Bill of Materials Component Item Types

A Bill of Materials can contain both normal or “stocking” items, and non-stock items. 

Stocking Items

Stocking Items are items that are tracked by the inventory control system.  Stocking items must be available in the warehouse location in which you wish to build something in order for the system to allocate the items to a shop order. 

Stocking items are used for most physical goods that have a value.  Stocking items are used for both serialized and non-serialized items.  Examples of typical stocking items would be computers, disk drives, auto parts, medicine, food,  television sets, television mounts, jewelry, cars, comic books, valves, pumps, fish, trees, etc. 

Non-stock Items

A Non-stock item is an item that is treated as available at all times, and that is not tracked by the inventory control system.  The quantity of a non-stock item is not adjusted when a non-stock item is sold, received, or consumed by the shop order system.  Non-stock items always have an on hand quantity of zero, but any shop or sales order lines that are entered for non-stock items will be fully allocated to as they are created.

If items are set up as non-stock items, the system will not prompt you to purchase them.  If a non-stock item needs to be purchased, it is re-ordered manually (if necessary).  

Non-stock items are typically used to handle things like internal labor and or production consumables.   Internal labor is available from your in house staff and does not need to be purchased.  Production Consumables are items that have a low cost or that are purchased in large quantities as they are needed (like tape, screws, grease, labels, etc).   

The cost of non-stock items are directly expensed or charged to a general ledger account such as Production Consumables as vendor invoices for the items are received.    If a non-stock item is set up for internal labor, the costs for the labor item are recorded when payroll is processed and posted to the general ledger.

A cost can be assigned to each non-stock item.  You can specify the cost for a non-stock item when it is set up, and you can adjust the cost of a non-stock item using the Average Cost Adjustment program.  However, non-stock items are NOT tracked in the inventory or work in process sub-ledgers or in the general ledger inventory control account.  Because of this, non-stock items must be assigned to specific product lines are set up to correctly post the cost of the items to the appropriate accounts as transactions for the item are processed.

If non-stock items have a cost assigned to them, and they are included in a bill or material, then the cost of the non-stock items will be added to the cost of the item that is built using the BOM.  The system will also make a journal entry each time non-stock costs are added to inventory in order to keep the inventory sub-ledger and general ledger control accounts in balance (it will reduce the cost source or “inventory” account pointed to by the nonstock item and it will increase the inventory control account pointed to by the top level item).

Since Non-stock items are not included in inventory, and since the system needs to adjust the general ledger when the items are consumed by assembly operations, the Product Line information for a non-stock item MUST be set up correctly.  Each Non-stock item should be assigned to a product line that contains the correct account to be reduced when the non-stock item cost is converted to inventory.  This would normally be an account like “Production Consumables Expense” for consumable items and an account like “Internal Labor used in Production” for an internal labor item.  The Production Consumables account would be increased as vendor invoices for consumable items are processed, and it would be decreased as consumable items are converted into finished goods.  The Internal Labor account would be increased as internal labor is converted to inventory and the balance in the account would offset or reduce the payroll expenses recorded in the other payroll accounts in the general ledger.  This type of setup ensures that costs for items like labor and consumables are not recognized twice.   Non-stock items are discussed in more detail in the documentation for the Product Management System.


BOM Creation and Maintenance