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  • Writer's pictureJohn Hannan

How to Make Best Use of the Bill of Materials (BOM) in Your ERP

Maintaining a bill of materials (BOM) is essential for businesses in the manufacturing industry. Enterprise resource planning with BOM helps improve your business's material planning, inventory flow, and strategic advantage.

BOM is a centralized source of information that contains a list of items used to manufacture products and instructions on how to do so. Creating a bill of materials is necessary for your product development and makes your product design a reality.

However, if the BOM is not accurately created, it can pose serious problems for material requirements planning. This article briefly discusses how to implement BOM in your ERP system.

What Is a Bill of Materials?

A bill of materials is an extensive list of raw materials, components, and instructions required to manufacture, construct or repair a product or service. A well-designed BOM helps with these production processes:

● Plan purchase of raw materials

● Control budget

● Maintain records

● Estimate costs

● Replace faulty components

● Manage inventory

● Track variances in manufacturing

● Reduce production delays and waste

● Improve supply chain security, etc.

An accurate, complete BOM helps to identify the cause of a product failure. It also allows you quickly work to replace faulty components, parts, or materials.

If your bill of materials is not created accurately, it can cause production to halt, hence increasing operation costs. It can also affect the time taken for production, customer satisfaction, etc. Therefore, the bill of materials must be detailed, up-to-date, accurate, and organized to get the best use of BOM in ERP.

How to Build and Maintain an Effective BOM

Most ERP solutions with BOMs are structured in a hierarchical format, with the highest level displaying the finished product. In contrast, the lower level shows individual stages and materials for making the products.

This include:

BOM Level

This unique number shows where each part fits into the BOM hierarchy. Levels differentiate different levels of sub-assembly within the same overall manufactured component.

Part Number

Part numbers are used to identify and refer to parts. Also, they can be intelligent and non-intelligent. The former capture and displays further descriptive characteristics of each unique item, while the latter does not provide any information about the part.

Part Name

A record of part names helps manufacturers identify parts and provide information about them.


This indicates where each part is in the product lifecycle. For example, “in production” and “in design.”


The description provides details of each part and helps one distinguish between similar parts by color and dimension.


Quantity indicates how many parts will be used in the assembly process. Sometimes, such as when using weighed materials in process manufacturing, the quantity is a “standard” or a target by which the cost and forecast are based, but the actual may be different due to a number of conditions.

Alternate Parts

It shows whether a part can be swapped for another if the original is unavailable. This is sometimes also called substitute items.

Procurement Specification

It describes how many parts are purchased and made.

Priority Analysis

This defines which parts are critical and helps one prioritize purchasing.

BOM Notes / Attachments

This is a place to document other useful information and unexpected changes. Robust ERP systems have the ability to attach external documents (such as Engineering Documents made in AutoCAD, supplier handling instructions, or MSDS sheets).

To create an effective bill of materials, you must determine what data to include, centralize the control of the BOM, and decide who can change it to reduce the risk of mistakes. Finally, decide how to track your changes and choose the BOM presentation that suits the product.

Utilize the Most of BOM With an ERP System!

Bills of materials help to facilitate accurate and efficient manufacturing and improve your decision-making. At John Hannan LLC, we can help you with software to automate your BOM development process.

In a future blog, we will discuss what steps to take if your company is newly implementing a fully functional ERP and developing bills for materials for the first time. We are doing this on a current project, and it is an exciting time for the company!

Contact us via LinkedIn today if you have questions or want more information.


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