Multi-Level Bills of Material: Managing Complex Product Structures Efficiently

Your Bill of Materials (BOM) is more than just a list—it’s the foundation of your production planning. For straightforward products, a single-level BOM might suffice. But as your business grows and you produce more complex items with multiple subassemblies, a simple list won’t cut it.

That’s where a multi-level (or indented) BOM comes in. It doesn’t just show components—it maps out the relationships between parts, subassemblies, and final products. Yes, these BOMs are more intricate, but the payoff is worth it. They offer valuable insights that lead to smarter production plans, optimized inventory levels, and smoother supply chains.

When integrated with your inventory management or ERP system, a multi-level BOM becomes a game changer. You’ll plan capacities more accurately, avoid bottlenecks, and boost production efficiency. In short, it’s the tool that can help you scale your operations while staying lean and responsive.

1. What is a multi-level BOM?

A multi-level BOM is a hierarchy of parts, showing relationships between the finished product and subassemblies in a family tree relationship. A single-level BOM lists all parts on the same level, whereas a multi-level BOM shows the parts under the sub-assemblies to which they belong. It shows multiple layers of dependencies, illustrating how they fit together to form subassemblies and assemblies.

A multi-level BOM is particularly useful in industries producing complex products like machines, appliances, and vehicles.

Multi-level BOMs comprise the following key components:

• Hierarchies: Show the parent-child relationship between parts, subassemblies, and finished products.
• Part numbers: Every part must have a unique number that differentiates it from all others. The part number ensures easy tracking through production.
• Descriptions: Clear, detailed descriptions reduce confusion.
• Quantities: Accurate quantities needed to produce each production unit enable accurate planning and resource allocation.
• Dependency levels: Every level of the BOM must show how parts make up the subassemblies and combine to create the finished product.

2. Importance of multi-level BOM in supply chain and capacity planning

The multi-level BOM provides a hierarchical plan of how complex products go together. It is a blueprint for planning supply chain actions and capacity utilization. It helps businesses plan workflows and ensures that materials arrive lineside as they are needed in the process.

Multi-level BOMs are helpful for the following reasons:

1. Improved visibility and traceability: Organizations can use the BOMs to understand relationships between components to ensure efficient material flow and prevent production delays. Planners can trace the components from procurement to assembly as they understand the dependencies in complex structures.
2. Integrated capacity planning: Multi-level BOMs support capacity planning with forecasts of material requirements, resulting in work center loading and resource requirements. The BOMs allow planners to work out exact material resource requirements. They can allocate machinery, labor, and production time and balance workloads. They can identify dependencies to detect bottlenecks and plan smooth production.

Modern demand and supply planning platforms like Netstock can integrate with planning software and BOMs to automate demand forecasting and help plan procurement based on production schedules and capacity planning.

3. Key benefits of multi-level BOM for supply chain efficiency

Multi-level BOMs bring a range of benefits that help drive supply chain efficiency, including:

• Streamline manufacturing processes: Multi-level BOMs allow planners to develop production schedules with smooth workflows to avoid downtime. Precise quantities ensure the proper inventory is delivered to the production line to prevent excess stock and material shortages. Procurement has the information to order materials and components in time to honor lead times.
• Risk management: Component dependencies reveal vulnerabilities, like reliance on sole suppliers or long lead times that could delay production. Businesses can map dependencies to identify bottlenecks and plan to overcome them before they become a reality. Better visibility means managers can identify risks and possible delays and act before disrupting production.
• Cross-departmental collaboration: Multi-level BOMs are a shared resource used by Engineering, Procurement, and Production teams. A single reference tool facilitates communication and helps to eliminate errors and misunderstandings.

4. Challenges in managing multi-level BOMs

Multi-level BOMs are complex documents and can present challenges such as:

• Data Complexity and overload: Multi-level BOMs contain vast amounts of data, especially where products have intricate designs and many subassemblies. Data volume management, especially with frequent product revisions, can lead to errors if not adequately controlled. This can lead to component shortages or excess stocks if parts or incorrect quantities are missing on the BOMs.
• Version control and change management: Outdated or inaccurate BOMs can lead to production errors and material shortages. The BOMs must be centralized to ensure all teams work with the same version. Even small BOM changes can only impact production if the change is adequately communicated to all parties.
• Integration with ERP/MRP systems: Accurate and up-to-date BOM information must be seamlessly integrated with the ERP and MRP systems. Without integration, there will be miscommunications between departments. Without an integrated system, teams must manually update ERP systems, and errors can creep in.

5. Case Study: Eastern Warehouse Distribution reduced inventory value by 40%

Eastern Warehouse Distributors (EWD) has been a trusted name in the automotive aftermarket since 1989. With 41 warehouses across the state, managing inventory was becoming more of a challenge. Their manual system offered limited visibility, leading to long lead times, stock-outs, and excess stock caused by spreadsheet errors.

To tackle these issues, EWD brought in Netstock and integrated it with their custom ERP system. The results speak for themselves:

Key results:

• Time savings: Managing purchase orders became much quicker, freeing up time for the team to focus on other tasks.
• Excess stock reduction: Inventory value dropped from $3 million to $1.8 million, and excess stock went from $68,000 down to just $1,600—releasing much-needed capital.
• Improved supplier relationships: Better forecasts and staggered deliveries helped improve reliability and strengthen relationships with suppliers.

By moving from manual processes to automated, data-driven inventory management, EWD has made inventory planning easier and more efficient.

6. Best practices for managing multi-level BOMs

• Standardization of BOM structures: Standardizing BOM formats across departments improves communication and reduces errors. A unified structure ensures clear hierarchies, part descriptions, and quantities, improving.
• Real-Time updates and collaboration: Real-time updates and collaborative tools within BOM management software work well. They ensure all stakeholders use the latest data, so there is less risk they will work with outdated or incorrect information.
• Technology integration: Integrating multi-level BOMs with inventory management and capacity planning tools, systems like Netstock optimize material requirements, lead times, and procurement planning. Integration improves visibility, enables better forecasting, and supports smoother workflows. Supply chain and production efficiency will improve.

7. Leveraging Netstock for BOM management and capacity planning

Netstock’s advanced software integrates multi-level BOM data, enabling better production scheduling and capacity planning.

It can consolidate complex BOM structures to accurate material forecasting, ensuring components delivery to the production is at the right time and place. Component visibility reduces lead times, prevents bottlenecks, and supports better procurement.

Netstock addresses the core needs of supply chain professionals with features like:

• Optimized stock levels: Netstock balances and optimizes inventory levels, so your business can meet demand without risking excess stock or stockouts.
• Real-time data synchronization: Netstock can integrate BOM data with your current inventory management system, providing real-time data about stock availability and production requirements.
• Enhanced forecasting: Accurate forecasts based on BOM data mean you can plan material and production better than before.

Netstock’s BOM lets you view all levels, from raw materials to subassemblies.

8. Simplifying production with multi-level BOMs

Managing multi-level BOMs effectively can make production run smoother and give better visibility across the supply chain. Teams can easily handle complex product structures, and having one central source of information helps different departments work together and reduce errors.