Why Managing BOM Is Such a Big Task

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In the discrete manufacturing sector, the bill of materials (BOM) is a fundamental piece of product data that exists throughout the major stages of a product's life cycle. According to Wikipedia, BOM is the term used to describe the raw materials, parts, subcomponents, and components needed to manufacture a finished product. Simply speaking, BOM is just a list of all materials needed to be assembled together into a product. The concept is clear and simple, and it doesn’t seem to be a difficult task to manage BOM, especially when we have a powerful tool—software—in hand. However, this is true only when the product structure is so simple that not much collaboration is needed to develop the product, when consumers are delighted to have the same products that everyone else has, and when design, engineering, and production are performed under the same roof. The truth is, during the past few decades, the landscape of the manufacturing sector has changed dramatically, and it is still changing at a rapid pace.

Collaborative Product Development

As time moves on, products become not only more complicated in structure, but also impossible to develop exclusively by a single department. In fact, developing a product is now a corporate-wide activity that involves almost every function of a company, from strategic planning, to sales and marketing, to after-sales services.

To see how things get more complicated, we don’t even need to look at all the participants. Let’s stay with three functions—product design, engineering design, and production—for a while. At the time when the product design department finishes its work, a design BOM will be generated. Ideally, this BOM will be carried throughout subsequent processes. However, this is not very likely to happen. For example, a single part created by product design team might be modified into two parts by the engineering design team for the feasibility of production; when the production team receives the production order, it might decide to use another material (which also meets the requirements) to produce the parts, since there is a large amount of this material in the stock due to a cancelled order.

The differences among the design BOM, engineering BOM, and production BOM create inconsistency of product data along the product's life cycle, and sometimes increase product cost and time-to-market. Besides these three types of BOM, there are also customer BOM, sales BOM, maintenance BOM, cost BOM, etc., all used for different purposes, making things even more complicated. One way to resolve this problem is to bridge the information gaps on a constant basis under the change management mechanism, which is a fundamental functionality within the product lifecycle management (PLM) solution.

Mass Customization

To meet the increasing demands of consumers that want more personalized products without significant increases in price, many manufacturers now practice mass customization of products ranging from automobiles to computers—even apparel. Modular BOM is one of the enablers for mass customization. It defines the components needed to produce a subassembly, and provides cost information for each component and "rolled-up" cost for the overall subassembly. Nowadays, one product may many configurations. If computer systems store each possible configuration as an independent BOM, BOM maintenance becomes almost impossible.

Configurable BOM is another enabler for mass customization. By using this BOM, buyers and manufacturers can create "end-items" dynamically. Based on this configurability, Quote-to-order (Q2O) solutions (sometimes known as configure, price, and quote, or CPQ) enable manufacturers to mobilize their mass customization initiatives. These systems can reduce time-consuming quoting and ordering processes, decrease unit costs, and lower sales costs.

Global Manufacturing and Consumption

Another significant shift in the manufacturing industry is that product development and production have been widely distributed. It’s not a surprise to find “Designed by Apple in California. Assembled in China” on the back of an iPod owned by a 16-year-old boy in Spain. Production offshoring and global marketing give companies opportunities to cut costs and to reach more consumers, but these activities also require more collaboration with up- and down-stream partners. Product data transparency between a manufacturer and its suppliers (or in other words, consistent BOM information throughout its supply chain) becomes an important issue when companies want less expensive production resources but still need to keep up with the pace of shortening time-to-market. In an old-fashioned way, an engineering change that reflects material changes may reach suppliers in days. Not to say that suppliers may also have a few layers of suppliers.

Consistent BOM throughout the whole supply chain relies on integration. First of all, internal integration ties all the information systems running within an organization (PDM/PLM, ERP, SCM, etc.) that rely on accurate BOM data. This integration allows companies to have effective and consistent product information any time it is needed. Secondly, external integration connects all parties on the value chain. Based on electronic data interchange (EDI) or other means of data exchange, external integration allows enterprises to have a common view of the product structure and other critical data, so companies can collaborate across organizational borders.

As many managers have reported, BOM management has become a sometimes cumbersome task for organizations, and inaccuracy or inconsistency of BOM has cost companies a lot. In fact, BOM management is one of the critical factors that lead to the adoption of PLM systems. PLM is the best solution so far to bridge different stages of a product's life cycle. With appropriate integration, PLM captures and records any changes that impact BOM and other important product information, and provides up-to-date product data whenever needed.
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