You must specify an operation for components if you are using repetitive manufacturing or want to use component yield calculations.

For repetitive environments, components are automatically backflushed (issued) when quantities for the parent item are reported in Advanced Repetitive or Repetitive reporting transactions. If a matching operation is not found, the component is not backflushed.

Entering an operation enables component yield cost calculations. Both Product Structure Cost Roll-Up (13.12.13) and Routing Cost Roll-Up (14.13.13) use this field when calculating material costs. If the operation yield is specified as less than 100% in an item’s routing, then material costs are increased to reflect yield loss. If an operation is not defined, the system assumes components are issued at the first operation.