What is a Manufacturing Bill of Materials?
A bill of materials, or BOM, is a critical part of the manufacturing process. There are several types of BOMs, which differ depending on the business need and use for which they are intended, but the most complete and detailed BOM is the manufacturing bill of materials (MBOM). This is a blueprint for how the entire end product will be manufactured; from its raw materials to being a finished good, including packaging materials, instruction guides, as well as items that are used in the assembly process. The MBOM should contain all the parts needed, broken down into the various assemblies required. There may be many levels to this, for example a sandwich may contain lettuce, ham, and bread, but if the bread also has to be made from scratch, this would require another MBOM.
A Central Plan
The MBOM is vitally important because it is the transition step between a product simply being a concept, to becoming a tangible item that can be sold and shipped to the customer. It drives all processes related to making the product: manufacturing, operations, purchasing, and logistics. Hence, the MBOM is behind many key decisions related to these different processes, which will directly impact the firm’s production efficiency and profitability for the product.
One important set of decisions driven by the MBOM is when to order raw materials. A product that is built in different stages may need different parts at different periods of the production process. If this process occurs over an extended period of time, parts should be ordered at different times to avoid holding excess inventory, and the dates for each order will derive from the MBOM. The MBOM will also determine the way the product is actually assembled. A single product may be able to be assembled in many different ways and/or with different techniques, where each method could impact the total production time, potential cost savings, taste (if it is a food product), staffing requirements, and product safety. The final assembly plan must be decided in the MBOM which best satisfies or accommodates these factors.
The Importance of Accuracy
Because the MBOM is so central to the creation of a product, any inaccuracies in the bill can lead to significant problems. If the wrong parts or wrong quantities of parts are ordered, a business will be unable to build enough of the product, or worse, none of the product until the error is corrected. This leaves the business with unusable components that need to be returned, or extra parts that tie up money in inventory. This can be very damaging for companies that try to run lean operations and save on costs; clearing up these mistakes are a frustrating waste of time and money. Another potential pitfall is that a defect in the MBOM remains undiscovered until after a production line is finished, or until after the product goes out to the customer. Even flaws that aren’t major faults in the product can damage demand and profit margins for that item. To avoid these problems, it is well worth spending the time to create a detailed, accurate MBOM that is easy to follow for the employees from different departments who will use it.
Ideally, your business should be able to produce its products as efficiently and cost-effectively as possible due to an accurate, organized MBOM. Taking the time to create a well thought-out MBOM early on is an excellent investment for success down the line.
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.