Item Master, BOM and Recipes: A Standardization Method (2026)

What is a Bill of Materials (BOM)?

The BOM is the DNA of the production process—it hierarchically defines all components required for each product

A Bill of Materials (BOM) is a comprehensive list of all raw materials, semi-finished goods, components, and sub-assemblies required to manufacture a finished product. However, a BOM is more than just a list; it is a hierarchical structure that illustrates how a product is constructed.

Core Components of a BOM

• Parent: The main product being manufactured or the intermediate sub-assembly
• Child/Component: The materials required to create the parent
• Quantity: The value specifying how many of each child component are needed
• UoM: Unit of Measure (e.g., pieces, kg, meters, liters)
• Level: The position in the BOM hierarchy (0 = finished product)
• Scrap: The expected percentage of loss during production

Why is the BOM Critical?

The BOM serves as the boundary system for a manufacturing enterprise. All of the following processes depend on the BOM:

• MRP (Material Requirements Planning): What material is needed, when, and in what quantity?
• Costing: Product costs are calculated based on the BOM
• Procurement: Material orders are generated according to the BOM
• Production Planning: Work orders are opened based on the BOM structure
• Inventory Management: Reservations and allocations are tied to the BOM

BOM complexity varies across different industries: while 20-50 components might suffice for a furniture manufacturer, machinery manufacturing may involve thousands of components.

Material Coding System and Coding Plan

A consistent coding plan establishes a common language for all systems

A material coding system is a method of assigning a unique identity to every material, semi-finished good, and finished product. A well-designed coding plan facilitates cross-system integration, prevents duplication, and strengthens reporting.

Coding Approaches

1. Intelligent/Significant Coding

The code carries information about the material:

• Example: SCREW-M8-25-SS (Screw, M8 external, 25mm length, stainless steel)
• Advantage: The material is identifiable just by looking at the code
• Disadvantage: If the coding structure changes, all codes must be updated; long codes and limited flexibility

2. Non-Significant Coding

The code is merely a unique identifier and carries no meaning:

• Example: 100001, 100002, 100003…
• Advantage: Flexible, resistant to changes, concise
• Disadvantage: The material cannot be identified by the code alone (requires system access)

3. Hybrid Approach

Categorical prefix + sequential number:

• Example: RM-100001 (Raw Material), SF-200001 (Semi-Finished), FP-300001 (Finished Product)
• Advantage: Ease of categorical filtering, reasonable flexibility

Coding Plan Design

Answer these questions when creating a coding plan:

• How many digits will the code have? (Typically 6-12 digits)
• Will it be numeric or alphanumeric?
• Will a category prefix be used?
• What are the rules for automatic number generation?
• Will deleted codes be reused? (Recommended: No)

BOM Types: EBOM vs. MBOM

The EBOM provides a design perspective, while the MBOM provides a production perspective

Different departments view product structure from different angles. Therefore, multiple BOM types exist:

Engineering BOM (EBOM)

Product structure from a design and engineering perspective:

• Can be generated automatically from CAD systems
• Organized by functional groups (e.g., electrical group, mechanical group)
• Includes all design components
• Does not contain production process details

Manufacturing BOM (MBOM)

Defines how the factory will produce the product:

• Includes work stations and the sequence of the production process
• Phantom items and sub-assemblies are defined according to the production flow
• Includes scrap rates and alternative components
• MRP and production planning utilize this BOM

Transition from EBOM to MBOM

This transition is one of the critical tasks of production engineering:

1. Production process analysis: In what sequence and at which stations will it be produced?
2. Sub-assembly groups: Which sub-groups will be produced separately and then joined?
3. Make vs. Buy decision: Which components will be produced, and which will be purchased?
4. Alternative component definition: Are there substitute materials?
5. Scrap and loss rates: What are the expected losses during production?

Other BOM Types

• Service BOM: After-sales service and spare parts perspective
• Sales BOM (Kit): Grouping of products sold together
• Configurable BOM: For products with options and configuration-based requirements

Multi-Level BOM Structure

Simple products can be managed with a single-level BOM. However, most manufacturing enterprises require multi-level BOM structures.

BOM Levels

• Level 0: Finished product (the final product to be sold)
• Level 1: Main sub-assemblies and their direct components
• Level 2: Components of sub-assemblies
• Level 3+: More detailed sub-components
• Lowest level: Purchased raw materials

Level Count Optimization

Too many levels (10+) lead to problems:

• MRP calculation time increases
• Planning complexity increases
• The number of work orders inflates
• Traceability becomes difficult

Too few levels (1-2) are also problematic:

• Intermediate stocks cannot be tracked
• Cost distribution cannot be performed
• Modular production is not supported

Criteria for Level Design

At least one of the following conditions should be met to add a new level:

• The intermediate product will be kept in stock (stock point)
• The intermediate product can be purchased or sold separately
• It is produced at a different work station/department
• A quality control point is required
• There is a need for cost tracking and reporting

Management of Phantom Items and Intermediate Components

A phantom item defines intermediate components that help organize the BOM hierarchy but are not physically stocked.

When to Use Phantom Items?

• The sub-assembly group moves to the next stage as soon as it is produced (not stocked)
• Grouping is only for BOM organization
• MRP is not required to create a separate work order
• Grouping is needed for cost calculation, but no stock will be kept

Phantom Item Behavior

When MRP encounters a phantom item:

1. It does not create a separate work order for the phantom
2. It “explodes” the phantom’s sub-components to the parent level
3. Material requirements are calculated from the actual components beneath the phantom

Recipe Management

For process industries (food, chemical, pharmaceutical), the concept of a recipe is the equivalent of a BOM:

• Formula: Raw material ratios and mixing rules
• Co-product: By-products that emerge during production
• By-product: Lower-value secondary outputs
• Batch sizing: Batch size and scaling rules

Defining Alternative Components

Define alternative components in the BOM for supply flexibility:

• Primary and secondary supplier materials
• Substitute material rules
• Priority order and selection criteria
• Cost difference calculation when an alternative is used

Field Example: Machinery Manufacturer

Real Case (Brand-Neutral)

Situation

An industrial machinery manufacturer with 85 employees. 12 different machine models, each containing an average of 1,500 components. Current state: Excel-based BOM management, each engineer uses their own coding system, duplicate material cards are very common, and MRP is unreliable.

Steps Taken (representative duration: 6 months)

1. Months 1-2: Existing material cards were inventoried, and duplicates were identified (8,500 total cards, 2,100 duplicates)
2. Months 2-3: A new coding plan was designed (hybrid approach: category prefix + 6-digit sequential number)
3. Months 3-4: BOM levels were redesigned, phantom items were defined, and the EBOM-MBOM distinction was made
4. Months 4-5: Alternative components and scrap rates were defined
5. Months 5-6: Data migration and MRP testing were completed

Result (representative)

• Number of material cards: 8,500 → 6,400 (25% reduction by merging duplicates)
• Average BOM level: 8 → 5 (optimization via phantom usage)
• BOM accuracy: 72% → 96% (representative improvement)
• MRP reliability: Unplanned material shortages decreased by 60%

7 Most Common Mistakes in BOM Management

1. Creating Duplicate Material Cards

The “I couldn’t find it, so I’ll create a new one” mindset is the most common mistake. The same material exists in the system with different codes, inventory and cost data become fragmented, and MRP calculates incorrectly. Material creation authority should be restricted.

2. Not Defining Scrap Rates

If losses during production are not reflected in the BOM, MRP will always calculate insufficient material. Scrap rates are critical, especially in cutting, drilling, and chemical processes.

3. Using the EBOM Directly as the MBOM

The engineering BOM does not carry a production perspective. It lacks phantom items, production sequence, and alternative components. The transition from EBOM to MBOM must be part of the process.

4. Not Implementing BOM Versioning

When the product design changes, the old BOM is lost. Which order was produced with which BOM version? Retrospective tracking becomes impossible during quality issues.

5. Creating Too Many Levels

Creating a separate level for every sub-group inflates the number of work orders and slows down MRP. Levels that do not represent an actual stock point or production decision should be phantoms.

6. Neglecting Unit Conversions

Procurement buys in “kg,” the BOM uses “meters,” and inventory tracks in “pieces.” If unit conversion factors are not defined correctly, every calculation will be wrong.

7. Not Assigning BOM Ownership

Who will update the BOM? Engineering or production? An ownerless BOM is data that no one takes responsibility for and that deteriorates over time. A BOM data owner must be assigned.

Systematic BOM management prevents errors

Success Metrics

Track the following metrics to measure the success of BOM management (representative values):

Adapt these metrics to your own enterprise and create monthly tracking reports.

BOM Management Checklist

This checklist can also be adapted and used in your sector-based projects.

Frequently Asked Questions (FAQ)