The Bill of Materials (BOM) is vital for managing inventory, optimizing capacity, and preventing production delays. This production “recipe” provides planning teams with all the information they need to build the products that drive the business. Accurate BOMs should ensure all resources are available and efficiently deployed to support the production schedule.
Integrated demand and supply planning solutions like Netstock use the BOMs to automate inventory replenishment and improve production planning. These solutions offer real-time insights into your business’s operations, helping you improve operational efficiency and achieve business excellence. This is a competitive advantage that is hard to replicate.
Table of contents
1. What is a Bill of Materials (BOM)?
The Bill of Materials is a detailed list of product components, materials, quantities, and their interrelationships. We often refer to it as the “recipe” for production, as it forms the production blueprint.
Each BOM includes the following:
- Item name or description
- Quantity per unit of production
- Specifications, including part numbers, sizes, or materials
- Assembly instructions or hierarchical structure showing how the components go together
BOMs range from simple, single-level lists to complex, multi-level structures for complex assemblies like cars or electronics. BOMs are an essential part of any efficient production and supply chain process because they help to:
- Streamline production processes: BOMs provide manufacturing with a plan, ensuring component availability and correct assembly to prevent delays and errors.
- Optimize inventory: BOMs outline precisely what materials are needed to prevent overstocking or shortages. This keeps stock accurate, reducing holding costs and stockouts.
- Cost management: Businesses calculate production costs based on the BOMs, which should contain the materials, labor, and overhead.
- Material Requirements Planning (MRP): The BOMs form a sound basis for the MRP. Demand forecasts and production schedules integrated with the BOMs calculate required materials quantities and delivery dates to support production.
- Supply chain coordination: BOMs enhance communication with suppliers by providing precise specifications and quantities, reducing procurement errors, and ensuring timely materials delivery.
- Production scheduling: BOMs detail assembly times, dependencies, and resource allocation, ensuring production delivers on time.
2. Types of BOM structures
Single-level BOM
This is the simplest BOM, with all parts listed on one level. Single-level BOMs are ideal for less complex products with no subassemblies or parent-child relationships. Use these BOMs to plan and produce simple products like furniture.
Multi-level BOM
A hierarchical or multi-level BOM includes subassemblies detailing parent-child relationships among components. The BOM groups items under the subassemblies, making up the final product. These BOMs provide a more detailed view of the BOM, which is needed to produce more complex processes, like the automotive and white goods industries. A vehicle engine, door, or dashboard might be subassemblies in the automotive industry.
Complex BOMs enable more precise capacity planning and detailed materials plans.
Manufacturing BOM (mBOM)
The mBOM emphasizes production components and processes and details how to use the materials. The BOM includes the materials, tools, and operational information, integrating with Enterprise Resource Planning (ERP) and MRP.
The mBOM is crucial for workflow and capacity planning and ensures accurate inventory requirements.
Engineering BOM (eBOM)
The eBOM, used during the product’s design, reflects the product’s as-designed structure. It includes detailed material and component specifications. Here, the emphasis is on design intent rather than the process.
The eBOM is a blueprint that helps production teams understand the form and purpose. It should ensure that the product meets quality standards and functional requirements.
Configurable BOM (cBOM)
cBOMs, often used in industries producing customized products. This BOM allows for components that may differ from one customer to another. The BOMs support flexible manufacturing where customers choose their features. They are often used in the electronic industry, where customers select various components, like hard drives or RAM for computers.
3. BOMs for efficient production and capacity planning
Planning BOM
A planning BOM, designed for capacity planning and demand forecasting plans quantities without specifying all component details. These BOMs support inventory planning by assessing demand trends, seasonal fluctuations, and production targets.
Planning BOMs work well with modular production setups, where different product configurations use standardized modules. Tools like Netstock match Planning BOMs with adaptable forecasting systems, as they efficiently plan inventory levels to meet expected demand.
Phantom BOM
Phantom BOMs track subassemblies, which are not stocked separately but form part of the final assembly. These BOMs, often used on continuous production lines, streamline production processes by reducing unnecessary inventory levels. They appear as part of the final assembly process.
Service BOM
Service BOMs, used in post-sale support services, include the components needed for product repairs, maintenance, and servicing. These BOMS help the service department plan their components and are essential for businesses offering long-term service agreements.
4. How BOM integration with capacity planning software enhances efficiency
BOMs integrated with capacity planning software offer manufacturers a new level of automation and accuracy. Tools like Netstock can help you optimize your production processes, demand forecasting, and inventory management by centralizing and automating BOM-related data so that production scheduling supports forecast demand.
Netstock uses the BOM data to generate replenishment orders automatically. It analyzes the BOMs to ensure critical data is kept in stock while minimizing excess stocks.
With a centralized BOM system, everyone works off a single data source. Everyone works off the same BOMs, which improves communication and planning. Automated systems can scale as they manage complex multi-level BOMs and have the capacity for multiple BOMS of various types.
Case Study: OnSite Support achieves inventory optimization with Netstock
OnSite Support, a UK-based construction industry supplier, dramatically improved its operational efficiency by introducing Netstock. The company manages over 6,000 stocked SKUs and several made-to-order items.
The implementation team integrated Netstock with the old ERP system to train users and validate forecasts before moving to the new system.
Netstock enhanced demand planning accuracy, allowed for manual adjustments, and streamlined purchase orders. As a result, OnSite Support quickly realized the following benefits:
- 25% reduction in excess inventory
- 96.4% fill rate, up from 86.9
- Better inventory control through BOM integration
- Automation with reduced administration and fewer errors
- Enhanced decision-making and operational efficiency across teams
5. Grow your business with optimized systems
Improve production and capacity planning with the right BOM structure. Netstock’s advanced planning tools support everything from simple to complex multi-level BOMs, ensuring accurate inventory, efficient workflows, and better resource allocation.
Real-time monitoring, improved forecasting, and centralized data systems help scale your business and drive operational efficiency.
