Bill of Materials – Everything a Procurement Professional Should Know
If you are familiar with a purchase order, then we’re sure you know what a bill of material is. Every professional procurement manager knows what it is.
Wait, what’s that? You don’t remember what it is? Then let this article guide you! We’re going to have a crash course on what a bill of material is and what it is used for.
After reading this article, you should have a clear definition of what a bill of material is and what you’re going to use for your next procurement!
Defining the Bill of Materials
If the purchase order is used as a legal document for showing a company’s intention to buy or procure supplies and/or services, a bill of materials is an extended list of raw materials, components, and instructions required to build, manufacture, or repair a particular product or service.
The list is complete with diagrams and lists of the materials needed to build or repair a specific product, with each part listed down with specifications and pricing so that the procurement team and supplier have a better understanding of what the company needs.
Apart from the supplies specification and pricing, the Bill of Materials also includes instructions on how to procure the materials listed. For a procurement team, having a BOM is truly a lifesaver because they won’t have to spend too much time sourcing for the parts and services!
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The Many Uses of a BOM
Similar to a purchase order, the BOM or bill of materials provide you, the procurement manager, a single record of the materials, components, and assembly instructions that go together with the product. This, in turn, ensures that your company has the items that are needed in-house and that these parts come in enough quantities when finally needed.
Having a BOM also prevents inventory issues and production delays. Your company is able to continue producing or manufacturing the products needed because having a BOM always keeps your inventory stocked with the supplies needed.
Finally, having a BOM ensures uniformity with the parts you use for your product. Because you have a list of supplies the company uses for creating the product, your procurement team won’t be looking for alternate parts, which in turn may affect the value of your company’s finished product.
What are the Types of Bill of Materials?
Because we’ve touched on BOMs, we at Procurement Tactics are pretty sure that you want to check what are the types of BOMs available for the procurement manager. In fact, we also know that you’re going to want to check some samples while you’re at it too.
For those who are interested in checking more than BOM samples, our Negotiation Gamechanger Course is open to anyone and everyone who wants to learn how to build a good bill of materials for any intended procurement project. We’ll show you the ropes, the tools, and the tricks needed to get the job done at once.
But for now, enjoy this simple but very accurate section explaining the types of BOMs:
Engineering Bill of Materials (EBOM)
Simply put, the engineering bill of materials is created when a product is still being designed. The result of the EBOM will determine the final product’s design. Of course, the final product may be different from the original design because of the different parts assembled. The EBOM also includes a technical drawing of the product.
Sales Bill of Materials (SBOM)
A sales BOM lists down all the components needed to develop a product that is ordered by a customer. The SBOM is different from the EBOM because it is developed from a sales order and the parts needed are in uniform as to what the customer needs for the product. The finished product and its components also appear in the sales record.
Manufacturing Bill of Materials (MBOM)
Meanwhile, the Manufacturing bill of materials or MBOM is used during production. It identifies the parts needed to produce a product that can be shipped to the customers. This includes the packaging for the product, as well as the waste and items consumed in the production process. This is always key for companies that practice ethical procurement when building their MBOM.
Configurable Bill of Materials
This BOM is used for finished products that are configured and designed to meet specifications requested by a customer. It identifies the materials and components, including any labeling or packaging requirements, needed to manufacture the product to the customer’s requirements.
Production Bill of Materials
A production BOM acts as the foundation for a production order and includes the components and assemblies that make up a product. As production proceeds, the components are converted to finished products.
What to Include When Building a Bill of Material
The main reason why a BOM is created is to ensure that the product is built right. Being the case, it is also important for the procurement manager to create a good BOM so that there won’t be any issues when the time comes for buying the needed parts for the product.
And since we’re going to build a great BOM, you need to consider the following to be able to do so:
1. BOM Level
Remember to assign each assembly or part a number to detail where it fits in the hierarchy of the BOM. This system will allow anyone who has a deep understanding of BOM structure to identify which part is important in the BOM.
2. Part Name
Always record the unique name of each part or assembly. This should help you in identifying parts easily.
3. Part Number
Assign a part number to each part or assembly in order to reference or identify the parts quickly. It’s always a common tactic for manufacturers to choose either an intelligent or a non-intelligent numbering system. Whatever system you choose, just make sure you don’t create multiple part numbers for the same part!
Indicate what stage each part is in its lifecycle. Placing a phase indicator for each part should help in introducing a new product in the market. With this, you can easily track progress and you can create more realistic project timelines for next time.
Provide a detailed description of each part that will help you and others distinguish between similar parts and identify specific parts more easily.
Record the number of parts to be used in each assembly or subassembly to help guide purchasing and manufacturing decisions and activities.
What is Bill of Materials?
A bill of material is a highly-detailed document listing down all the parts needed to assemble a product.
How to build Bill of Materials?
To create or build a bill of materials, one needs to first determine the product to assemble. When that is finished, start listing down all parts needed, how much each part costs, and where to buy the parts.
Who is in charge of building Bill of Materials
It’s the procurement manager’s responsibility to create a BOM.
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