Understanding Bill OF Material and How to Make It

Bill Of Material or often abbreviated as BOM is a description or definition of the final product which consists of items, materials or materials needed to assemble, mix or produce the final product.

Bill Of Material comes in several forms and can be used for various purposes. Bill Of Material is created as part of the design process and is used by manufacturing engineers to determine which items to buy or produce. Production and inventory control planning uses BOM which is linked to the master production schedule , to determine when the exact time an item is purchased or produced.

Table of Contents

1 So, What Is A Bill Of Materials? Here are some definitions

2 Uses of Bill Of Materials

2.1 Basis of Selling Price Calculation

2.2 Basic Raw Material Requirements Planning

2.3 Avoiding Shortage of Raw Materials

2.4 As a reference for product improvement

2.5 Uniting Functions in the Company

2.6 Level 0

2.7 Level 1

2.8 Level 2

2.9 Level 3

3 BOM Structure

3.1 1. Standard Structure (Tree Structure / Pyramid Structure)

3.1.1 Product structure:

3.2 2. Modular Structure (Bourglas Structure)

3.2.1 Product structure:

4 Ways to Make Bill Of Materials

So, what is a bill of materials ? Here are some definitions

  • Bill of materialsis a list of the number of components, a mixture of several materials and raw materials needed to produce a finished product. BOM not only qualifies a product product but is also useful for costing and can be used as a list of materials that must be issued for production or assembly employees.
  • The Bill of Materialsis a hierarchical list of materials (components, subassemblies  and ingredients) needed to make a product, showing the amount of each item Other information may also be included in the BOM for planning and costing.
  • A bill of materialis a document used by a manufacturing company or other business to request material from inventory that aims to meet consumer needs. BOM shows the specifications of each item that shows the quality of a company’s product to its customers. The producer of raw goods and materials industry can find out the buying habits of their customers from the information in the BOM. BOM is also used for accountant purposes in order to calculate the price of the products made.

A good and accurate Bill Of Material must show information about each input such as a component description, part number, unit of measure and component description as well as the lead time for processing or ordering. All items and the BOM must be uniquely identified and numbered.

Also read:  Definition, Types and Benefits of Bill Of Materials in Manufacturing Companies

Use of Bill Of Material

BOM is made with the purpose and function that can be used as needed. Here are some BOM functions and their explanation:

·         The basis for calculating the selling price

BOM is used as the basis for calculating the selling price of the product. With BOM, it can be seen that the potential profit or loss obtained by the company is based on the selling price of the product. The selling price of the product is obtained by adding up the cost of raw materials and other costs.

·         Basic Raw Material Requirements Planning

BOM serves as the basis for planning the need for raw materials. The goal is to know the amount of raw material needed for production. Suppose it takes how many bricks to make a building and so on.

·         Avoid Shortage of Raw Materials

BOM is also used to avoid possible shortages or even running out of raw materials. For example, when a factory produces a lot of goods, then many goods fail to produce. So that the stock of goods becomes too much. With BOM, companies can have reminder notes so they don’t run out or overstock an item.

·         As a Product Repair Reference Reference

This is because BOM contains material and component records of a production. For example there is damage or shortage of components of a product, the company can see the component records needed in the company BOM.

·         Unifying Functions in the Company

The function of the BOM is to unify functions within the company. BOM owned by the company will facilitate relations and coordination between various divisions. Especially regarding matters related to production.

BOM presents a list of components in the form of a product structure and expressed in terms of manufacturing level. In a systematic manner, apart from being known as the BOM product structure, it is also known as a product tree. Each of the BOM components has a level based on the following components:

Level 0

A finished product which is not used as a constituent component of another product.

Level 1

A component directly forming a Level 0 product. At the same time, this component is also a finished product. As an illustration, car tires can also be sold separately as a ready-made finished product.

Level 2

A direct forming component of a Level 1 product. As with level 1, the component at level 2 can also be used as a direct forming component at level 0 or as a finished product.

Level 3

A direct forming component of a Level 2 product. As with level 2, the component at level 3 can also be used as a direct forming component at level 0 or as a finished product.

BOM in the form of product structure is easier to understand. But if the number and level of components are very large, then the description with the product structure becomes inefficient. Therefore, the BOM is also represented in tabular form.

BOM structure

1.Struktur Standard ( T ree Structure / Pyramid Structure )

There are more subassemblies compared to the final product and more components than subassemblies. Only a small amount of the final product is made from its constituent components. This final product is kept in stock for delivery.

Product structure:

The highlight is the final product

The middle section are the assemblies

The bottom part is the components and raw materials

2. Modular Structure ( Bourglas Structure )

There are fewer subassemblies than the final product and more components than the subassemblies. In a modular structure many end products made from the same subassemblies are then stored for assembly to fulfill customer orders.

Product structure:

The highlight is the final product

The middle section are the assemblies

The bottom part is the components and raw materials

Also read:  Get to know the Manufacturing Company Accounting Cycle

How To Make A Bill Of Materials

Some indicators that must be known when making Bill Of Material are as follows:

  • Determine the type of bill of materialthat matches the product to be made.
  • Valid data that will be used as a reference in the formation of a bill of materials.
  • Understand and master the systems or applications used to create bill of materials(application examples: SAAP, IFS, Web-based applications, etc.).
  • Specify numbering as a substitute for the code of an item or an image, usually each company has a special format in the item code numbering.
  • Master the component / item level structure before forming.
  • Master the processes contained in a component. (for example: welding processpainting process , machining process and others)
  • Determine and identify items/ goods according to their function (for example: goods bought or not purchased, goods need to be processed or not processed, etc.).
  • After validation is formed by checking.
  • Periodic checks to make sure the bill of materials is

In making a bill of material or BOM, it is important to remember that before making the BOM you must first understand what will be made, the item order list must match what is needed. The bill of materials can be made by making new or modifying existing bill of materials . Every company has a different system from each other, it is due to different needs according to each company category.


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