What Is A Bill Of Materials?
In a nutshell, a Bill of Materials (BOM) is the complete list of all the items that are required to build a product. But, it is more than a mere shopping list. A list of material, or the Bill of Materials is a list of all the production and assembly needs of an item.
For example a baker may include raw material such as bread flour, but also the necessary infrastructure, such as kneading machines and ovens in the Bill Of Materials. In addition to that, instructions on how exactly production and assembly should work is also a part of BOM. A list of materials is used within all forms of production and assembly: assembly by stock (Assembly To Stock), assembly by order (Assembly To Order), manufacturing by stock (Made To Stock), and manufacturing by order (Made To Order.)
A bill of materials usually appears in a hierarchical format, with the highest level displaying the finished product and the bottom level showing individual components and materials.
In a nutshell, it is the complete list of all the items that are required to build a product.
A well-defined BOM helps companies:
- Plan purchases of raw materials
- Estimate material costs
- Gain inventory control
- Track and plan material requirements
- Maintain accurate records
- Ensure supply robustness and reduce waste
Types of BOM:
A Bill of Materials is used in almost all fields related to production. Due to prolonged use, there are two activities for which different versions of bill of material were created. The two most important types are: 1) Engineering Bill Of Materials (EBOM) and Manufacturing Bill Of Materials (MBOM) or the list of manufacturing materials. As the names indicate, these lists of materials are specifically designed for the design and production phases of the items.
- Engineering Bill Of Materials (EBOM)
The engineering bill of materials (EBOM) defines the finished product as it was originally designed. It lists the items, parts, components, subassemblies, and assemblies in the product as engineering designed it. The EBOM is often created by the product engineers based on a CAD drawing. For a finished product, more than one EBOM may be created.
- Manufacturing Bill Of Materials (MBOM)
This type of BOM is a set of documents that have all the information related to assemblies that are needed to finalize and ship a product. It includes things like packaging materials such as boxes, quickstart guides, CDs, or any other related item that completes the packaging of a particular thing.
A good BOM always includes certain essential elements:
- Full representation of the product:
A comprehensive, informative description of each material or part must be included. This description helps you and others identify parts and distinguish between similar parts and materials.
- Unique part names:
Each part, material, or assembly should also include a detailed, unique name that allows anyone to identify the part easily without having to reference other sources.
- Unique part numbers:
The BOM should assign a part number to each item, which allows anyone involved in the manufacturing cycle to reference and identify parts instantly. To avoid confusion, each part must receive only one part number.
Make sure to record the lifecycle stage of each part in the BOM. For example, for parts that are the process of being completed, a term like “In Production” can be used. Other terms, such as “Unreleased” or “In Design” can be used for parts that have not yet been approved. Such terms are especially helpful during new product introductions since they allow progress to be tracked easily.
- The available inventory:
It is the inventory of each component and material that you have ready to use.
- Stock or security inventory:
Minimum amount your company has in case there is a deficit.
- Temporary raw material:
It is optional, and you may not use it if your goal is to save inventory costs.
- Lead time (cycle time, delivery time, waiting time, etc.):
It is the time that elapses from when you place the order of an order until it arrives.
- Scheduled receptions:
Orders placed long ago, and that is expected to arrive in the next few days.
It is the number of articles, materials, components, and supplies that are a part of the manufacturing process. If it is a finished product (independent demand), the quantities come from the Master Production of Schedule. A master production schedule (MPS) is a plan for individual commodities to be produced in each time period such as production, staffing and inventory. It is usually linked to manufacturing where the plan indicates when and how much of each product will be demanded.
This plan includes significant processes, parts, and other resources in order to optimise production, to identify bottlenecks, and to anticipate needs and completed goods. Since a MPS drives much factory activity, its accuracy and viability dramatically affect profitability. Otherwise, if it is a material or component with dependent demand, the gross needs will be those dictated by the explosion of needs. So, there is an urgent requirement to define total needs. Using MPS helps businesses avoid shortages, costly expediting, last minute scheduling, and inefficient allocation of resources.
It is important for you to check the available Inventory, which is a product or material that is available at all times. It is the result of taking the available inventory that was left at the end of the previous period and adding it with the scheduled receptions. Then, subtracting it with the gross needs of that period.
Available inventory = Available inventory from the previous period + Scheduled receipts-gross needs
If the available inventory is less than the gross needs, we use the safety stock. Therefore, the available inventory will be equal to the security stock, and the latter will be restored in the next period. Consequently, it will be added to the net needs.
Net needs are obtained when the available inventory is not enough. This implies the obligation to generate an order. In other words, when the net needs are more significant than zero (0), the launch or release of a production order is generated to have the material available when required. If they are less than 0, it means that the available inventory is sufficient to meet the demand so that we will place 0 as a result.
They are obtained as follows:
Net needs = Gross needs + security stock-inventory available from the previous period-scheduled receptions
Example of BOMs
You can generate BOM on excel sheets quickly. And, the best thing about them is that they can be formatted the way you want. However, it is also a bad thing because then, it is easy to tamper with it, and anyone can make changes to it.
This leads to inconsistencies across the BOMs of companies. In such a scenario, generating BOMs through software can be helpful to maintain consistency.
Here is a screenshot of a BOM with some of the necessary details:
Here is a screenshot with the header. It is critical to have some notes on the header to make sure that all the details are mentioned on it.
Frequently Asked Questions (FAQs)
1. What is the purpose of having a BOM?
A list of materials is used first to schedule the purchase of materials. The material lists determine which elements should be purchased and in what quantity. Therefore, the necessary materials must be detailed in the list of articles. Utensils such as cutters and glue guns are sometimes not included in the list of materials, but without buying these tools, it is difficult, for example, to mount a photo frame. Frequently, necessary materials, such as screws, remain fixed in the inventory. However, it may be useful to put them on the bill of materials. The document helps determine the total cost of production or assembly of the item.
2. How can BOM help?
The Bill of Materials helps by ensuring that production or assembly goes well and at all levels. By adding clear instructions for each step, one can reduce the number of errors. If an employee discovers an anomaly in a product to be used, you can also check the steps and instructions above to find out where things could go wrong. For example, if a mechanic at a car factory detects a failure in the engine to be mounted, he can see with the engine manufacturer, what instructions have not been performed correctly. However, if the engine manufacturer is an external supplier, you can only indicate where the fault is. The supplier should investigate within his list of materials where the manufacturing process could have gone wrong regarding the instructions.
3. What, when and how much to produce: the Master Program Schedule (MPS)?
You must have a Master Production Program in which you have the number of units produced per time horizon, usually plotted in weeks. This will allow us to know what components and materials we must get and manufacture to meet the quantity defined in the MPS, but not before considering the inventory.
To sum up, you must note that regardless of what kind of software or even excel sheets that you use for your BOMs, it is crucial to have all the information in it. Moreover, you also need to make sure that it is accurate so that you build high-quality products. A comprehensive BOM is also essential because it has all the valuable information to keep a check on it.
In the end, manufacturers rely sincerely on these Bill of Materials to build products. Therefore, you can choose to have either part of the names of quantities or complete information depending on your requirements. Since, there is a tremendous amount of information in a Bill of Materials, companies either use a software or an automated tool to do it. In any case, it is more important to have a BOM with comprehensive information so that it is helpful for future reference.
Profitbooks is an excellent example of a software that helps you manage everything from purchase to sales. You can create bills of material and manage your inventory with ease.