A bill of materials - which is more commonly referred to as a BOM - is a list of the raw materials and associated quantities that are needed to manufacture, assemble or repair an end product. Much like a list of ingredients that a chef would use to make a recipe, a BOM provides us with a compact inventory-oriented representation of the requirements associated with an end product.
This information is typically stored in a business’ ERP or MRP systems, and leveraged to execute repetitive tasks such as replenishing all materials at once for a finished product.
BOMs themselves are hierarchical in nature, with the top level representing the finished product and the items beneath representing the materials required in assembly. While they can be as small as just two components, these lists can also be extremely long, with multiple levels where sub-assemblies in the list even have BOMs of their own.
Therefore, the main aim of a BOM is to make things simpler and clear up some of the mess that can occur when dealing with complex parts with multiple sub-assemblies and components. However, this simplicity can be highly deceptive. Managing BOMs is usually fairly straightforward, but optimizing anything involving BOMs makes things considerably more difficult. This high level of complexity is introduced by the interconnected components that each have their own individual constraints, such as stock levels, lead times and service levels.
How can you tackle this issue of complexity and what you can do to optimize your BOMs? Namely, optimizing production and stocks in the presence of BOMs is not just about optimizing a single item but an entire system. This system is highly interdependent, which from an inventory optimization perspective results in a complex network that can only be solved using advanced statistical techniques.
Find out more about Bill of Materials.