What to include in your bill of materials template
A good Bill of Materials will help to ensure that your products are made with the same components, and with the correct ratios, each and every time. Let’s talk about what kind of details you’ll want to include in your BOM, and the different use cases for the document.
Manufacturers will already know what a bill of materials (or BOM) is, but even if you’re not the kind of business that assembles products, you’ll still want to get familiar with this concept. After all, if you do any kind of kits or specially priced bundles, you might use a BOM to track these as well.
Think of a bill of materials like the ingredients list for a finished product (or finished good): the specific quantity of raw materials that are required to create one finished item. Just like the ingredients list in a good recipe, you’ll want to be very precise with your bills of materials template.
Which items are listed on the BOM? Be as specific as you can about the kind of item here: “Green aluminum frames from Keystone” gives you a lot more information than “Green Frames”, since your store may sell multiple items that match that basic description.
You may not personally need this level of specificity because you know your own products well, but as your business grows you may no longer be the one who actually takes action on your Bill of Materials, so you’re doing yourself a favour by including the right amount of information up front. You can prevent a lot of confusion and extra training down the line by including enough detail up front.
In the case of Archon Optical’s Zealot sunglasses, the bill of materials (BOM) would start off like this:
These sunglasses are pretty simple, but the BOM can be a little more complex than you might think. In the case of Zealot sunglasses with optical corrections for myopia (nearsightedness), then the left lens could be different from the right lens. That’s because different corrective levels in lenses require different cuts and thickness of glass. This means that each lens could be a different item on the BOM, and the BOM for a Zealot (No Correction) would have different components than the BOM for a Zealot (with Myopic Correction).
Specify the ratios or quantities in your BOM
It’s important to list the kind of items that make up your finished good, but their quantity is just as important. Just like “a pinch of salt” can vary greatly depending on who is doing the pinching, you don’t want to leave the ratios in your BOM up for interpretation.
Try to be specific about the unit of measure (UoM) that you use when you write your BOM by using words like “each”, “cartons”, or “crates”. You’ll also want to standardize those UoM and write out how they relate to one another.
The documentation should answer questions like: how many pieces are in a single carton? How many cartons are in a crate?
Tracking costs through your bill of materials.
One of the other important functions that a BOM serves is to track cost. It’s easy enough to track cost when you’re just buying parts because you’re only accounting for the initial price and freight, but creating something out of a bunch of different items is another challenge altogether.
Without a good BOM, it can be easy for the actual cost of your component items to get lost in the mix, and this can skew the actual cost of your end product. Since many businesses derive their price from their costs using markup, inaccurate costing could cause you to under-value the finished goods you create.
When you’re putting a BOM together, make sure to track the specific costs of the items. It might also be a good idea to add a date to the BOM, since the costs of your products can change over time.
Using BOMs for kits.
As discussed earlier, even if you’re not in manufacturing, you might still create BOMs for special kits or promotional bundles. By listing all of the item details as if you were going to manufacture the finished kit, you can be sure you’ll have the right items and the right quantities present. A good BOM will also help you decide how much the final kit actually costs.
Multi-tier bill of materials.
What we haven’t discussed yet is where you should keep and update the BOMs for your products. Excel or Word are easy places to keep BOMs if they’re simple and relatively straightforward. In fact, we have a template for single-level BOMs to help you get started.
However, once you start dealing with assembling items out of other assembled items (sub-assemblies), things can be a little harder to track.
As an example, let’s talk about Archon Optical’s Zealot shades with some myopic correction. We assumed that those lenses earlier were just supplied to Archon Optical, but what if the company had to manufacture them as well? In that scenario, the BOM is suddenly multi-tiered and you have one assembly (Zealot) relying on another sub-assembly (the lenses).
This is where it can really help to have specialized software to handle your inventory and manufacturing. inFlow Inventory is able to maintain a bill of materials for a product and also help keep track of inventory. This means that when Archon Optical is making a new pair of Zealot shades, they know whether or not they need to create new lenses, or whether they have some on-hand. What’s more: they can see all of this information on a single screen.
However, regardless of what system you decide to use for your business, it really helps to have a detailed bill of materials. Putting in the work up front and keeping your BOMs updated will ensure you always have an accurate picture of your manufacturing or kit costs.