A blog by Oleg Shilovitsky
Information & Comments about Engineering and Manufacturing Software

The devil is in the BOM (Bill of Materials) and it is confidential

The devil is in the BOM (Bill of Materials) and it is confidential
Oleg
Oleg
10 June, 2016 | 3 min for reading

the-devils-is-in-bom-cost

The idiom “the devil is in the detail” refers to a catch or mysterious element hidden in the details, and derives from the earlier phrase “God is in the detail” expressing the idea that whatever one does should be done thoroughly and the details are really important.

When it comes to manufacturing, cost structure is one of the most sensitive information that can be exposed about how a specific manufacturing companies is doing its business.

Solereview article What does it cost to make a running shoe brings a very interesting perspective on a business of companies manufacturing running shoes – Nike, Adidas and few others.

The following passage speaking about BOM management is my favorite:

However, what we don’t have is the material break down of each FOB cost. In the industry, this is known as the BOM – short for bill of materials. This itemizes the cost of each and every component used in the shoes, based on their consumption in a single pair.

Think of it as a list of ingredients in a cooking recipe, except that the list is marked with how much each ingredient cost you to purchase.

For a typical running shoe, the BOM will add the consumed cost of synthetic leather, mesh, threads, logos/inks, trims, midsole, outsole etc. The final costing sheet also includes the labor and overhead (LOH) costs. Very often, the cost of making the expensive sole molds is spread across/amortized a particular model too.

The BOM information is confidential, restricted to the product team involved in creating a particular shoe model. For that reasons, we do not have individual BOM’s and costing sheets.

The same article brings an interesting summary of a shoe cost. Take a a look on the picture which shows the cost anatomy of Nike shoe:

nike-shoe-cost

While BOM and cost are hugely important, I found the transparency of BOM and cost information in an organization problematic. The information lives in different departments, organizations, suppliers and systems. Each of these systems knows how to manage BOM and related information. But the overall picture is often missed.

The vision of PLM system was to manage product information across a lifecycle. But most of PLM implementation stuck in CAD management. With an increased complexity and distribution of design, manufacturing, supply chain and distribution, to manage information about product is a challenging task.

Many manufacturing ending up with no information about what does it cost to manufacture product and how to decompose Bill of Materials and what are the most important components in product BOM from every standpoint – production, components, etc.

What is my conclusion? When it comes to manufacturing “God is in the BOM” and it is really important for companies. The information about BOM cost is scattered among different departments, people and functions. To combine it in a single place with all references pointing on the right information sources, people and operations can be an interesting exercise for many manufacturing companies. Just my thoughts…

Oleg

Want to learn more about PLM? Check out my new PLM Book website.

Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital network platform that manages product data and connects manufacturers and their supply chain networks.

Recent Posts

Also on BeyondPLM

4 6
3 February, 2022

For many manufacturers, ensuring the security and reliability of their supply chains is a top priority these days. However, it...

11 June, 2013

Recently, I’ve been talking a lot of search paradigm and findability in PLM. In many aspects, web search changed our life....

30 August, 2012

Vacation is a great time to work :). Finally, you can have time to think about variety of topics that...

20 July, 2010

Note: My new website and blog is BeyondPLM. I’m proud to share some numbers about live discussions that happen in...

1 February, 2016

Part numbers are hard. What started as a simple number and references to a part company usually purchase from a supplier,...

4 May, 2017

In the past department stores were build around the idea that consumers will come to the store for inspiration and...

1 November, 2019

Cloud technologies made huge progress in the last ten years in engineering and manufacturing companies. Back in 2010. You might...

15 March, 2016

Innovation platform is a new name in the competition of PLM and engineering software. The message is widely supported by analysts...

17 May, 2017

Cloud is making its way into manufacturing industry. I’ve been watching this process for the last 5-7 years and I can...

Blogroll

To the top