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Formula and Formula Versions


Formulas are key components used in the manufacturing and production processes. Formulas are very similar to a bill of materials in that it is a structured list of components, ingredients or items required to manufacture a finished product. It provides detailed information about the materials, sub-assemblies, and quantities needed for production. In some cases, services can be referenced in a formula/BOM. 

Formulas are a type of BOM that are commonly used in process manufacturing and offer additional functionality. The key distinction between BOMs and formulas lies in the fact that when a BOM item is produced, it is restricted to only one final product. However, formulas can create co-products and by-products alongside the finished product (based on the setup in the formula version).

Formulas are hierarchical, meaning they can contain multiple levels of components, where each level represents the sub-assemblies which, in turn, have their own formula/BOM containing their respective parts. Generally speaking, an item requires its own level in the formula/BOM if, at any stage, the item needs to be:

  • Tracked
  • Stored
  • Sold

Co-Products are intentionally produced alongside the main product and are treated as separate items with their own cost and inventory records. The production of co-products is planned and managed as a joint process, and a proportion of the total product costs is usually allocated to the co-product. Co-products are stored in inventory for use in subsequent productions or sold to customers. For example, when harvesting corn, the corn would be the main product but the co-products might include cornmeal, corn oil, and corn starch. All these products have their uses and will therefore have the production cost apportioned accordingly.

By-Products are secondary outputs that are produced alongside the main product and generally have lower value or significance compared to the main product. Unlike co-products, by-products might not be intentionally produced; they can arise incidentally or unexpectedly during the production process. By-products are stored in inventory and might have value and usability, but more typically have no value. Usually, by-products add a cost burden to the production to account for the disposal of the material. For example, in paper manufacturing, the production of paper can yield by-products like bark and sludge, which will need to be disposed of at a cost.

Formulas, like BOMs, can be categorised into different types if required, such as engineering BOMs, planning BOMs, production BOMs, costing BOMs, etc., depending on their purpose and your requirements. In simpler implementations, a planning BOM, production BOM, and costing BOM can be modelled as one BOM. In environments with frequent engineering changes and multiple alternative production methods, it may be necessary for a larger set of BOM types. In Dynamics 365 Supply Chain Management, you can specify different types of BOMs in the product lifecycle by utilising the BOM versioning feature.

  • Engineering BOM – Typically used when you design products that are based on existing product portfolios. Engineering BOMs are structured to simplify the design process and group complex products into engineering modules. For simple products, it might be possible to use engineering BOMs for the actual production process. However, for other products, the engineering BOM must be converted to an actual production BOM. Engineering BOMs are typically represented by phantoms in the BOM hierarchy. Although engineering BOMs can be used for the planning and execution of manufacturing operations, this approach can lead to inefficiencies, especially in repetitive operations where many orders are created.
  • Planning BOM – Used to do planning for material requirements. The demand for components and ingredients is calculated based on the demand of the finished products. Like costing BOMs, planning BOMs might represent a specific mix of material that is used in a period.
  • Production BOM – The actual BOM that is used for a specific production. A production BOM must take into account the actual resources that are used to produce the product. When a production order, batch order, or Kanban is created, the multiple levels of BOMs that are represented by phantoms are collapsed into one level and distributed over the operations for the order.
  • Costing BOM – Used to calculate the estimated cost of a product. For example, you can use a costing BOM when standard cost is used or the estimated planned cost of a given product is calculated. Costing BOMs can refer to a specific mix of materials and resources that are expected to be used. Therefore, you can use the costing BOM to create a representative estimated cost for a period and help avoid variances over time.
Dynamics 365

Formulas can be created and maintained via Product Information Management > Bills of materials and formulas > Formulas. The example screenshot below shows a multi-level formula; the ingredients are detailed in the Formula lines section. The product comprises an amount of concentrated and pure orange juice (which are sub-assemblies as they have their own formulas), various vitamins and acids and some co-products e.g. orange pulp.

A formula line can contain bill of materials (BOM) items, formula items, catch weight items, purchased items, co-products, or by-products. 

The subsequent questions in this survey chapter will explain many of the other settings on this screen.

Site / warehouse specific formulas

If the same product can be manufactured at multiple different sites or warehouses, it is possible to create multiple formulas with the site and warehouse specified. This will ensure that the correct formula is used when a batch order is created or master planning is run.

It is also possible (and often common practice) to use the same formula for multiple sites but use different routes. By specifying the resource on the route and selecting the ‘Resource Consumption’ checkbox on the formula line, the appropriate picking warehouse for the raw materials can be determined automatically.

Formula Versions

It is important to understand that a formula on its own has limited use. It is possible to create a standalone formula but to link it to a product, one or more Formula versions are required. A formula version allows version control such as different validity dates, different product dimensions (e.g. colour, size, style etc.) and different quantities. Versions allow multiple items to be linked to a formula and vice versa, allowing items to be associated with many different formulas.

Formula versions are typically created and maintained from the released product screen via Product information management > Products > Released products and clicking on the Formula versions button in the Engineer action pane:

Any co-products or by-products that are produced during the manufacturing process are added to the formula version screen by clicking on the Co-products button in the Formula version action pane:

And then click the New button to add any required co-products and/or by-products:

Formula and Formula Version Approval and Activation

To use a formula or formula version in the planning or manufacturing process, the formula and formula version need to be approved. Each formula/formula version can be separately approved or unapproved. If a formula is unapproved, all related formula versions are also unapproved.

Typically, approval of a formula occurs when the first relevant formula version is approved. However, in some business scenarios, these approvals might be different steps in the process and might involve different process owners.

Once a formula version is approved, it can also be activated. An activated formula version will be the one used by master planning and when manually creating batch orders. When a version is activated, Dynamics 365 will check that there is not already an active version for the same combination of product dimensions, date range, site, or quantity and will display an error message if the version conflicts with an already active version. The previous version will either need to be deactivated or the data changed to prevent a conflict.

The formula can be approved / unapproved by clicking the Approval button. If the formula is already approved you would slide the Remove approval selector to Yes:

The formula version can be approved / unapproved in the same way:

And activated by clicking the Activate button which will toggle the Active status:

Learning with Microsoft

Further information related to formulas and formula versions can be found on Microsoft Learn via the URL below.

Formulas and formula versions – Supply Chain Management | Dynamics 365 | Microsoft Learn