What is a Bill of Materials (BOM)

The Bill of Materials (BOM) is a precise list of all items needed to make a product. Depending on the nature of the business and its partners, the list may include as many levels of detail as might be needed to produce, package, and support a specific product part as delivered to a customer. Every business that makes products for customers needs a clear and specific list of every part and option included with their finished products. Without it, they can’t reliably support their customers and scale their businesses.

In a scaled manufacturing company, BOM detail is often managed by Document Control organizations and must include the information that:

• Engineering and Development teams need to track product so that they can anticipate changes should components change or become obsolete.
• Finance teams need to plan for costing and Sales forecasts.
• Operations and Manufacturing teams need to break forecasts down to plan for production, equipment, and warehousing.
• Product Management teams need to plan for feature roadmaps and integrations.
• Marketing and Sales teams need to articulate product functionalities and configurations for customers.

The BOM clarifies what’s included in a given product with specific detail. That specificity stretches across all operational departments, so planning and forecasting can move forward in anticipation of the product release.

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Why are BOMs Important?

In technology, simple terms are often used to describe complex products. It helps make customers feel more at ease. Simple terms like “cable” can also be deceptively ambiguous. Consider the cable that comes with new iPhones, commonly called a “charging cable.” There are now several kinds, sizes, and lengths. Delivering the wrong cable with an iPhone or some third-party accessory, would leave frustrated customers asking for refunds.

Removing ambiguity ensures that the product can be reliably reproduced and controlled for quality. Without it, businesses can’t be sure of:

• Quality control
• Product reliability
• Brand consistency
• Regulatory compliance
• Customer commitments

The role of BOMs is at the heart of product companies because they define what goes into a product. BOM management is key to Quality Management Systems (QMS) and Product Lifecycle Management (PLM) because it defines the level of significance for changes. In John’s Organic Reuben, American singles can’t substitute for organic Swiss cheese. An alternate supplier for organic Swiss might be acceptable, for example, if it is qualified by a specific set of criteria or tests.

What Should Be Included in a BOM?

To be specific and unambiguous, BOMs must include all components and in precise quantities. The precision of the specification is key to quality. Without it, companies can’t commit to customer expectations or regulatory compliance. BOMs must include every detail relevant to the definition of a product.

Depending on a business category, this can include:

• Raw materials in specific quantities and form factors.
• Assemblies and subassemblies as sourced from suppliers or as structured into Work In Progress (WIP) locations to simplify or optimize manufacturing.
• Contract Manufacturer (CM), supplier, or other alternate sources.
• Outsourcing for assemblies, processing, or other component work.
• Qualification criteria and validation testing.
• Customer-facing model numbers or Stock Keeping Units (SKUs)

As BOMs start to come together, subtle distinctions can make a big difference. Most systems also include an area where BOM Notes can be shared with a team. These might include an explanation about open issues before formal changes are released, for example.

Depending on the nature of the product and organization, BOMs may also specify seemingly trivial details that are necessary to planning such as:

• Consumables such as glue, staples, and zip-ties.
• Files such as datasheets to document adherence to specifications.
• CAD-based assembly drawings to specify exactly how components come together.

To address the needs of the entire organization, BOM structures include these basic elements:

• Part Number: This is a unique numeric or alphanumeric string that specifies a unique individual component. Some companies choose “intelligent” numbers that reflect categories, for example. Others use “non-intelligent” numbers that might be generated sequentially. Depending on BOM structures and criteria, the same component with the same part number may be used in different products. Cables are a great example. Criteria differences such as sourcing or packaging might justify using a different number for a similar part.
• Marketing Part Number or Model Number: In complex products where customers are selecting between different models in a product family, each model may have a different part number. These might be referred to as model numbers or marketing part numbers to distinguish them from the underlying numbers used internally. Distribution partners and customer contracts often have terms that specify fit-and-function of a model. Software revisions might be allowed without changing a model but not ports, for example.
• Part Name: Names make it easier for organizations to track components. Many systems have internal names with specificity useful to Operations, Test, and Engineering teams. A separate nomenclature might be with customers in Sales organizations. Unlike part numbers, part names aren’t necessarily unique. Consistent use of part names like connector, adapter, and cable, can help keep everyone on the same page.
• Description: Descriptions give teams the detail they might need to cross-reference details or include version information relevant to distinguish parts. Often descriptions include information about related capacities or required options.
• Reference Designators: Products built from Printed Circuit Board Assemblies (PCBAs) typically include reference designators that specify a location for a part on a board. Including this information in a BOM will minimize any confusion should changes affect parts in one location but not another as might occur with resistors, for example.
• Quantities & Units of Measure: Since the BOM functions as a recipe for building a product, both the quantities and units of measure are critically important. A consistent articulation of quantity data as it affects individual parts and subassemblies is vitally important to all departments of an organization as they plan cost, sourcing, and distribution plans.
• Procurement Type: Categorizing products by procurement types (such as made-to-order, single-source, or off-the-shelf) gives planners the information they need to optimize the supply chain for cost efficiency and time-to-market.
• Phase: Since BOMs are vital to scaling manufacturing, labeling them for Phase is also important as it clearly delineates when a part has been approved for key phases like Quotation, Purchase, and Release.‍

BOM Structure

Structures refer to the ways in which the components of a product are captured in the bill of materials. There are generally two approaches, single-level BOMs, which collapses all items into a single level, and multi-level BOMs, which nest items into two or more levels. Decisions about structuring individual products and product families can have significant implications for not only a company but also its supply chain and distribution partners.

Single-level Bill of Materials

Single-level BOMs are the easiest to conceptually understand because they are simply a list of items, much like a list of items in a recipe. To make cookies, you need flour, sugar, butter, and so on. In selling products, the list of items can get much more complicated because components can be made of other components, and typically it needs to accommodate multiples, packaging, and so on. Representing complex products in single-level or “flat” BOMs can make them difficult to understand internally and unwieldy to manage through a supply chain.

Multi-level Bill of Materials

Multi-level BOMs collapse related items together into logical subgroups such as purchased parts, kits, or sub-assemblies. This approach provides a means to reflect how parts are sourced from suppliers or distributed into channels.  

Hierarchical structures can also address the needs of internal organizations, for example,

• Marketing where products may be presented to customers as families and share accessories
• Manufacturing and Operations where sub-component structures may reflect kitting procedures or cost optimizations
• Engineering and Quality Assurance (QA) Testing where chipset families or fabricated subassemblies used in multiple products may be subject to the same updates or test suites.

When the same product is sold in a variety of configurations or into a variety of channels, BOM structures can directly affect assembly efficiencies or sourcing costs. By breaking components down into purchased parts and sub-assemblies, companies with complex products can better share visibility into product details for customers, sales teams, internal managers, and suppliers. That visibility can be used to forecast demand, manage inventories, and cut procurement costs.

The structure of products can also be defined by an organization’s defined New Product Introduction (NPI) process. The Phase field, usually modified through managed Engineering Change Orders (ECOs), allows lower-level assemblies to be released to production independent of high-level assemblies. This can be used to release long lead-time parts to production as early as possible. The same applies for off-the-shelf components. A standard IEC power cord might be in the Production phase, even as the top-level part for the computer chassis is still in the Design phase.

Configurable BOMs

Configurable BOMs (or CBOMs) allow the structure to be modified as the product is sold, often with “configurator” tools where the end customer is selecting software protocols or styling options on the final deliverable.  

Typically, these kinds of configurators produce a customer-visible list of line items with separate pricing for each. From an internal perspective, the key is to ensure that each line reflects one and only one item that can be tracked with version and cost information. Depending on how sales and accounting functions track profitability or commissions, line items can be offered for free or combined with others at bundled pricing when delivered to customers.

This approach is helpful for a range of products with options. Consider:

• Complex products with a wide range of options where a sales engineer walks a customer through a decision tree (routers with software and hardware options, for example.)
• Highly competitive products where the base price, without expected options, might be used for price comparisons (laptop computers or cars, for example.)

Types of BOMS

Most companies structure their product and service BOMs to address their unique internal and external objectives. For a given product and configuration, some companies use separate systems to structure BOMs for Engineering and Manufacturing purposes. These Engineering Bill of Materials (EBOMs) and Manufacturing Bill of Materials (MBOMs) can be independent of company-wide managed BOMs or be designed to integrate into them.

EBOM

Most technical products begin with an engineering bill of materials built with the software product designers and engineers need to specify Printed Circuit Board Assemblies (PCBAs) layer traces, reference designators for chipsets, and the like. Computer-Aided Design (CAD) and Electronic Design Automation (EDA) software tools give a team of engineers the functions they need to collaborate on these kinds of specifications for a finished product.

EBOMs for enclosures and packaging might be delivered as CAD files including multi-part assembly instructions. Because engineering BOMs are typically developed very early in the design phases, structures may be changed before final production.

MBOM

By contrast, manufacturing BOMs are designed for the needs of manufacturing and operations teams where sub-assembly configurations can be optimized to save money and manage around production lines. A MBOM typically contains more product information than a MRP (manufacturing resource planning).

Unlike EBOMs, MBOMs should reflect all components as assembled and delivered to an end customer. This includes enclosures, packing material, and labeling. For companies with multi-tier distribution, this can also include multi-pack and pallet instructions. MBOMs also will frequently include managed locations (bins, for example) and other details specific to warehouses and distribution centers.

Manufacturers often plan one or more First Article Reviews in which the manufactured part is disassembled by the product team before a final product release. First Article Reviews are typically integrated into formal or informal new product manufacturing processes with ECO systems to ensure that changes can be tracked to validate resolution. Feedback from these systems in manufacturing can also inform ongoing Quality Control (QC) and Quality Assurance (QA) procedures.

BOM Management and Next-Gen PLM

With BOMs playing such a critical role across an organization, the thoughtful selection of BOM Management tools can create a significant point of leverage for a product company. Next generation Product Lifecycle Management (PLM) systems use modern, cloud-based architectures to ensure that information can be available and updated continuously throughout a global organization and integrated into communications with partners and contract manufacturers.

Modern BOM management systems should anticipate the key requirements of product companies, including:

• Engineering teams’ needs for CAD design and collaboration.
• Hardware, firmware, and software integration where version compatibility can be important.
• Product phases and lifecycle planning that allows for components to be released to test and manufacture on schedules optimized for cost and planning.
• BOM-level detail around costing so that procurement teams can identify suppliers and target component costs and marketing teams refine pricing and margin expectations.
• Manufacturing and Enterprise Resource Planning (ERP) integration so that parts and assemblies can feed into production systems for a smooth handoff to contract manufacturers or internal manufacturing teams.
• Tools to share specifications and other product details with downstream customer-facing teams. Information like compliance, weights, and product structures are critical to collateral, sales bundles, pricing, and strategies.
• Time-stamping and access control as appropriate to integrated modern ECO systems.
• Production, compliance, and specifications documentation as needed for both internal and external teams in engineering, marketing, sales, and services in a way that’s secure and centrally managed.

Propel Software reimagines bill of materials (BOM) management — with all the enhanced functionality that comes with the most user-friendly interface in the cloud PLM industry.

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