You need raw material, components, tools, and techniques to build one final product. And not once – you have to repeat this same standardized process multiple times to produce the whole batch, depending upon your customer demand and market need. Seems fun and easy, right?
Until…
You have to stop your production line for a missing $0.05 screw. Ouchh…
That happens when you lack proper visibility into your inventory and don’t have a system in place to forecast materials.
And that is where the bill of materials inventory management comes in.
A bill of materials is a list of all the materials and tools used to produce a finished good. And the proper management of that list tells a lot about how smoothly you can run your business operations.
Let’s dig deep to uncover the secret sauce for properly managing your bill of materials, preventing lost sales, production errors, overstocking, and understocking, and streamlining your production, operations, and overall supply chain.
What is a bill of materials (BOM)?
A bill of materials or BOM is the complete list of raw materials, components, assemblies, sub-assemblies, and tools needed to build a product. In short, it’s a recipe with all the ingredients to make a final meal.
Bill of material inventory management is an important part of overall inventory management. To run smooth business operations, you have to make sure that you have all aspects under control because an average business spends about 25%-30% of its budget on inventory, and if not managed properl,y they can face serious financial losses, operational challenges, production delays, and customer dissatisfaction that can even lead to business failure in worst-case scenario. Therefore, your business must have a system in place to manage the material list to prevent understocking or overstocking, as this alone can help you reduce 10% of your total inventory cost. It’s a win-win.
Why do you need to keep your bill of materials in place
Answer this honestly:
How can you manage inventory if you don’t even know what’s in it?
Gartner found that firms with a formal BOM process cut production errors by 20 %. Without it, you face rush-shipping costs, missed deadlines, and a growing number of refund requests.
If you want production to run error-free and avoid the mid-run panic of “Oh, we’re out of stock; we need to reorder this raw material!” put a BOM in place.
Otherwise, BOOOM: extravagant rush-shipping costs, angry customers, and delayed schedules.
It may sound blunt, but guesswork has no place in listing the materials you need. A clear system to forecast demand is the only way to keep production consistent.
How can you manage the bill of materials (BOM) effectively?
About 43% of small businesses don’t monitor their inventory at all.
While other small to mid-scale businesses use either an Excel spreadsheet (about 67.4% according to Founder Jr) or a logbook to manage their inventory. Among those who monitor using the above approach (spreadsheets), it was reported that about 90% of the spreadsheets contain errors. And these errors lead to further chaos.
Another option for monitoring and managing inventory, suitable for small to enterprise-level businesses, is inventory management software. With this method, companies can reduce human error by up to 43.5% by automating processes where errors could occur if done manually. And with fewer errors, there comes more precision and smooth operations.
How automation can help in bill of materials inventory management
Businesses are actively shifting to inventory management softwares, mostly with large manufacturing operations, because it makes stock management stress-free and reduces errors.
By managing stock levels, automating reorder points, and having complete visibility of the stocks in one place, businesses can prevent lost sales. How? By forecasting how much more material they need to produce a certain volume of goods that meet the customer demand without delays and shortages.
A bill of materials gives you one-window visibility
When you have all the stock data in one window, you can forecast the demand, cut storage costs, and prevent overstocking and dead stock.
- Accurate demand forecasting
A single dashboard shows every SKU in real time, letting you spot trends early and plan purchases before demand spikes.
- Right-size inventory, cut storage costs
Complete visibility tells you exactly how much to keep, no over-stocking that inflates warehousing fees, no under-stocking that stalls orders.
- Stop dead stock in its tracks
Idle, damaged, or outdated items surface instantly, so you can discount, bundle, or liquidate them before they eat up space and cash.
How Seebiz can help you with bill of materials inventory management
Well, we don’t say we are the best, but what we do say is – we are one of the very few softwares that was specially made to help manufacturers, wholesalers, and distributors. Using Seebiz inventory management software, you can manage materials purchased from different vendors, set reorder points to prevent shortages, and set stock levels. You can also receive notifications if stock levels reach your set threshold. It provides complete visibility into your entire inventory, making it easy to forecast.
In short;
- Track materials from every vendor in one dashboard
- Auto-set reorder points; get alerts before a stock-out
- Export BOM reports for finance and ops in a click
- Forecast demand with AI-powered analytics
So, if you are wondering where to start, this could be a good place to begin. Here, check the demo and streamline your operations by minimizing BOM errors.
FAQs
What is the Bill of Materials in inventory management?
A bill of materials is a list of all the data relevant to the products, including raw material, tools, components, and assemblies used to manufacture a final product. In short, it’s a recipe with all the ingredients to make a final meal.
What is a BOM list of inventory?
It’s a comprehensive list of inventory comprising all the raw materials, components, tools, assemblies, subassemblies, and techniques used to produce a final product.
What is the difference between COGS and BOM?
BOM (Bill of materials) is a list comprising all the assemblies and materials used to produce a final product. At the same time, COGS (Cost of goods sold) in manufacturing contributes to the total cost of all the material and components specified in the BOM and used in the production of finished goods.
