Creating a Bill of Materials:
What is a Bill of Materials (BOM)?
A bill of materials (BOM) is a comprehensive list of parts, items, assemblies, and other materials required to create a finished product. A BOM also contains the quantity or volume of each item used.
Regardless of the size of a project, a bill of materials is essential for production.
It acts as a shopping guide for the procurement of materials and a guide on production, meaning no matter who reads the BOM, by using the information provided they will be able to make the product.
BOM’s also include time factors such as lead and production time, so the Sales teams can provide accurate delivery dates and wait times to clients. Not having a BOM, or having an inaccurate BOM, can lead to waste, inefficiency, and errors.
What are the benefits of having a Bill of Material (BOM)?
- Purchasing – Planners can use a BOM to plan purchases in the correct quantity.
- Costing – BOMs are vital for conducting accurate costing of finished goods. If the BOM is truly multi-level and fully and accurately measured and costed, the Cost of Goods Sold (COGS) calculations will be accurate. This will impact margins, profits, and even taxation levels.
- Inventory – By using an accurate BOM and purchasing in appropriate amounts, manufacturers can better control their inventory. This not only means the reduction or elimination of shortages, but it also means a reduction of excess inventory. The procurement team do not want materials sitting in the factory not being used.
- Waste Reduction – Because all levels of components are accurately measured for quantity and volume, waste can be measured and controlled better. Even the slightest volumetric miscalculation can cause unnecessary waste in a high-volume operation.
Defined simply, a BOM ensures the right parts are in the right quantities at the right time.
What to include in a Bill of Materials (BOM):
Why having an accurate, detailed Bill of Materials (BOM) is important:
It is not uncommon to have multiple departments — engineering, purchasing, manufacturing, outsourced contractors — working from the same Bill of Materials in order to bring the product through the production process.
Small things may make a big difference in the accuracy of a BOM. One example is consumables. While many may not want to go to the trouble of adding glue, tape, labels, and shrink wrap, many product lines have missed ship dates due to one of these unforgotten components.
While making time to measure, cost, and quantify an application of a small amount of something such as glue may seem like a headache, it is important for the BOM to be complete.
Two essential types of BOMs to consider:
Manufacturing Bill of Materials (MBOM):
A manufacturing bill of materials displays the materials, assemblies and subassemblies that are required to produce a finished product. Parts that require processing prior to assembly must also be included in the MBOM.
Engineering Bill of Materials (EBOM):
An engineering bill of materials is different from a manufacturing BOM, as it defines the design of a finished product. The document usually lists the items, parts and components in the product as designed by the engineering team.
Further issues associated with inaccurate BOMs include:
- Inferior material planning
- Material shortages
- Inaccurate product costing
- Elevated production costs
- Delays in shipments
- Lost sales
- Increased risk of product liability as a result of a malfunctioning product
Creating a detailed and accurate Bill of Materials detailed, accurate BOM is essential for manufacturing, regardless of the product size or job complexity. A MBOM and EBOM will inform all teams within the business (design, engineering, sales, procurement and assembly) of the upcoming production jobs and projection of sales. As a result BOMs can help a business plan, budget, project and operate.