Engineering bill of materials
by Jon Clancy, CIRAS
An engineering bill of materials (BOM) is often compared to a cake recipe. Both identify and list the components of a finished product. While the cake recipe identifies ingredients such as flour, sugar, and eggs, the BOM identifies and lists all raw materials, subassemblies, and even intangibles that contribute to the costs of manufacturing a product. While a recipe and a BOM are similar, the consequences of inaccuracy are not. The wrong ingredient in a cake recipe may create a "flop" that ends up in the garbage, a loss, but one that could be resolved in a matter of hours by baking a second cake. Producing product with a wrong component in an engineering BOM is not so easily resolved. It can negatively impact your company's performance through:
- incorrect costing of product,
- inaccurate inventory levels,
- accounting variances,
- customer returns,
- production of out-of-spec units,
- potential product liability claims.
An accurate engineering BOM is a prerequisite to developing other operating systems. It's a "building block," a central source of information that supports product costing, inventory control, and engineering documentation.
A bill of materials may be in a tree form, or more typically in a printed document indented to the lowest level required to accurately describe all material and subassemblies of the parent (or level one) product (Table 1).
Whether you utilize the tree or indented method, the key to understanding BOMs is their leveled structure with a "bottoms up" or "goes into" organization. For example, level three components always "go into" level two components, level two components always "go into" the parent (or level one) finished product. However, not all components at a given level require a supporting or lower level. If a sub-assembly at level two is a purchased part, there is no need for a lower, or supporting level (For example, PN15476-62009 [I] Control). Conversely, if a level two component is fabricated in-house, all materials that "go into" the level two component must be identified and listed at a lower or supporting level (For example, PN14644-38389 [AA] Precipitator Assembly). The BOM should be considered an engineering document that accurately identifies and lists the components required to produce a given product at a given revision level.
BOMs can be designed to reflect varying degrees of complexity, depending upon the company needs. Utilized as a basic engineering document, the minimal requirements for BOM information should include:
- structure level,
- part number,
- revision level,
- quantity required,
- unit of measure,
- description, and
- make or buy indicator.
BOM's may be single or multi-level, depending upon company inventory and marketing policies. BOMs can be enhanced to include costing information by including labor and material costs in each lower level component and adding these costs from the bottom to the parent level. Application of overhead rates will then provide fully burdened manufacturing costs. Caution must be exercised when converting engineering BOMs to cost BOMs. Labor and material standards on cost BOMs are an estimate, and provide an accounting standard for the fiscal year. Consequently, they are a reference that must be adjusted by both labor and material variances to obtain actual costs.
The accuracy of BOMs is paramount when considering a switch to computerized MRP systems. Basic guidelines for BOM structure include:
- Each part number must be uniqueÄno duplication allowed.
- Part number identification system must be compatible with software. For example, some software requires numeric identification only.
- Units of measure on BOM must be as purchased. For example, if purchased in feet, express usage in feet.
- Material use must be adjusted for predictable shrinkage.
The engineering BOM and routing sheets are two of the most important documents associated with the manufacturing process. The importance of maintaining accuracy cannot be overemphasized when considering the substantial impact that they have on product costing, inventory, and production management.
CIRAS News, Vol. 32, No. 1, Fall 1997