A Bill Of Materials, which is often referred to as a BOM, is a very indepth, accurate list of each and every raw material, sub-assembly, intermediate assembly, sub-component, different parts and the exact amount of each required to manufacture and produce an item.
The Bill of Material paints the most accurate picture of what an item consists of and actually costs, so it is a very effective tool within the business environment. Obviously it is necessary to know exactly how much something will cost before the end pricing is set, so the BOM will assist in setting a price that is profitable.
Knowing exactly ‘how much’ of something is required to produce the end good, via the bill of material, can facilitate various operational business processes from procurement through to inventory management. Equipped with this knowledge, it will be easy to forecast how many parts and components are required, against a demand forecast and for the business to react accordingly.
If a company plans to increase its production, then looking at the Bill of Materials will ensure that they are aware how much will have to be ordered to increase production, thus it can act as an aid for business planning.
Different Types of Bills Of Materials
Due to the fact that businesses have different stages in production and different needs at these different times, there are different bills of materials.
Engineering bills of materials will be used where the product is being designed (sometimes referred to as an “As designed configuration list or ADCL”). Within the engineering bill of materials, the focus is still on the end product, but it is based on the design, so that there is a clear understanding of what is required to make the product and what it should be priced at, in order to ensure a profit can be obtained.
Sales bills of materials define the products as they are actually ordered, so that information is generated about the components required to assemble the products.
In addition to these standard bills of materials, there are also manufacturing bills of materials, which relate to the products as they are being built, as well as service bills, which relate to the products as they are maintained.
Within process industries, the BOM is also referred to as the recipe, the ingredients list or even the formula. The use of the word ‘recipe’ is a good description, because in essence, this is what a BOM is, it simply lists out all the different things needed to create the end product.
One thing that BOMS have in common is that they start off with the finished product and then show the other parts in a hierarchy format. So if the finished product is an umbrella, then the list would start off with the umbrella at the top and work back from there.
However, there are different layouts according to the specific type of BOM being created.
A single level of BOM has the finished product (or sub-assembly item) with just a single level of items underneath it; these parts, when classed together and formed in a specific way will create the item in question.
The indented BOM will display the end product in the left hand side of the page and then the components and parts required, will be indented towards the right hand side.
The other layout that is often seen is a Modular BOM which is a way of devising a BOM for items that are complex in terms of production and also which need to generate specific information about costs involved for each component and the cost information for the different stages of sub-assembly. Sometimes this can be quite complicated, as data on, for example, how many engineering drawings are required, may also need to be produced. But with the BOM, the information is then extracted and processed by information systems, as required.