40.00) + (100 % * 10.00) + (25 % * 20) = 10.00 + 10.00 + 5.00 = 25.00
WHITE - Total cost = 60.00
Material (25 % * PLASTIC) + (100% * WHITEDYE)

(25% * 40.00) + (100% * 20.00) = 10.00 + 20.00 = 30.00
Labor (25 % * SETUP) + (100 % * WHITERUN) + (25 % * CLEANUP)

(25 % * 40.00) + (100 % * 10.00) + (25 % * 20) = 10.00 + 10.00 + 5.00 = 25.00
RED - Total cost = 60.00
Material (25 % * PLASTIC) + (100% * REDDYE)

(25% * 40.00) + (100% * 15.00) = 10.00 + 15.00 = 25.00
Labor (25 % * SETUP) + (100 % * REDRUN) + (25 % * CLEANUP)

(25 % * 40.00) + (100 % * 10.00) + (25 % * 20) = 10.00 + 10.00 + 5.00 = 25.00
BLACK - Total cost = 60.00
Material (25 % * PLASTIC) + (100% * BLACKDYE)

(25% * 40.00) + (100% * 10.00) = 10.00 + 10.00 = 20.00
Labor (25 % * SETUP) + (100 % * BLACKRUN) + (25 % * CLEANUP)

(25 % * 40.00) + (100 % * 10.00) + (25 % * 20) = 10.00 + 10.00 + 5.00 = 25.00

Error and warning messages

  • * Missing warehouse record for stock code : %1 Warehouse : %2

    If you enabled the Apply warehouse BOM Costs setup option (Inventory Setup) then this is an error and BOM costs are not updated. If you did not enable the option, then this is merely a warning and BOM costs will be updated for bought out stock items not stocked in the warehouse to use.

  • *Missing warehouse record for notional part: XXXXXX Warehouse: XX

    This warning is displayed if a notional part is not defined against the same warehouse as its co-product (i.e. you have co-products defined against warehouses in which the notional part was not defined).

  • * Missing warehouse record for co-product: xxxx Warehouse: XX

    This warning is displayed if not all co-products are stocked in the same warehouse. For example: You may have defined a notional part in warehouse AA and attached three co-products, but only defined one of these co-products as being stocked in warehouse AA.

  • An error is given where stock items do not exist in warehouses. The reason is that unless you define a specific component warehouse to use against the parent warehouse, or define a warehouse to use on the BOM itself, then the cost implosion assumes that the component to use for the cost implosion exists in the parent warehouse.

Hints and tips

Record amendments

  • Amendment journals are created if these are required for Inventory (Inventory Setup).

Notes and warnings

eSignature considerations

Electronic Signatures provide security access, transaction logging and event triggering. This enables you to increase control over your system changes.

Access to the following eSignature transactions within this program can be restricted at Operator, Group, Role or Company level. You configure this using the Electronic Signatures program.

eSignature Transaction Description
BOM Cost implosion

Controls access to the Start Processing function in the Cost Implosion program.

Change of Rev/Rel

  • Enabling the option: Allow cosmetic changes (Bill of Materials Setup) determines whether you are prompted to change the revision/release of affected items.

    If you select to change the release, then the BOM is updated without changing the revision.

  • For automatic control, components added and deleted are considered significant changes, as are changes to the following fields:

    • Revision (Component)

    • Release (Component)

    • Unit of Measure

    • Quantity per

    • Fixed quantity flag

    • Parent per fixed quantity

    • Structure on date

    • Structure off date

    • Include from job number

    • Include to job number

    • Scrap percentage

    • Scrap quantity

    • Warehouse to use

    If a structure or routing is not found when checking for cosmetic changes, the item is assumed to be a component and its revision/release is changed.

    When saving cosmetic changes for an affected parent item, if a component against the BOM of the parent is also an affected item, then this component revision/release is not applied to the parent, as this constitutes a major change. This applies even if the component revision/release is changed at the time of applying BOM changes.

Transferring BOM costs

  • You cannot run the Transfer BOM Costs to Wh Costs program unless you run the Cost Implosion for all stock codes.

    If a range of stock codes were updated on one cost implosion run and another range of stock codes were updated on a different run, then the Implosion numbers in the Inventory Master table will differ, resulting in you not being able to do the costs transfer.

Activity based costing

Inserting Application Help

You would typically follow this procedure to display help for the current program in a customized pane that can be pinned to the program window.

Information includes step-by-step instructions for the various functions available within the program, including a brief overview of what the program does, what setup options are required and how to personalize the program.

  1. Open the program for which you want to insert application help into a customized pane.

    This functionality is only available for a program that has panes.

  2. Right-click any form field.

    You can also click the triangle menu icon that appears in the title area of a pane.

  3. Select Insert Application Help from the context-sensitive menu.

    The application help appears in a pane within your program. You can reposition the pane using the docking stickers or pin it to the program window.

Removing the Application Help pane

If you no longer want to display application help in a pane for your current program, you can simply remove it.

  1. Select the Close icon in the right-hand corner of the application help pane.

  2. Confirm that you want to delete the pane.