What is a 'Bill of Materials - BOM'

A bill of materials (BOM) is an extensive list of raw materials, components, and assemblies required to construct, manufacture, or repair a product or service. A bill of materials usually appears in a hierarchical format, with the highest level displaying the finished product and the bottom level showing individual components and materials. There are different types of bills of materials specific to engineering used in the design process and specific to manufacturing used in the assembling process.

BREAKING DOWN 'Bill of Materials - BOM'

The different types of bill of materials depend on the projected use and business needs. A manufacturing BOM is essential in designing enterprise resource planning (ERP) systems and materials requirement planning (MRP). A bill of materials explosion displays an assembly at the highest level broken down into its individual components and parts at the lowest level, while a BOM implosion displays the linkage of individual parts at the lower level to an assembly at the higher level.

For example, a computer is exploded into hard drives, computer chips, random access, memory panels, and processors. Each processor is exploded into an arithmetic unit, control unit, and a register. The requirements for the arithmetic unit, control unit, and register are imploded into the requirements for the processor, which are imploded into the requirements for the entire computer.

A bill of materials is a centralized source of information used to manufacture a product. It is an engineering term that refers to the design of a product. Manufacturers that build products start the assembling process by creating a BOM. Creating an accurate bill of materials is vital because the correct parts must be available when the item is manufactured. If it is not accurate, it can cause production to halt or cause delays, which increase operation costs because a company has to locate the missing parts, start another production order, or deal with customer returns.

What Is Included in a BOM

Every line of the bill of materials includes the product code, part name, part number, part revision, description, quantity, unit of measure, size, length, weight and specifications or features of the product. The engineering BOM is often organized by engineers based on a Computer-Aided Design (CAD) drawing. For a finished product there may be more than one engineering BOM created.

 

A BOM list reduces possible issues if product repairs are required and is necessary when ordering replacement parts. It helps plan for acquisition orders and reduces the possibility of errors.

Engineering BOM

The engineering bill of materials defines the design of the finished product. Engineers generate a BOM based on a computer-aided design drawing. It includes all alternative and substitute part numbers and parts contained in the drawing notes.

Manufacturing BOM

The manufacturing bill of materials comprises all the assemblies and parts required to construct a finished item ready to be shipped. It also incorporates the packaging materials required to send the product to the customer. It contains processes that require execution on the product prior to completion and stores all the information required for manufacturing activities.

RELATED TERMS
  1. Manufacturing

    Manufacturing is the processing of raw materials into finished ...
  2. Raw Materials

    Raw materials are commodities companies use when producing or ...
  3. Mass Production

    Mass production if the manufacturing of large quantities of standardized ...
  4. Material Weakness

    A material weakness occurs when a company's internal controls ...
  5. Material News

    News released by a company that might affect the value of its ...
  6. Purchase Order Lead Time

    Purchase order lead time is the number of days from when a company ...
Related Articles
  1. Investing

    The 3 Largest Materials ETFs (XLB, VAW)

    Find out which three exchange-traded funds (ETFs) are the largest in the basic materials sector, and how they are performing year-to-date in 2016.
  2. Investing

    The Debt Report: The Materials Sector

    Find out why the U.S. materials sector has accumulated more and more debt each year between 2011 and 2015, outstripping valuation gains.
  3. Financial Advisor

    The Top 5 Materials ETFs for 2016

    Read about five of the best materials exchange-traded funds available for 2016, and learn how you can get the exposure you need in this sector.
  4. Investing

    Applied Materials Trades Ex-Dividend Tuesday (AMAT)

    Applied Materials will send its dividend payment on Dec. 15 to shareholders of record as of Nov. 25.
  5. Investing

    What are Top 3 Materials Equity Mutual Funds?

    Read about mutual funds covering the basic materials sector that could be excellent buys after a catastrophic 2015 for the category.
  6. Investing

    Key Financial Ratios for Manufacturing Companies

    An investor can utilize these financial ratios to determine whether a manufacturing company is efficient, profitable and a good long-term investment option.
  7. Personal Finance

    8 Steps To An Organized Financial Life

    Disorganization makes planning difficult, and that can cost you big-time. Follow these 8 steps to an organized financial life.
  8. Investing

    Bill of Exchange

    A bill of exchange is a document used in international trade to pay for goods or services. It is signed by the person promising to pay, and given to the person entitled to receive the money. ...
  9. Investing

    Material Adverse Effect a Warning Sign for Stocks

    Learn what this phrase means and how to spot it in a company's financial statements.
  10. Investing

    Materials Sector: Industries Snapshot (DOW, DD)

    Explore the chemicals, packaging, construction materials and mining industries. See which factors are driving growth in each industry of the materials sector.
RELATED FAQS
  1. On which financial statement does a company list its raw material costs?

    Discover what items are raw materials, how raw material costs affect businesses, and where these costs are recorded on a ... Read Answer >>
  2. What raw materials do auto manufacturers use?

    Learn about some of the raw materials required for auto manufacturing, including iron for steel, aluminum, rubber, and petroleum ... Read Answer >>
  3. Which commodities are the main input materials for the automotive sector?

    Explore the materials used by automakers to create modern cars and trucks. Find out more about the materials market as it ... Read Answer >>
  4. Who uses bills of exchange?

    Find out who uses bills of exchange, why they are important in international trade and what happens when a bill is traded ... Read Answer >>
  5. What are the main problems with a JIT (just in time) production strategy?

    Learn about the just in time (JIT) production strategy and how the precise coordination and timing it requires can end up ... Read Answer >>
  6. What is the difference between a bill of exchange and a bill of lading?

    Understand what a bill of exchange and a bill of lading are and the different purposes they each serve as documents used ... Read Answer >>
Hot Definitions
  1. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  2. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  3. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  4. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  5. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  6. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
Trading Center