Bill of Materials Best Practices: Simple Strategies to Reduce Costs

One of the issues I often come across with manufacturers is their willingness to ignore the importance of proper bill of materials (BOM) management. Instead of amalgamating the volumes of their most common raw materials, consumables and spare parts, they just produce one new BOM after another, each one calling for an entirely new sub-component parts list, instead of relying upon what’s already available in inventory.

Simply put, if you find yourself in a situation where your bill of materials aren’t calling out your most common parts and consumables, then you have to start by using a simple BOM substructure analysis. Success means you’ll pool together your most common components, drive down your costs of inventory and shorten your product to market lead times.

Amalgamating the volumes of your most common sub-component parts is essential to reducing manufacturing costs. Unfortunately, very few companies use the sub-assembly analysis and even fewer take the time to standardize their parts and materials list. Why? Simply put, they just move from one priority to another, never fully aware of the damage they inflict by coming up with a new bill of materials list for each and every new product design. If you’re one of those enterprises that continually tries to reinvent things, then here is a list of simple strategies you can adopt to improve your BOM management once and for all.

1. Use a Bill of Materials Sub-Structure Analysis

The image below is taken from the post: Bill of Materials Essentials: Sub-Structure & Sub-Assembly Analysis. It shows how to amalgamate your most common sub-component parts. However, it’s not just about eliminating your most expensive components and spares. It’s about ensuring that each change is one that doesn’t impact the three “F’s” of design and performance; your product’s Fit, Form and Function must be respected. Don’t make any changes if they increase your cycle times in manufacturing, increase purchasing costs and affect the overall performance of your product offering.

2. Build New Designs Around Standard Parts First

Another mistake I often see manufacturers make is they first complete the design, and then they try and see what standard parts fit. Now, by no means am I implying that you should sacrifice the design by only using standard parts and consumables – ones that don’t meet your overall envelope. Instead, I am implying that you always keep your most common components in mind when pursuing a new design. Think of them during the design phase.

3. Don’t Differentiate Between Consumables & Sub-Component Parts

Don't separate raw materials, consumables and sub-component parts within your bill of materials. In essence, don't leave certain consumables out of your BOM structures. For instance, paint and assembly screws are sometimes ignored. The idea being that individual assembly departments and work cells are responsible for using internal purchase requisitions to drive demand on material requirements. Don’t allow this to happen. Everything that goes into making a finished good, must be included in the list of materials needed to make that finished good. Leave nothing out – capture everything within your BOM.

Keep it simple with respect to managing your bill of materials. Don't try and separate sub-assembly parts. It leads to confusion and material shortages. Only on very rare exceptions should you ever consider separating items from a BOM. If you do, you must make sure that your system captures demand, without resorting to manual processes. Your BOM calls out all of your parts, raw materials, work-in-process and semi-finished inventory requirements - use that to your advantage. Amalgamate those volumes and reduce your costs.