When Should Manufacturers Use Multi-Level BOMs?

What is a multi-level BOM?

A multi-level BOM is a bill of materials that details the composition of the product as well as the composition of the subassemblies used in the product.

While a single-level BOM would only include the highest-level components and materials used in the making of a product, a multi-level bill of materials also breaks down the BOMs of the components, the components of the components, and so forth.

Multi-level BOMs are therefore used by manufacturers that also produce the subassemblies used in their products. Manufacturers that purchase all of their subassemblies only require single-level BOMs.

For example, a typical automobile consists of subassemblies such as the chassis, engine, hydraulic system, etc. These components can be broken down into smaller ones, which may then break down into even smaller ones.

When should you use multi-level BOMs?

Multi-level BOMs can be used with any product that contains a subassembly, but their usefulness grows exponentially as the product becomes more elaborate. They become practically indispensable once you reach a certain product complexity and need to manage the manufacturing of many subassemblies.

Having tens, hundreds, or even thousands of subassemblies expressed with separate single-level BOMs makes it very difficult to track inventory and coordinate and schedule production and purchasing. Managing everything this way gets even more complicated if you offer customization options.

Multi-level BOMs are also a good option for using material kitting to simplify inventory picking. In this case, material kits constitute lower-level BOMs used to manufacture the main product.

When should you NOT use multi-level BOMs?

In the context of production and materials planning, a product's detailed structure may be irrelevant, and using a multi-level BOM could even become detrimental, as too many details could make one lose sight of the big picture.

For example, when the production process is fairly short, it would be reasonable to flatten the BOM and look at all of the components as parts of a single-level BOM. This is done to simplify the purchasing process.

I.e., if some of the components are used in several of the sub-assemblies in a product, the component quantities should be added together and ordered all at once. By doing this, you can minimize the time spent on purchasing activities and reduce the risk of ordering errors.

In addition, when your product contains many subassemblies but there is a single production operation—assembly—that must be done at once, using a multi-level BOM would not make sense from a production scheduling point of view.

Using spreadsheets to manage multi-level BOMs

Excel or other spreadsheet programs have been used in production planning for decades and it is not impossible to manage the production of multi-level products there. But it is very difficult and risky. Even though spreadsheets are very affordable and there are free templates available online for managing various aspects of manufacturing, they may become disastrously expensive once errors start to add up.

According to a report by Ray Panko, Professor of IT Management at the University of Hawaii, nearly 90% of all spreadsheets contain errors. Managing your multi-level BOMs, however, may require thousands of rows of interconnected data, making the risk of errors even higher.

Spreadsheet-based production management systems are also notoriously unintuitive and clunky, becoming increasingly inconvenient as their complexity grows. Although the basics of Excel can be learned in a few days, using it at this level requires the user to be a seasoned expert.

Setting up the relations, macros, and formulas needed for multi-level BOM management and production planning is best left to Excel professionals. But luckily, there’s a much better option available even for small manufacturers with tight budgets.

Managing multi-level BOMs in manufacturing ERP

Modern manufacturing ERP software, such as MRPeasy, can handle multi-level BOMs and is a boon to manufacturers struggling with BOM management and production planning. By allowing users to easily create multi-level BOMs and instantly tie them to shop floor and inventory management, it drastically reduces the amount of work involved in planning and managing the production of items with a multi-level structure.

Having set up the bills of materials and production routings in the system, you can create manufacturing orders for your products. The orders then include MOs for all of the subassemblies needed to manufacture the end products, allowing you to book the necessary quantities of raw materials and components from stock and automatically schedule the manufacturing operations needed to complete the orders.

If you offer customization options for your multi-level products, MRPeasy also allows you to effortlessly manage the production of configurable subassemblies. Compared with using separate single-level BOMs for all of your subassemblies, it drastically reduces the amount of paperwork and the time spent on MO creation, material planning, and production scheduling.

If you have already set up your multi-level BOMs in spreadsheets or use CAD software to design complex products, MRPeasy allows you to easily import them in bulk as CSV files. This way, you can avoid wasting time on manual data re-entry and minimize the resources spent on setting up the system.

MRPeasy is a simple yet seriously powerful ERP software for small manufacturers. For more information, please visit mrpeasy.com