Leveraging Maximum Benefits By Building Accurate Bill of Material (BOM) ! Discover All Essential Constituents and Processes!!

Abstract : 

A bill of materials, or BOM for short, is an extensive list used by manufacturing companies. These lists are highly detailed, and contain everything needed for a company. They are normally sorted into comprehensive levels. At the top you’ll find the finished product, and at the bottom you’ll find the raw materials. When reviewing a BOM, you can expect to find any and all of the following:

• Parts
• Specific items
• Assemblies
• Subassemblies
• Intermediate assemblies
• Related documents
• Product drawings
• Process of assembly
• Any other requirements to create a product

BOMs are used for complex products. You wouldn’t expect to find them for simple items. Rather, they’re used for products that require some level of engineering. There are single-level bill of materials (single-level BOM) as well as multi-level bill of materials (multi-level BOM). A multi-level BOM is normally organized by rank. The highest levels of the product are at the top. The individual pieces are at the bottom.

Keywords

Bill of Material, BOM, BoM Level, mBoM, eBoM, Inventory, Accounting, Parts, Specifications 

Learning Outcomes

After undergoing this article you will be able to understand the following

1. What's exactly Bill of Material?

2. Why Bill of Material is important?

3. What's the types of BOM?

4. What constitutes a BOM?

5. How to create a BOM?

6. How BOM affects inventory?

7. What's the advantages of BOM ?

8. What's the disadvantages of BOM ?

9. Conclusions

10. FAQs

References 

1. What's exactly Bill of Material?

A Bill of Materials, at its core, is a structured inventory of all the materials required, parts, and components necessary to build, manufacture, or repair a product or service. 

The roots of the BOM can be traced back to the early days of industrial manufacturing, when the need for detailed documentation of parts became evident. 

Today, BOMs have evolved with technology, incorporating software systems like Computer-Aided Design (CAD) and Product Lifecycle Management to enhance precision and collaboration across various departments. 

For example, in automotive manufacturing, a Manufacturing BOM includes everything from engine components to the smallest screw, while in electronics, an Engineering BOM might detail printed circuit board assemblies.

2. Why Bill of Material is important?

The Bill of Materials (BOM) is not just a document; it’s the backbone of the manufacturing process and supply chain management. 

An accurate and well-maintained BOM ensures that every part of the production process runs smoothly, from material requirements planning to assembly. It is the blueprint from which all manufacturing BOMs derive their structure, serving as a crucial point of reference throughout the product lifecycle. 

For contract manufacturers, the BOM dictates the materials template to follow, ensuring that inventory management is synchronized with production planning to meet the demands of the final product. A BOM is a strategic tool in materials management to reduce waste, improve efficiency, and control costs.

3. What's the types of BOM?

Although there are multiple types of BoM created, we shall look into the 10 most commonly used BoM in the engineering and manufacturing industry.

Manufacturing Bill of Materials (mBoM)

This is the most widely recognized BoM for an assembling organization. The manufacturing  BoM (mBoM) is utilized when a business needs to show every component and their assemblies needed to put together a finished item. Parts that require handling before assembling should likewise be entered in the mBoM.

The record contains data that is spread to all the coordinated frameworks engaged with requesting parts and building the item. These departments include materials resource planning (MRP), enterprise resource planning (ERP), and also manufacturing execution systems (MES) in some cases.

The mBoM relies upon the precision of the number of parts ordered in the process of manufacturing. The subsequent processes and the departments that take over from this stage can maintain a schedule based on the mBoM. This specifically helps the purchasing team to align the timetable to request the essential parts and arrange the most ideal cost from appropriate sellers.

Engineering Bill of Materials (EBoM)

The EBoM is all about specifying the parts and the assemblies constituted and designed by the engineering department. It includes a technical and mechanical drawing of a product, depicting the product’s functionality.

An EBoM pertains to the design perspective of a product rather than its manufacturing perspective. Commonly, it is the tools such as Electronic Design Automation (EDA) or CAD - Computer-Aided Design, that the engineers use to develop EBoM.

In most processes, there are multiple EBoM because the design usually goes through numerous revisions. An EBoM essentially represents the necessary raw materials and guidelines to finalize a product. The engineering bill of materials also covers the factors that affect the cost of the product.

The accuracy of an EBoM is crucial as the manufacturing bill of materials is dependent on it. An error-ridden EBoM could generate incorrect product costs, erroneous inventory levels, invalid accounting, and also repeated revisions.

On the other hand, an authentic EBoM can improve purchasing decisions of required parts, can give integrated manufacturing information, and steer clear of unnecessary revisions.

Sales Bill Of Materials (SBoM)

A sales bill of materials gives us information about a product that is in the sales stage. It consists of information about the details of the product before its assembly. Every type of BoM has a distinguished structure and each of these entails different levels of details. Therefore, a Sales BoM denotes the management of a finished good as a sales item.

Service Bill of Materials

This is designed primarily for the service technicians who would utilize the list of the parts, installation steps, and the repairing guidelines of a product. They may use it at the customer’s place or any other installation site of the designed product.

Assembly Bill of Materials

Similar to a Sales BoM, an Assembly BoM lists the parent item as a sales item instead of an inventory item. However, an Assembly BoM mentions only the finished product in the sales document. An assembly BoM could be single-level or multi-level.

Production BoM

The components, the sub-assemblies, costs, measuring units, are all listed in a production BoM. It makes for a foundation of the production order. It is in the production stage that all the individual components are put together to make a final and assembled product. With an efficient and fully automated BoM system, all the costs and availability of the components can be added to work orders. This guarantees that the raw materials are assigned to the products appropriately.

Template Bill of Materials

A template BoM can be used either for Sales BoMs or Production BoMs because of its flexibility. It exhibits the parent items at the top followed by the components below. A template BoM also enables you to update, replace, or delete the number of components in the sales order.

Configurable Bill of Materials

The configurable BoM is required in industries that deal with highly configurable products such as industrial machinery or heavy machinery. Therefore, the BoM consists of components necessary for designing and manufacturing an item per the client’s requirements.

Single-level BoM

Products that are simple in structure and are devoid of any subassemblies, usually use single-level BoM. This document typically facilitates for only one level children in components, assemblies, and raw material. Ordinarily, this report contains an all-out check of the relative count of parts utilized in the development of an item and those parts are recorded in part number order.

Multi-level BoM

As opposed to a single-level BoM, a multi-level BoM will in general be utilized for more intricate developments. Therefore, it incorporates subassemblies that are further disintegrated into additional subassemblies. In this type of BoM, each part number (either a crude material or work) should connect with a parent item, besides at the top-generally level.

5. How to create a BOM?

The following aspects play an important part in creating a Bill of Materials:

• BoM Level: This depicts the total number or ranking of assembly and part which is given in the broader BoM. The BoM level intends to make it simple for all the components of the BoM.
• BoM Notes: Notes incorporate any extra data crucial aside from the components of the BoM.
• Description: Each material or part inside a BoM must have an extensive and enlightening depiction. The description is aimed at making it easy for anyone who reads the document, to know about the material in detail.
• Part Name: The unique name given to each part allows anybody to recognize the part effectively without having to verify it from other sources.
• Part Number: This is unique to each part. This facilitates an easy reference of parts by anyone engaged in the manufacturing cycle. The unique part number also helps in identifying the parts.

• Phase: The different stages in the lifecycle of the product are designated by phases. This could be explained as: when a part is in the middle of the process of completion, then it is said to be in the ‘Production Phase’ or ‘In production’. Other terms for phases could be ‘Unreleased’ to identify the parts that haven’t been approved yet. These terms hold significance as they enable easy tracking of the status of completion of a part.
• Procurement Type: This term specifies the method through which the parts are acquired.
• Quantity: This highlights the amount or number of parts used in each assembly for BoM. It is a critical tool that empowers you for precise purchasing.
• Reference Designators: These are used when a product incorporates printed circuit board assemblies - PCBAs. The reference designators utilized to clarify exhaustively how the part fits on the circuit boards.
• Unit of Measure: As a part of BoM, the unit of measure is used to evaluate the part or material. Some examples of units of measure are ounces, feet, inches, each. This guarantees that exact amounts are bought and conveyed to assembly lines

6. How BOM affects inventory?

Here’s how BOM can help you manage your inventory

Capacity planning: This is about determining what the business requires to meet changing demands for its products. It includes considering the number of machines, the size of the employees, equipment utilization and overall efficiency.

Procurement planning: It has to do with ensuring that business purchases arrive promptly and in the right quantities

Forecasting of the procurement: It is the process of calculating quantities of parts required to make selected products and is about planning for the future to support inventory optimization.

Production planning: It is planning a business’s production and manufacturing modules. For instance, how you manage your supply chain, raw materials, employees, and the physical space where the manufacturing process takes place.

Improved cash flow: A BOM outlines the exact materials and quantity used in every product, so a business can order only what it needs and prevent unnecessary purchases.

Inventory optimization: This a vital part of inventory management, if a business wants to use less capital while maintaining a saleable inventory and factors in the volatility of supply and demand.

7. What's the advantages of BOM ?

BOMs permit businesses to share information between all departments, and allow for easier understanding of creating an inventory of raw materials used for manufacturing. Curating a list of primary raw materials allows you to identify the different resources the company uses most frequently.

Some of advantages of BOM are as follows:

Ease in Inventory Management 

Reduce waste

Enhances collaboration

Effective Communication

Helps in Regulatory compliance

Improves Efficiency

Cost control

Reduces data management overhead

Cost savings

Costing 

Materials planning

8. What's the disadvantages of BOM ?

Bills of materials are a great tool for tracking the components and subassemblies used in a product. They can also help you to track the cost of parts and materials, and they are an efficient way to communicate with suppliers.

However, there are some disadvantages of using bills of materials. A lot of companies use them as a vehicle to communicate with vendors, but they don’t take advantage of their full potential by incorporating them into their ERP systems or MRP systems.

Another drawback is that BOMs don’t provide much information about how long it takes to make a product or what resources are consumed during production. It’s up to you as a company to decide whether this information is important enough for you to collect it.

Levying the significance of the BoM, it should be no great surprise that errors in this document can spell out big problems in the grand scheme of things. If not caught in time, some problems can be felt not only interdepartmentally, but also by the end-user. Here are just some of the dilemmas inaccurate BoMs can cause:

1. Wrong Component Quantity/Inaccurate Inventory – Inaccurate inventory can lead to stalls in production, adding valuable time to the overall product design cycle.
2. Missing Component on BOM – Missing components on BoMs are also antecedents of costly time expenditures.
3. Incorrect Costing of Product/Accounting Variances – Errors in costing impact your overall Return-On-Investment. The consequence for this sort of problem can be widespread and affect many departments within your organization. Large enough costing discrepancies can even lead to layoffs.
4. Production of Out-of-Spec Units – The production of Out-of-Spec units can lead to rejection of product batches. As you know, this can have a number of repercussions including setbacks in the production cycle, loss of incoming jobs, or as we’ll see below, dissatisfied end-users.
5. Potential Product Liability Claims and Customer Returns – Products not made to specification as a result of inaccurate BoMs that go unnoticed could open you up to some pretty precarious issues. Customer returns and recalls to name a couple. Thinking back to current events, (exploding cell phones), big name companies are spending large amounts of money to put procedures in place to protect them from potential liabilities in the future. A customer getting injured while using your products opens the door to the L-word (lawsuits). Verifying the accuracy of your bill of materials could be a much less expensive alternative to protecting your company from liability claims

9. Conclusions

A Bill of Materials (BOM) is a critical document for manufacturing that provides a comprehensive list of all the materials, components, and subassemblies required to build a product. BOMs are essential for managing inventory, reducing errors, and ensuring accurate and efficient manufacturing processes.

10. FAQs

What are 7 steps to make a bill of materials?

Creating an accurate bill of materials is vital for all production activities later. Here are the steps you should follow:

1. Identify which information to include: Decide how detailed your BOM should be. For example, do you want to include consumables like glue or wire in your BOM? These are indirect materials and whether to include them or not depends on how you control your inventory.
2. Centralize the management of the BOM: For the BOM to remain accurate and consistent across different departments, you should have the same information system that aligns everyone to the BOM. Updating the BOM is also easier when there’s a single record.
3. Decide who’s in charge of changing the BOM: You should limit the number of editors to reduce the risks of mistakes.
4. Decide the way to track revisions of the BOM: Since BOMs can be revised many times, it’s better to ensure all changes are tracked to make the most out of BOMs. What to track includes the change itself, who makes the change, when, and why the change is needed.
5. Select the BOM presentation: How you present your BOM can be single- or multi-level, depending on how complex your product is.
6. Listing all materials needed: Create the details by listing all materials, parts, and components that will make up the product. Make sure to be specific on the material number, quantities, descriptions, etc.
7. Refine the list: Continue to improve your list. After many rounds of revision, the list may grow and change over time. You can then find out the best version for your BOM gradually.

References