Stock and manufacturing glossary
BOM
Bill of materials
A bill of materials (BOM) is the list of raw materials, components and quantities needed to make one unit or one batch of a finished product. It is the basis for costing the product, planning what to buy and issuing the right material to production.
Why it matters to your business
Without a BOM, product cost is a guess and material planning happens when something runs out. With one, you know what each product should cost, what to buy for next week’s orders, and whether the workshop used more material than it should have. That difference between planned and actual use is often where a manufacturer’s margin quietly disappears.
How it works
A furniture maker’s BOM for one office chair might read:
| Component | Quantity | Cost |
|---|---|---|
| Steel frame | 1 | ₹900 |
| Seat assembly (made in-house) | 1 | ₹650 |
| Castor wheels | 5 | ₹300 (₹60 each) |
| Screws and fittings | 1 set | ₹80 |
| Labour and power | per chair | ₹270 |
| Planned cost per chair | ₹2,200 |
The seat assembly has its own BOM of plywood, foam and fabric, with 5% expected scrap on the fabric. For an order of 50 chairs, the BOM tells you to issue 50 frames, 250 wheels and the material for 50 seats, and to check stock for each before you start. After the order, comparing actual material issued with the planned quantities shows whether wastage stayed within 5%.
Common mistakes
- BOMs not updated when the product changes. A new component or supplier means a new version; old costs on new products mislead pricing.
- No allowance for scrap. A BOM that assumes zero wastage understates cost and material needs.
- Units that do not match purchases. If you buy fabric by the metre but the BOM uses square metres, issues and stock will not reconcile. See unit of measure.
- Overheads left out. Labour, power and machine time belong in the product’s cost, or every quote you give is too low.
Questions about BOM
What is a multi-level BOM?
A BOM in which some components are themselves made in-house from their own BOMs. A chair's BOM may include a seat assembly, which has its own BOM of plywood, foam and fabric.
Is a BOM the same as a recipe or formula?
In food, chemicals and pharmaceuticals the BOM is often called a recipe or formula, usually for a batch rather than one unit. The idea is the same.
How should scrap be shown in a BOM?
As an expected loss percentage on each material, so the quantity issued covers normal wastage. If a sheet yields 95% usable material, the BOM plans for about 5% more than the finished part needs.
What is the difference between a BOM and a production order?
The BOM is the standing recipe for a product. A production order is a specific instruction to make a quantity on a date, using the BOM to work out the material to issue.
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