Bill of Materials: A Recipe for Success
Mmm, the warm smell of grandma’s apple pie.
That sweet scent which takes you back to your childhood without a moment’s warning.
We’ve all tried to replicate the recipe from memory, but it never comes out quite the same. After all, grandma spent years perfecting this recipe through trial and error.
But unless she writes it down for the rest of us, then it could be lost in time.
What a shame that would be.
And just like brilliant food, brilliant products also need recipes.
In the manufacturing world they are known as Bill of Materials, or BOMs.
A Bill of Materials is a list of the raw materials, sub-assemblies, intermediate assemblies, sub-components, parts and the quantities of each needed to manufacture an end product.
It’s basically the DNA helix of a product.
Like a food recipe, they let you know what goes in and often how to do it too.
They are meant to be followed of the letter and are considered a core element of any efficient manufacturing operation.
What is a Bill of Materials?
Although it is an essential part of the manufacturing process, there’s a lot of discussion online about why Bill of Materials is important.
Just to be clear Bill of Materials (BOM) has varied applications and is sometimes also referred to as Production Recipe or Assembly Component List.
In this post, we are looking at Manufacturing BOM.
So, what is BOM in manufacturing?
In Lean Manufacturing, which has quickly become a dominant assembly method nowadays, a BOM includes more parameters which traditionally were handled as separate structures (such as Operations and Routings for example).
It may include parameters like effort and equipment required to build a product.
So you at least know what goes in the product, and often how much resource is spent on it too.
As you can imagine the complexity of these things totally depends on the complexity of the product. A bill of materials for a laptop for example could be as long as a New York skyscraper.
The bill of materials for a simple, comfy cushion could fit in the palm of your hand.
For this reason, it’s good to get to know the different types of manufacturing BOMs. Each has their own uses and you can conceptualise which would be the best fit for your products.
We have Modular, Configurable and Multi-level BOMs.
Your BOMs are going to be one of many aspects your business is going to need to master to be successful. That’s why we’ve compiled an absolute, must-have guide for anyone manufacturing for small businesses. We’re all in this together and this will help you understand the industry.
BOMs that describe the sub-assemblies are referred to as modular BOMs.
The main reason why modular BOMs are used is that the job of maintaining the BOM is much simpler (given that the assembly list of the product is long and complex, and maintenance does not require a complete overhaul of the BOM each time).
A configurable bill of materials (CBOM) is a form of BOM used by industries that have multiple options and highly configurable products.
The CBOM is used to dynamically create products that a company sells, so it can easily be moulded and shaped. The benefit of using CBOM structure is that it reduces the work-effort needed to maintain product structures.
The configurable BOM is most frequently driven by "configurator" software. Here’s an example for custom furniture.
The development of the CBOM is dependent on having a modular BOM structure in place.
Modular BOM structure provides the assemblies/sub-systems that can be selected to "configure" an end-item. So, this structure requires modular BOM as well.
A multi-level bill of materials (BOM), also referred to as an indented BOM, is an intricate bill of materials that lists the components, assemblies, and parts required to make a product.
It provides a display of all items that are in parent-children relationships. When an item is a sub-component for example, all its components including finished parts and raw materials are also exhibited.
A multi-level structure can be illustrated by a tree with several levels and branches.
In contrast, a single-level structure only consists of one level of children in components, assemblies and material.
You can see then that there are layers of complexity you can apply to your bill of materials depending on your product.
You can’t say each type of product always fits a specific BOM.
It’s a lot more fluid than that.
If your comfy pillow has a hundred mini pillows inside it, then maybe you could use a multi-level BOM too.
The important things to consider are whether it captures the recipe as you intend. And if it gives you the space to improve it as you go along.
You want to make sure your BOM is both flexible and accurate.
That’s what it really boils down to.
Benefits of BOM Manufacturing
Comparing food and manufacturing gives a basic idea as to why recipes are a useful thing to have.
But the benefits of having BOMs (aka product recipes) in manufacturing can be a lot more widespread than just on the end-product itself.
Because, as much as I love grandma’s apple pie, it’s not quite as intricate as a manufacturing business’s workflow.
With a clear list of materials, quantities and inventories you will ensure you won't run out of materials.
By using BOMs your Smart Workshop Software can remind you when stocks are low so that you can replenish as necessary.
This can massively reduce delayed deliveries to customers. Awesome.
Knowing the required inventory levels, process involved and the time it takes to manufacture, results in timely and predictable delivery processes.
By knowing how everything functions at every step along the way you can ensure that each step happens on time when it needs to.
With better planning comes more accurate knowledge on how much time a job will take which feeds back into the BOM.
This allows your team to cost up jobs and orders more effectively, making you more profit.
It’s a beautiful self-refining cycle.
Another reason why a BOM is essential in manufacturing is its ability to help decrease waste: the word that makes every manufacturer cringe.
And a lot of waste comes from excess inventory itself. You are tying up resources that could be put to use and keeping unusable products. It’s throwing away money.
With BOMs you know what is needed and by bringing in the right parts efficiently, you aren’t left with excess inventory. You know exactly how much would be needed, and you aren’t left with incorrectly assembled products that cannot be used.
In the end you are left with product recipes that constantly self-improve. And at the same time this kind of BOM inventory helps manage your inventory at optimal levels.
Even grandma would be impressed.
How to Make a Bill of Materials
Despite the awesome benefits of using BOMs, it cannot be denied that you have to spend a bit of time putting them together at first.
But at the very least you can think of it as an exercise to really get to know your product, and even the chance to know your margins too. It can get intimate.
Here’s a basic bill of materials example to show how you can get started.
Let’s go with making wooden doors, simple enough.
First job is to list the items that go into making a door.
Okay I guess we’re done then. Time to go home?
Well not quite yet, there’s a few more steps to go through. And the next is to determine how much of each item we need.
A “sprinkle of sugar” might work for grandma’s apple pie, but we need to be a bit more exact when putting the door together.
-Panel (x1 unit)
-Handle (x1 unit)
-Hinges (x2 unit)
-Latch (x1 unit)
Brilliant, we know what we need and how much of it.
Next up: how much does it cost?
It might not matter too much to grandma how much it cost to get her apples from the farmers market. But when it comes to business your costs matter a little bit more.
-Panel (x1 unit) $20
-Handle (x1 unit) $6
-Hinges (x2 unit) $2
-Latch (x1 unit) $2
Total Cost: $30
So, that’s about as simple as a Bill of Materials, or product recipe, as you will ever find.
It’s not too hard to imagine how it could become more complex. If for example, we offered different door handles then it would make sense to build a configurable BOM.
Then the handle section needs to be split into two subsections and the different costs accounted for.
This is not to mention all the processing costs. Putting the door together.
That’s an essential element of the BOM and requires a bit of time to calculate.
But that should give an idea on how it works, so you can start building your own BOMs.
In order to make your manufacturing process more effective you may want to "enrich" the BOM structure with more parameters.
The ice cream to compliment the pie if you will.
Slot these into your BOM as you see fit.
Lead Time — the time between the initiation and completion of an assembly process;
Scrap factor — the percentage of components and/or materials ruined during manufacturing operations;
Quality criteria — upfront defined measurable tests and test results in order to confirm that the quality objectives of an assembly process have been met;
Done criteria — an upfront agreement of assembly steps and tasks which need to be completed in order to complete the assembly process; and
Roll-up Cost — calculates the standard cost based on the BOM and routings of assembling the product.
It all depends on the manufacturing process and what data you want to make use of. Each of these metrics can have great value for business making decisions.
Bill of Material Software
We got through what BOMs are, why they’re important and how to make them.
But where do you keep and update them?
Well grandma’s recipes can just be written on a piece of paper.
If you manufacture a simple product with few processes, then a spreadsheet should do the job.
Anything beyond that though and it gets a little tricky. Especially if you have sub-assemblies and multiple components involved.
It would make a lot more sense if you could have a software that made everything seamless, wouldn’t it?
Well you can thank your lucky stars then.
Because you can now use a Smart Workshop Software, like Katana which embeds your BOMs into your inventory and entire workflow.
That means you can see how your BOMs are affecting your inventory, production and sales from a single dashboard.
Katana Smart Workshop Software allows you to create BOMs that interact with your entire workflow in real time.
To create a product recipe (BOM) you simply have to log in to your Katana account, access the “Items” screen, click the “Products” tab and then choose a product you need to create a recipe for. Then choose the “Product Recipe” tab and add your materials and their respective quantities. The stock cost will automatically update, accordingly.
Here’s a handy video tutorial to simply things:
Then you can enjoy grandma’s delicious apple pie with absolute peace of mind.