Managing Reverse BOMs and One-to-Many Manufacturing Processes

January 25, 2021
3 min read

Most manufacturing processes begin with a Bill of Materials (BOM), from bicycles to swing-sets, tires to airplanes. Financial tools and the more robust ERPs are designed with these kinds of BOMs in mind: many individual pieces go in, and one finished good comes out. This is great for operations who specialize in discreet manufacturing, but this approach falls short when it comes to managing reverse BOMs.

So, what is a Reverse BOM?

If you have a Reverse Bill of Materials or deal with one-to-many processes in your manufacturing, you know already. It’s the exact opposite of what most manufacturing or WMS software is built to manage. It’s taking one item, and then using it to make many things. While every manufacturing industry runs against this challenge here and there, in many food manufacturing and food processing verticals, Reverse BOMs are the norm. In fact, over 40% of all ParityFactory WMS clients utilize Reverse BOMs.

While not limited to these verticals, most produce processors as well as the majority of our protein clients fall into this category. Whether processing apples into various sizes and grade, and fresh sliced and dried sliced and puree, it’s one apple becoming several finished goods. Protein clients, from beef to seafood to poultry are in the same boat. Beyond those, even other food verticals run into it from a consolidated WIP step, such as dividing a single tray of tofu into a variety of uses.

This presents a unique challenge, because ERPs systems weren’t built with food in mind and certainly weren’t built for Reverse BOMs or one-to-many processes. The main reason is the history behind some of these tools (i.e., they were designed for making bicycles), many of which are dated in technology terms. The other issue is that Reverse BOMs are more difficult problem, particularly when it comes to costing. For example, if you process a ten-dollar whole salmon, and produce twenty-dollars of row, ten dollars of filet, and one dollar of trim, how do you divide the cost of the original fish against those outputs? (The answer is, there are many ways from weight, to finished good value, to a fixed ratio—but the right path differs per operation.)

One of the core reasons ParityFactory WMS was designed as a stand-alone WMS—integrated with ERPs like QuickBooksNetSuiteIntacct and Microsoft, but not a built in them—is so we could solve this exact problem.

ParityFactory tracks the input goods by lot (tote of blueberries, bin of walnuts, full carcass or case primals, etc.) and marry back the finished goods that result from processing those input lots—regardless of the variety of finished goods. What this means is ParityFactory can report back on the yields of that production run, both in terms of weight and units. (ParityFactory also supports numerous cut sheets to give direction on how to process proteins, depending on outstanding sales orders, etc).

The reality is that ERPs do a terrible job of managing Reverse BOMs. Similarly, so do WMS packages. So many of our customer had given up on the idea of implementing a WMS because these aren’t supported or, even worse, they only found out once they’d bought it that Reverse BOMs weren’t supported.

At ParityFactory, we do food only. And to say that, you have to be able to manage One-to-Many Processes and Reverse BOMs. Reach out to schedule your demo today and we’ll show you how ParityFactory WMS can take the work out of managing your reverse BOMs.