Understanding Bills of Materials (BOMs) and Their Benefits for CPG and E-commerce Businesses

LearnJuly 22, 20244 min read
Caroline Lu, Product Marketing Manager

Efficiency, accuracy, and scalability are crucial for consumer packaged goods (CPG) and e-commerce businesses. One essential tool that can significantly enhance these aspects is the Bills of Materials (BOMs). Settle is excited to introduce a new feature that allows users to add BOMs to our platform. But what exactly are BOMs, and how can they benefit your business? Let’s dive in.

What is a Bill of Materials (BOMs)?

A Bill of Materials (BOM) is a comprehensive list of raw materials, components, assemblies, and sub-assemblies required to manufacture a product. Essentially, it’s the recipe for creating a finished product. Each BOM includes detailed information on each part, such as part numbers, descriptions, quantities needed, and sometimes additional specifications like cost and supplier details.

Types of BOMs

  • Single-Level BOM: This is a simple list of all components directly required to make a product. It’s straightforward but doesn’t capture the complexity of products with multiple sub-assemblies.
  • Multi-Level BOM: This type includes hierarchies, showing how components come together at various stages. It’s ideal for complex products with simple assemblies and sub-assemblies.

Benefits of Maintaining BOMs for CPGs and E-commerce Businesses

  1. Improved Production Efficiency: With a detailed BOM, manufacturers can streamline production processes. Knowing exactly what components are needed and in what quantities helps in scheduling production runs more efficiently, reducing downtime, and minimizing errors.
  2. Enhanced Inventory Management: BOMs provide a clear picture of all the materials needed, which helps in maintaining optimal inventory levels. This reduces the risk of overstocking or stockouts, leading to better cash flow management and reduced storage costs.
  3. Cost Control and Reduction: By detailing all necessary components and their costs, BOMs enable businesses to analyze and control production costs better. They can identify cheaper suppliers, alternative materials, or more cost-effective production methods.
  4. Quality Assurance: BOMs contribute to maintaining product quality by ensuring that the right components are used in the right quantities. This consistency is vital for meeting regulatory standards and maintaining brand reputation.
  5. Facilitating Collaboration: For businesses with multiple departments or teams, BOMs serve as a single source of truth. Teams all work from the same document, reducing miscommunications and ensuring everyone is aligned.
  6. Simplified Product Lifecycle Management: BOMs are crucial throughout a product’s lifecycle, from development and production to maintenance and disposal. They make it easier to track changes, manage revisions, and ensure that outdated components are not used.
  7. Enhanced Decision Making: Having detailed and accurate BOMs allows for better decision making regarding production planning, cost estimation, and process improvements. It provides the data needed to make informed strategic decisions.

Why BOMs are Particularly Beneficial for CPG and E-Commerce

CPG and e-commerce businesses often deal with a wide range of products, each with its own set of components and suppliers. BOMs help these businesses manage this complexity with efficiency. For instance, a skincare company might have multiple product lines with different formulations, packaging, and labeling requirements. BOMs ensure that all of these elements are accounted for, leading to smoother production runs and timely product launches.

In e-commerce, where customer expectations for quick delivery are high, having precise BOMs can significantly reduce lead times. When all components are accounted for and properly managed, businesses can avoid delays caused by missing parts or last-minute procurement issues.

Manage Your BOMs in Settle

Settle’s Universal Catalog is designed to make it easy for brands to add and manage their Bills of Materials, offering a dynamic solution for all your raw materials and finished goods that’s designed to scale with your business. Bringing your BOMs into the Universal Catalog seamlessly connects your supply chain, operations, and purchasing workflows into a single platform.

With our Universal Catalog, you can:

  • Create and edit BOMs with ease (including bundles and kits)
  • Ensure that all team members are working from the same accurate information, reducing negative downstream impacts such as creating erroneous work orders
  • Eliminate repetitive data entry with BOM templates for new product variations (e.g. flavors, sizes, colors)
  • Streamline production planning and inventory management.

Create your first BOM in Settle today! Want to learn more? Check out our feature announcement.

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