What is a Bill of Materials? Here’s What You Need to Know

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For manufacturers a bill of materials is an absolute necessity. In this comprehensive guide, we’ll explain what bills of materials are, why they’re important, and cover:

What are bills of materials?

Bills of Materials are a list of sorts that provide organisations with a complete and accurate picture of all the items required, and all of the processes associated with manufacturing a single product. A bill of material (BoM)incorporates each part that is used within individual components, completed inventory, and it itemises everything down to such things as packaging, labels and the fastenings needed in the assembly or production process.

A bill of materials can cover the smallest of assemblies to large machinery and equipment. The latter can consist of many smaller BoMs, containing every part within an individual component. BoMs can be used as a picklist of all items issued for production and when documented correctly, they also serve as a helpful tool for costing finished products.

Example of a bill of material

A bill of materials is hierarchical in nature. The finished product ranks at the primary level with subassemblies, components, and other parts at lower levels of importance. For example, a single-pane aluminium window sits at the highest level while subassemblies and other modules are listed in subsequent levels:

bill of materials example

The itemised bill of materials would include every aspect of the window assembly down to packaging and even the safety sticker for the glass pane.

Why is a bill of material important?

BoMs are important because they provide businesses with a complete and accurate picture of the inventory stock required and all the processes associated with creating a single product. In manufacturing a BoM provides a description of the individual components used in production and the relationship between each of those individual parts. In addition, it can include detail of the tools and equipment required for assembly, sub-assembly and any other consumables needed for the manufacture of a final shippable product.

BoMs are essential tools for eliminating problems in any company that runs lean and continuous improvement processes. They help to reduce errors such as ordering the wrong part or the wrong quantities or similar issues that can lead to costly downtime and production delays.

What does a bill of materials include?

A bill of material should encompass everything required to produce a final product. Detailed instructions, routes and practices that need to be followed during the manufacturing process can be included within a Bill of Material along with images, diagrams, and links to external files. Generally, a BoM should address:

  • Quantity – the number of parts to be procured or manufactured should be specified for each assembly. Quantity is a primary requirement of any BoM
  • Unit of measurement – to ensure that exact quantities are ordered a BoM should specify the unit of measure for each quantity. For example, per-unit, lengths, litres, inches, grams, kilograms, square-feet, and cubic-feet
  • BoM level – the BoM level specifies the number or ranking for each part to help identify all the elements of the BoM, whether single or multi-level
  • Part number – a unique part number is assigned to each item for easy reference and for effortless tracking of each part
  • Part name – the unique name of each item combined with a specific part number helps to identify the item easily and effectively
  • Raw material – the BoM should specify the exact quality or type of essential raw material required in the manufacturing process to produce a finished product
  • Description – each part should have a suitable description of the part to help distinguish it from similar parts
  • Notes – the notes simply provide any additional information relevant to the BoM save for the description of parts
  • Images – having images or diagrams of the product being produced, provides a visual representation to help easy understand each component and to cross-reference the BoM details with the image
  • Procurement method – this identifies whether the required part or inventory is purchased externally or manufactured internally

Benefits of an effective bill of material

Boost efficiency

The primary benefit of a bill of material is that it identifies all the inventory stock, including raw materials, subassemblies, components, and parts necessary to create a single finished product. This, therefore, ensures greater, more efficient inventory control.

Avoid waste

A BoM helps to identify avoidable waste. When they have complete knowledge of every component and step in the manufacturing process, operations teams can make proper trade-offs between time, cash flow, and inventory control throughout the life of a product.

Manage production costs

The BoM helps to identify the basic cost of components which, once component costs are known, businesses identify if it is more cost-effective to outsource or purchase assemblies externally than to manufacture internally.

Information obtained through your Bill of Materials can feed directly into any management software system to further enhance operation efficiencies. They make the manufacturing process more cost-effective and aid decision-making. Having an all-inclusive measure of total assembly promotes informed decision-making and highlights areas for improved efficiency, quality enhancement, and improved cost-effectiveness.

For companies that outsource manufacturing activities, having an accurate bill of materials is particularly important. A BoM for contract suppliers should be complete, accurate and reviewed at regular intervals to avoid cost blowouts and production delays.

How to prepare a bill of material in Excel

Online inventory control software is the most effective way of creating and working with bills of material. However, for small businesses that are still working with spreadsheets, here’s a quick guide to creating a simple bill of material in Excel.

  • Create a new landscape orientated workbook in Excel. On the first page list all your main products and or projects including any subassemblies. The product number will reference the corresponding product bill of material that lists the BoM in detail. Remember to always record the revision number and date of your product/project
  • Add column headings for your bill of materials. Headings should reflect all aspects of a part relevant to the completed project such as Part Number, Name, Description, Quantity, Units and Unit Cost
  • Format your columns. For example for unit costs, you can click the $ symbol on the menu bar to format the currency. Then select ‘Save As’ and save the workbook as an Excel template so that you can use and adapt it to create a BoM for a variety of products
  • For each new BoM, enter the details for each part in the rows under the headings. Include as much relevant information as possible, listing the manufacturer’s part numbers to ensure every part number is unique and to avoid confusion
  • Put a system in place to track all changes to the document. This can be a record of all previous versions and revisions, the changes made, by whom, and when. Ensure that each version is clearly marked and that the most recent one is always being used
bill of materials window example

An example of what a bill of materials for a window looks like in Excel

The main challenge when using Excel for your BoM’s is that spreadsheets are plagued with issues and need to be constantly updated manually. Once the file has been copied, saved to a desktop, or even emailed, the spreadsheet can be easily modified. It then becomes difficult to know with any certainty that you are using the latest, most accurate revision.

How to prepare a bill of materials in inventory management software

For an efficient and accurate way of creating bill of materials, use an inventory management software. Watch this quick video to find out how to set up a bill of material in Unleashed:

Types of bills of material

BoMs can be implemented into practically any business in any industry, the following are common variations of a bill of material.

Single-level bill of materials

A single-level BoM is the simplest form. It shows each assembly or sub-assembly and the required quantities of each. It does not show the relationship between assemblies or sub-assemblies and therefore will not identify the parts linked to a repair or failure.

Multi-level bill of materials

A multi-level BoM or an indented bill of materials, as it is sometimes referred, is a bill of materials that details exactly how you build your product. It includes all the sub assembly, the components, and the materials that go into making the finished goods.

The hierarchical structure of a multi-level BoM maps out all components and sub-assemblies for a product. A multi-level BoM shows the finished product at the top, then breaks down the components that go into that product, including SKU’s, part descriptions, quantities, costs, and any relevant specifications.

Multi-level BoMs are vital in manufacturing, especially for manufacturers who use multiple sub-assemblies (several components constructed to make a single unit that is used as a part for a larger assembly), to produce their finished goods.

Assembly bill of materials

An assembly BoM identifies the items and resources needed to assemble a parent item. Unlike a production bill of materials that contain machine or work centres, the assembly BoM simply contains a list of sub-components.

Any item with an assembly BoM is easily replenished with an assembly order that can be generated directly from a sales order. When customer’s request a slight variance of an item, the assembly order has the flexibility to be modified order on a per-sales order basis.

Engineering bill of materials (EBoM)

An EBoM is a special sort of bill of materials that deals specifically, with how a product is designed. It contains the list of all the equipment, parts, components, subassemblies, and assemblies that go into an engineering product.

Engineers typically create an EBoM using computer-aided design, that provides the product design for more than one component, where necessary. Because the information contained in an EBoM is passed on to manufacturing, it is important that accurate parts and quantities are given. This information will help manufacturing operations to make better purchasing decisions, avoid delays due to missing parts and will it ensure the availability of everything necessary to consistently produce a quality product.

bill of materials window example

Boost production efficiency and manage costs with a Bill of Materials.

Manufacturing bill of materials (MBoM)

An MBoM provides a description of the individual components used in the production of a finished good and it details the relationship between each of the separate parts used. In manufacturing, all components required to manufacture a complete, shippable item are listed by part number, description, and quantity.

An MBoM should include details of the tools and equipment required for assembly, sub-assembly and any consumables needed in the manufacture of the final shippable product.

Sales bill of materials (SBoM)

The components for an SBoM must be sales items. SBoMs represent an assembled finished good at the sales stage. The finished product is managed as a sales item, rather than an inventory stock item.

The pieces can also be sales and inventory stock items. For example, the finished product may be a set of outdoor furniture. With this BoM, both the finished product and the components appear as separate items on the sales order document. When the delivery to dispatch the customer’s order is created, the components on the bill of material are deducted from raw inventory stock.

Configurable bill of materials (CBoM)

A CBoM is used by industries that have very configured products. The creation of a CBoM is dependent on having a modular BOM structure in place because it is used to create customised versions of the products sold. Therefore, needing to be easily moulded and shaped.

The benefit of a CBoM construct is that it reduces the effort required to maintain product forms. A CBoM is often driven by configurator software.

Service bill of materials

The service bill of materials should incorporate all information required to undertake a service job. The service BoM will be regularly updated along with a single master BoM to integrate the new engineering or product change orders.

A service BoM is a list of all the serviceable parts needed to maintain an operational asset and is applicable to people servicing and maintaining machinery and equipment. A service BoM establishes a foundation for accurate, assessable information and provides relevant information to service-specific roles.

happy staff

With a BoM in place, your business can focus more on growing and less on fixing production problems.

 

Tips for building an effective bill of materials

A simple BoM has several basic features such as part number, component description, quantity, unit of measure, others go into greater depth to utilise other product attributes. Whatever the complexity of your BoM, these four point are the basis for building an effective BoM.

Tailor the BoM to project needs

Before creating a BoM, decide on the important details that are required from it and design the BoM to meet those requirements. Customise the BoM to the unique demands of your project or build.

Include adequate detail

Include as much helpful information as possible to ensure the BoM is as clear, detailed, and accurate as possible. While some types of information aren’t always helpful, a general rule of thumb is the more detail, the better.

Check the details

Go over the information to check that everything is included that needs to be and that the data is accurate before uploading the BoM or forwarding it on. Even small mistakes can be costly so review the details to ensure the information is correct.

Restrict access

Limit the number of people with editing access to the BoM, allow editing access only where necessary. Other members of the organisation can still access and use the information but will not be able to make changes. This helps to protect against human error.

And finally, the best tip for building an effective bill of materials is to implement an online inventory management system that offers bill of material functionality. SaaS companies can provide valuable advice to help get the most out of your Bill of Materials and automation will ensure that you are always working with the most current and up-to-date information.

More about the author:

Melanie - Unleashed Software
Melanie

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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