How to build an effective bill of materials
Blog //06-07-2021

How to build an effective bill of materials

by Daniel Docherty, Head of SaaS operations

If you’re in the manufacturing industry, you’ll know that a bill of materials can be an integral part of production and stock control operations. Just like with any endeavour, different businesses will have different ways of managing this practice (with varying results).   

In this article we discuss how to build a bill of materials in an effective way, and the benefits of doing so. We also explain how, with the use of our software, you can achieve even better results (increasing efficiency and making life easier in the process).   

What is a bill of materials?

A bill of materials (or BOM) is a list of everything needed to create a finished product. It’s basically a product recipe. This includes the raw materials, sub-assemblies, intermediate assemblies, components and parts needed, as well as the quantities of each needed in order to complete the production process.

What is the importance of a bill of materials?

A bill of materials strategy shouldn’t be underestimated in terms of its impact. It allows manufacturers to plan carefully, so that they know exactly what will be needed for each production run.

Without such a list in place, a key component of a product could be forgotten. In this scenario, the production would need to be completely halted, which would delay the whole supply chain. This would lead to lost time and money, as well as customer dissatisfaction.

A bill of materials is also important from a financial perspective, as it provides a clear picture of the associated costs. It also details how to construct each item. Without such guidance, the creation of products would be a lot more disorganised, with increased errors, waste and general inefficiencies.  

What are the different types of bill of materials?

  • Manufacturing bill of materials

    An MBOM contains all the unique parts needed to construct a physical product. This type of BOM is all about what is required to complete the manufacturing.
  • Engineering bill of materials

    An EBOM is all about the design of each product. An engineer will possibly use a drawing or computer-aided design for this process. This bill of materials will include everything needed in this design version.
  • Configurable bill of materials

    A CBOM is used to aid with manufacturing, but it’s for companies whose products vary slightly (or are configurable) in some way. This bill of materials offers a more flexible approach, so that companies can make last minute adjustments to change specifications like colour, size, etc.
  • Sales bill of materials

    An SBOM looks at items from a sales perspective. This will list everything included when the sale takes place. Perhaps the finished product is made up of more than one part and needs to be assembled.

As well as the different types, there can be different levels to a bill of materials too. A single-level bill of materials will include all the top-level materials needed to construct a product.

A multi-level bill of materials is when you start to drill down, if there are smaller components that make up each part. There could be several levels that are structured in a hierarchical fashion.  

How to build a bill of materials effectively

  1. Include everything 

    All materials should be included in your BOM, no matter how small or irrelevant you think they may be. If anything is missed, it will create costly delays when constructing the product.
  2. Identify the BOM level 

    Each material should be assigned the correct BOM level (when using a multi-level bill of materials). This will help to govern at which stage each material comes into play.
  3. Note the procurement type 

    It’s important to distinguish how each item was obtained. Was it perhaps manufactured or purchased from a supplier? You should also note whether it’s ready to be used in its current state, or if it still needs to be altered.
  4. Part name and number 

    Each individual part should be assigned its own unique name and number. This is so that employees can identify them with ease.
  5. Highlight the quantity 

    The BOM should specify the exact amount of each part needed to create one product. When using this in tandem with demand you can maintain good stock levels.
  6. Distinguish the phase 

    It’s crucial to note the phase each item is at in its production cycle. This makes it easier to determine timescales, and to judge what needs to happen next.
  7. Ditch the spreadsheets 

    Some manufacturers may build their entire bill of materials on paper or a spreadsheet. This may suffice for some, depending on their specific needs. But these manual techniques require a lot of manpower to monitor, maintain and update. They are also limited in terms of the complexity of BOMs that can be created. They’re also more prone to human error.
  8. Use dedicated BOM software 

    A more sophisticated system would overcome these limitations, and allow you to effortlessly implement the best practices mentioned above. Using software with specific BOM management functionality is the easiest and quickest way to improve the way you carry out this activity.

Benefits of good BOM management

Increased clarity

By having a thorough product recipe and schedule, it becomes easy to see what is needed from everyone involved in the process. With the right system in place, all employees have access to an up to date / consistent pool of product data.  

Manage finances more accurately

If the finance team has access to this information, they can see exactly how much it costs to source parts and to assemble products. They can use this when working out the company’s financial performance. And if they compare it to other data around customer demand and sales, they can work out how profitable each product is.

Better inventory control

By knowing exactly what it takes to build a product, manufacturers should have a greater grasp when it comes to stock control. If they can find a way to link this to sales and product demand (as we’ll come on to), they’ll be able to maintain an optimum level of stock (reducing storage costs too).  

Enhanced production planning

Having a detailed list of ingredients (and knowing at which point they’ll be needed) makes it much simpler to plan production runs, as there will be a clear picture of the flow of actions that are needed.     

Increased efficiency

Effective BOM management improves your efficiency and productivity. The benefits mentioned above have a positive impact on the whole supply chain, ensuring you can deliver to customers on time.

Less waste

Not only will you have enough materials to meet product demand, but it means you don’t have too much either. Without a comprehensive bill of materials, it’s likely that a lot of guesswork would take place. An overestimation of required materials inevitably leads to waste.  

Which BOM management software to use?  

It should be a central objective for manufacturing businesses to carry out BOM management as effectively as possible, as this activity is foundational when converting an abstract idea into a purchased product.    

Our Manufacturing Software has a dedicated bill of materials function. It allows you to create BOMs with unlimited depth, meaning you can create product configurations and stock interdependencies that are as complex as you see fit.

You can achieve a level of intricacy that’s not possible on paper or in spreadsheets. With dedicated fields to record all the necessary data, everything is accounted for with ease.  

Manufacturing Software is more than just a bill of materials management solution though. It unifies all your business functions, allowing you to complete all activity in one place. It has functionality around accounting, e-commerce, stock control, contact management, production planning and more.

This means that when an online sale occurs, this influences the financial and inventory data in the system. So, not only do you have a clear picture of every material needed, but you’ll know exactly when to source from suppliers and when to start production runs (as this data will be synchronised with demand).  

It’s a fully integrated business management solution that provides a transformational level of efficiency throughout your supply chain. It unshackles you from repetitive tasks, allowing you to expand as much as you want to (as the system is scalable too).    

 

If you found this topic interesting, you may want to check out some of our similar articles below. If you're looking to implement an effective bill of materials process for your business, read more about our Manufacturing Software

Blog Business Cloud Essentials Manufacturing
Daniel Docherty

Daniel Docherty

PUBLISHED BY

Head of SaaS operations

Daniel joined Advanced in May 2019 to lead our Software as a Service portfolio and brings with him over 15 years of experience in core business and finance solutions, working with customers from a wide background of industries and scale.

Read published articles

Related Articles

BLOG // 28-09-2021

Materials management best practices for manufacturers

by Grace Child, Senior Product Marketing Executive

Materials management best practices for manufacturers

A quick lean manufacturing guide

There are many tried and tested production methods in manufacturing. Different strategies are appropriate for different businesses, so it’s always wor…

by Daniel Docherty, Head of SaaS operations

BLOG // 02-09-2021
A quick lean manufacturing guide