You might be an established player in the manufacturing business, or maybe you have just started out and are new to manufacturing. Whoever you are, you must surely have come across the term Bill of Material, or simply “BOM”, on a frequent basis. A BOM is an essential component of the manufacturing process that binds together all the concerned departments and suggests how a product should be put together.
A BOM is an integral part of the manufacturing process for both discrete as well as process manufacturers. Talking particularly about the latter, a BOM is of great significance, as it allows linking the formula with the finished goods or the intermediates stored in the inventory. Such is the importance of BOM that an inaccurate or incomplete BOM can potentially result in inferior material planning, material shortages, inaccurate product costing, elevated production costs, costly delays in shipments, lost sales, increased risk of product liability as a result of a malfunctioning product, or even bring the entire unit to a standstill.
This is precisely why the manufacturers must fully understand exactly what a BOM is, how it functions, what its types are, and why the Bill of Materials is important.
So firstly, what exactly is a Bill of Materials?
Bill of Materials is nothing but a structured list of all the components that make up a product or assembly – including the raw materials, semi-finished products, or ingredients, sub-assemblies, intermediate assemblies, sub-components, parts, material number of each component, unit of measure, and the quantities of each needed to manufacture an end product. Required to define how an item is manufactured from top to bottom, a manufacturing BOM may be used for communication between manufacturing partners or confined to a single manufacturing plant. It lets everyone involved in the procurement and manufacturing chain know exactly what to purchase, how to purchase and where to purchase.
A BOM can be a single level and multi-level, and you can understand it this way. A finished material can contain semi-finished materials as components, which in turn can have raw materials as components in the next level. A manufacturing BOM also includes a comprehensive set of instructions on how a product must be assembled right from the conception phase through to the finished product ready for shipping, including the packaging materials. A well-defined BOM can help manufacturing businesses with planning for purchases of raw materials, estimation of the material costs, enhance inventory control, tracking and planning material requirements, maintaining accurate records, and waste reduction, among other things.
Types of BOM in BatchMaster ERP
- Container BOM: The container BOM is mostly used by bulk manufacturers. It can be explained this way: A Cola manufacturer produces 10,000 ltrs. of Cola, and stores it in bulk. He then sells it in different packs of 200 ml, 500 ml, and 1 ltrs. 2 ltrs. etc. The manufacturer can’t do it without using a container BOM.
- Intermediate BOM: The intermediate BOM also links formula to an item location, but in this type of BOM, no packaging is required for an intermediate item.
- Finished Good BOM: A Finished Good BOM links formula to an item location. In this type of BOM, the packaging items and their quantities are also defined.
- Assembly BOM: An assembly BOM is predominantly used for discrete items, and it allows the assembling of the final product.
Another important part of a BOM is its Fill Level. It basically signifies the quantity of the material that should be filled to make one stock unit of the end item. BOMs provide manufacturers with the flexibility to define Fill Level in the desired unit of measurement, as it can be interpreted in the system weight unit or system volume unit. This eventually helps in meeting the current yet an important requirement of multiple packaging by the manufacturers. For a Finished Good BOM, the material to be filled is produced using the formula associated with this BOM. Fill Level is not applicable to an Intermediate BOM, as an intermediate is not a packaged product. Also Fill Level may be assigned for an Assembly BOM too, allowing cost analysis.
Why is the Bill of Materials important in manufacturing?
By now you must have got a fair idea about how critical a role manufacturing BOM plays in the development of any product. In fact, you simply cannot manufacture a product without a BOM. It helps the process manufacturers manage and oversee resources and identify materials to reduce wasteful spending by providing them with accurate information, which also facilitates better decision making to manufacture cost-effective & efficient products – irrespective of whether they are food products, pharma products, chemicals, or paints. Let’s take a look at exactly why Bill of Materials is so important in manufacturing:
- Avoid running out of materials: Due to inaccuracy in BOM, the production team runs out of inventory required to build the product, thus resulting in production halts. With a clear list of materials, quantities and inventories, a manufacturing BOM allows you to manage what you need to ensure you never run of materials again. An ERP software, which allows you to set reminders when stock is running low, also comes in handy in this regard.
- Get a tailor-made shopping list: With knowledge of every raw material needed, along with its quantity, procurement of materials becomes a cakewalk for the manufacturers. BOM actually offers the manufacturers a custom-made shopping list, which can also be scaled up and down depending on budgets.
- Ensure better planning: Quite similar to the point mentioned above, BOM offers the process manufacturers with a comprehensive list of what is needed to complete a project. This way, the planners are equipped with all the data they require to chart out a plan as to how long the project will take and how many people need to be involved.
- Time & cost savings: Since a manufacturing BOM lays the foundation for effective inventory management, the manufacturers can ensure the stock is ordered only when it’s required. This way, excessive inventory holding costs can be avoided, and cost savings can be made. Furthermore, with the manufacturers having knowledge of how much of each component is required, and with the individual components being in stock and waiting to be used, they get to save crucial time. They also save time by linking one formula to multiple BOMs.
- Encourages consistency: There are many small businesses where often only one person is responsible for specific areas of production. For such businesses, a manufacturing BOM provides a framework, which can be followed by the staff to ensure consistency.
- Unites all departments: A Bill of Materials predominantly ensures that all departments work together as one. Different departments such as design, procurement, production, and sales give input to ensure the BOM that’s created is 100 percent accurate.
- Convenience: The packaging of finished goods is often done keeping the convenience and the requirements of the end consumer in mind, especially in the process manufacturing industry. For example, these options may range from an 8 gm sachet, to 250-500 gm bottles, to bulk containers. In such a case, manufacturers can associate formula, labor, overheads as well as packaging materials with the finished good to govern the production process, using a BOM.
If you’re looking for advice about a manufacturing ERP software, or creating Bills of Materials for your process manufacturing business, please contact our sales team at firstname.lastname@example.org. We’re confident your search will end at BatchMaster ERP– a specialized manufacturing ERP with a comprehensive BOM functionality.