Nov
18
The Bill Of Materials (BOM) is a detailed list that consists of all the component parts, sub-assemblies and materials together with the correct quantities required to produce and manufacture the end product. The BOM should provide an accurate description of what items the product is constructed from and, when combined with appropriate financial data, the true cost.
In using the BOM, understanding “the list of ingredients” it takes to produce the end goods, will assist the operational business activities from supply chain activities such as buying through to stock and inventory management. Having this information will simplify the estimation of parts and components needed to match demand (or forecast demand) and allow the business to respond appropriately.
When a company wants to increase or decrease output, using the BOM to drive the material requirements guarantees the correct amount will be ordered to fuel production. Where the BOM is inaccurate this can lead to manufacturing delays (waiting for parts) or excess inventory. Both of which results in cost.
Different Bill Of Materials for different uses?
With different stages of a products lifecycle (from development to testing through to production) companies commonly utilize different forms of BOM’s – they are all used in the same way but their robustness and their interface with operational elements like procurement vary.
Engineering bill of materials (often used in conjunction with an initial product configuration lists) are typically used during the product design phase. The engineering bill of materials continues to focus on the end product; however its role is to support the engineering team providing an outline of requirements. It’s common in this phase for the BOM to be incomplete or reference parts or materials that are yet sourced or designed. Engineering BOMs will typically not drive procurement activity but will be used in-house until such a time that the BOM is robust enough to be treated as a production BOM (i.e. the product has reached final design stage).
Manufacturing bills of materials are used to identify those parts required for manufacturing purposes – these are the most typical BOM’s and usually represent 100% of the product and its related components and are used within the forecasting process to identify to procurement which parts to buy and in what quantities.
In some industries (e.g. Aerospace) detailed bills of material often accompany the sales process. These Sales BOM’s identify the products as they are shipped (often down to component serial number level). This is often to meet compliancy requirements but also enables the end user to track usage and life expiry data). In some cases these BOM’s may not contain the full list of products but may only track those components that are required to be monitored during usage.
BOMS all have one thing in common, and that is they begin with the top level part (the saleable product) and then display all other parts using a parent child format. At one level (the parent) the end product—or sub-assembly item is listed, below that (the child) the sub components. when these parts are grouped, they create the end item.
The Modular BOM is another common layout. It is a method of developing a BOM for complex production items and those that need to make particular information about involved costs for every component and cost information of the various stages of sub-assembly. This can difficult. For example, data on the number of engineering drawings desired can be produced as well. However, using the BOM the information can be obtained and processed by the information systems as needed.
Summary
Bills of Materials are a common tool used in manufacturing organizations – they are used by many parts of the business from design through to supply chain and finally production. For BOM’s to be effective (and useful) they rely on robust and accurate data. Accurate BOM’s can drive efficiency and value – an incorrect BOM can spell disaster.
Nov
17
Using Technology That Can Make Your Supply Chain More Efficient
Filed Under Blog | Comments Off on Using Technology That Can Make Your Supply Chain More Efficient
Technology has almost revolutionised the management and execution of supply chain functions within business today. With vast amounts of innovative hardware and software solutions (either stand alone systems or those that are built into existing modular MRP/ERP systems) available businesses are increasingly looking at how these can be applied to deliver benefit and leverage their position in the marketplace.
Successful utilization of technology can be a critical. For supply chain teams successfully applying technology can deliver:
• Simplification and Improved efficiency
• Improved management information
• Improved compliancy
• Improved forecasting
• Improved accuracy
Technology can be applied to almost every facet of the modern supply chain supporting both tactical and strategic objectives. Whilst simply throwing money at software vendors and consultants in the vain hope that some might stick and deliver benefits is never a good idea. Businesses must consider a targeted, goal orientated approach closely reviewing its operations, understanding specific weaknesses and considering what improvements would deliver strategic value.
One approach is to review the various elements of the supply chain and consider where and how technology could be applied to solve either specific problems or to deliver processes that improve competitiveness. For example:
Planning and Management: With increased visibility and controls inventory controllers can better manage company assets. With software based management reporting forecasting can be simplified and usage rates closely monitored which can deliver clearer buy signals and drive improvements in restocking practices (EOQ’s, Lot sizes etc) driving down costs whilst retaining service levels.
Integration: Delivering closer ties between trading partners facilitating efficiency and accuracy allows organizations to change their emphasis from tactical processes to strategic processes (SCM for example) that can deliver true value.
Warehouse Management: Introducing technology into the warehouse can ensure that the material handling controls are integrated, warehouse space is utilized the best effect and that the inventory overall is managed efficiently.
There is a wide range of technology available from Warehouse management systems through to vastly efficient hand held scanners through to product tags such as RFID which cal all deliver benefit when applied correctly.
Planning: Whilst many MRP systems have dedicated planning tools organizations must ensure they leverage this functionality. Robust planning ensures that resources (labor and material) come together at the same time and that the business maximises it’s own “engine room” a planning system that is not delivering means a business that doesn’t deliver either.
Finance: Whilst almost every finance system will manage the key tasks (bought ledger, sales ledger etc) to truly control costs organizations must get smart at looking under the hood of their business ascertaining key cost drivers and opportunities. For the supply chain this is centred around two areas – firstly by ensuring that the systems that manage product “bill of materials” and costs are closely integrated and secondly by having a robust supplier spend analysis system.
Asset management: Technology can help to manage assets and help mitigate risk within the supply chain. Asset management can be labour intensive and is often linked with meeting key service levels (i.e. repair turnaround times). With technological systems, asset management (including the control of rotable stock pools) can be simplified with improved management information and controls.
Purchase to Pay (P2P) Through applying workflow and flexible controls implementing a software based purchase to pay solution can deliver many benefits from integration, efficiency, control and savings. Purchase to Pay is a huge area and deployments can be small (focus on a key part of the process) or significant (focus on many or all of the purchasing process).
Technology will always be a moving feast. There will continue to be innovation in terms of functionality and its application we have only seen the start of the technological revolution and businesses must continue to be tuned into software/hardware lifecycles to avoid being caught in the “legacy application” trap. A failure to consider an appropriate supply chain technology strategy can not only impact efficiency but can also impact competiveness as other businesses use new tools to better serve the market.