Why The Bill Of Materials (BOM) Is A Key Document For Importers

2020-12-03

In This Episode... Sofeast's CEO, Renaud, and Adrian from the team discuss the 'Bill Of Materials.' Why is this document SO important for importers, what does it contain, how does it help the development and manufacture of products, and why and how must it be kept confidential where possible? These questions, and more, are all answered in this episode! Show Notes 00:00 - Introduction. 01:22 - What is the BOM? A rough introduction to the document and its purpose. A list of the c...

In This Episode...

Sofeast's CEO, Renaud, and Adrian from the team discuss the 'Bill Of Materials.' Why is this document SO important for importers, what does it contain, how does it help the development and manufacture of products, and why and how must it be kept confidential where possible? These questions, and more, are all answered in this episode!

Show Notes

00:00 - Introduction.

01:22 - What is the BOM? A rough introduction to the document and its purpose. A list of the components/materials/accessories/packaging/markings/fasteners/etc that make up a product, each with its own row in the BOM. A lot of information about each individual part is included per row. Why it's a confidential document that some suppliers don't want to share (as it includes their sources and product development info) and how this can leave importers in the dark about what goes into their products and if changes have been made if they're not granted access.

06:39 - Problems that can occur if you don't have the BOM. OEMs and ODMs may make changes without telling you, this causes trouble with quality and compliance. It can also cause compliance issues because if they change the makeup of the product between batches, you could unwittingly be importing non-compliant products (we discuss product compliance here). If they commit to a BOM you're aware of these issues are less likely.

10:46 - How the BOM evolves throughout the product development process & what's included. The BOM follows the new product development phases, going from concept BOM which is simple and gives a rough idea of what's included, through to a prototyping and manufacturing BOM which is complete and is continually updated with quantity, component status, price, testing results, issues, new requirements from the customer, product engineering info, CAD drawings, colour, texture, finishing, and more.

17:02 - The need for a review process on the BOM to make sure any mistakes are found. Mistakes with the BOM could lead to incorrect parts, quantities, or wrongly specified parts being purchased. Checking and updating the BOM accurately is also connected to traceability for if issues are found later on with products.

18:51 - What does a Bill Of Materials look like? A good resource here is Renaud's video walkthrough where he explains an example BOM row by row. A few words on BOM format.

19:50 - How and why do we protect the BOM's confidentiality? The BOM includes pricing and it is not ideal for everyone to get an idea of how much components or full products truly cost. No company wants to make their margin that obvious. Components may have their markings removed or obscured to stop competitors finding out your suppliers and being able to more easily replicates products and features, but if a BOM was to get into their hands this would allow them to skip many months of development immediately.
So, anyone receiving the BOM must be contractually bound by the same kind of manufacturing contract covering the final products, too.

26:57 - If a Chinese supplier doesn't want to provide the BOM, what can you do? This is a matter of leverage and negotiation. If the supplier is afraid you will leave they may relent and provide the BOM or at least a partial BOM which will give you a lot of the key information you require.

28:21 - Other reasons why a BOM is important to both buyers and manufacturers. A buyer will also find a BOM from the supplier helpful in order to track down quality issues coming from a sub-supplier which allows you to send an inspector to the sub-supplier to check on how they're working and push them to improve if problems are found. Without the BOM, of course, this isn't possible and improvements can't be driven.
A manufacturer will find an ERP useful in order to manage purchasers' practices (assuming they don't already use an ERP which most don't), as this will force purchasers to use a specific BOM per product instead of a collection of spreadsheets, contacts, and documents that only they have access to, and then management can check that they haven't overpaid, skimmed, etc, occasionally.

33:33 - Closing recap about the importance of the BOM, its function, and contents.

Extra information you may find helpful

A number of blog posts and resources about the Bill Of Materials here for you to digest:

How To Manage the Bill of Materials, from Initial Design to Mass Production
What is the Bill of Materials and why is it important?
Bill of Materials (BoM) - summary

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