SAP Business One Standard Manufacturing Functionality

Manufacturing Business Software | SAP Business One

Featuring bills of material, production orders, MRP, serial numbers and more

SAP Business One delivers integrated manufacturing and production functionality right out of the box. The production functionality is fully integrated into SAP Business One’s inventory, financial, and material requirements planning (MRP) features, giving end-to-end visibility of the production process from sales order to finished goods.

Key features and functionality

Bills of Materials (BOMs): Standard and disassembly production orders for finished goods or intermediate items use the components assigned to the BOMs for the parent item.  You can create multilevel BOMs and produce graphical indented-bill reports with batch and serial controlled items.

Production orders: You can create standard, special, and disassembly production orders allow manual or backflush issue of components. Special production orders are on the fly without a BOM.  Financial accounts and stock balances for work in progress are updated in real time as components are issued to the production order. SAP Business One allows you to over- and under-issue production orders, and it calculates the variance at the product order level.


Drive production demand in two ways:  From a Sales Order or from the MRP

Driving production demand from a Sales Order

Clicking on a drill-down arrow shows you the component items within the BOM. SAP Business One can automatically create a production order from a sales order, or you can create it manually. Alerts can notify you when orders are still open and need to be produced.

Driving production demand from the MRP


A wizard helps you plan and optimize future material requirements and then both manage and execute purchasing and manufacturing recommendations and exceptions. The MRP wizard helps reduce costs by considering both minimum order quantities and order multiples helping users take advantage of, say, purchase pricing breaks or standard production batch sizes. To make the appropriate recommendations, SAP Business One considers various supply and demand sources, including existing stock levels, planned production orders, open purchase orders, actual sales orders, forecasted orders, master data like BOMs, and planning data like lead times and minimum stock levels.

Exceptionally clear MRP results, recommendations, and exceptions screens allow you to sort, filter, and drill down through MRP pegging information to actual receipts and requirements (forecasts or sales orders) and edit, individual purchase order line quantities.

Setting Up Bill of Materials

Purchasing or Operations team members who regularly set up your bill of materials and inventory items can use the standard functionality through the Item Master.  You can define BOMs with multiple levels, including all sub-assemblies and raw materials that are required to assemble and produce the finished product.  Define line items as items, resources, or include text, and group line items based on process flow.  The basic types of BOMs are:

  • Sales BOM: both the finished product and the components appear in the sales order document
  • Assembly BOM: just the finished product appears in the sales order document
  • Template BOM: the components simply appear as a list of items in a sales document
  • Production BOM: This BOM is used in the production order document. The parent item is the finished goods, and the children are the components. You can add labor as one of the components, this will be a non inventory item with a standard cost.

Create The Production Order


SAP Business One can automatically create production orders based on sales orders, forecasts, and stocking rules. You can also create purchase orders on the fly, using the different BOM types as templates and linking them back to sales orders for tracking in make-to-order environments.

Release Items to the Production Order

Component items can be issued manually or using the automatic backflush, creating real-time WIP and variance postings. Once the production order has been initiated, the software changes the status to Released, allowing a partial or full completion report of the production order or cancellation. 

Review Costs

Once the finished product is created, the updated summary tab shows:

  • The costs of the finished product
  • The cost of the components
  • Any variance that may have been created
  • A drill-down arrow to the inventory posting for the components and the finished product
  • The number of planned items
  • The number of completed items
  • The number of rejected items

Review Resource Capacity

Within SAP Business One you can manage and plan resource time and production capacity.  You can capture machine, labor or other types of resources with associated costs in the Resource Master Data, and can linked to fixed assets and employee data.  Capture time per Resource Units.  Accounts to be used are defined in advanced account determination. 

Resource Capacity allows a view of capacities by different types.  This visibility of available capacity helps you to avoid bottlenecks and optimize production plan. Resource costs are included in the final product cost.


Complete the Production Process


Once manufacturing is complete, the production order summary tab sums up the order details, components total cost, the finished goods cost and whether there is any variance between them when you use standard cost method.  A production order may have one of the following statuses:

  • Planned: The production order is not yet released to the shop floor for manufacturing.
  • Released: The production order has been released to the shop floor for work.
  • Manual: The manual status is used to issue components to the shop floor. You can also update the component items as long as there are no transactions for the selected component.
  • Closed: With this status, no new transactions can be added to the order. You close the production order when all planned quantities are completed.


Standard reports for production, as well as Crystal Reports for building your own views and reports is available.

For More Information

Our next blog article covers built-in process within SAP Business One for taking your manufacturing operations from quote to invoice.  Read more....


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