A phantom assembly is a material that is not physically produced, but its components are directly consumed in the production of a higher-level material. To set up a material as a phantom assembly, you need to do the following steps:

Define the special procurement type as 50 (phantom assembly) in the material master of the phantom assembly. This indicates that the material is not procured or produced, but its components are exploded in the BOM of the higher-level material.

Change the item category of the phantom assembly in the BOM of the higher-level material to N (phantom item). This indicates that the phantom assembly is not relevant for production order or MRP, but its components are.

Alternatively, you can change the phantom item indicator for the phantom assembly in the BOM of the higher-level material to X (phantom assembly). This has the same effect as changing the item category to N, but it also allows you to use the same BOM for different purposes, such as costing or sales. References: [SAP S/4HANA Production Planning and Manufacturing Certification Guide], page 68; [SAP Help Portal: Phantom Assembly].