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

12/02/20 • 34 min

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

In This Episode...

Show Notes

00:00 - Introduction.

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.

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

Previous Episode

The Impact Of Chinese New Year On Importers & Tips To Prepare For CNY 2021

In This Episode...

Sofeast's CEO, Renaud, and Adrian from the team discuss the forthcoming Chinese New Year holiday which is officially between Feb. 11th to 17th 2021 (CNY day is Feb 12th). We'll look into how and why this holiday has a serious impact on lead times, quality, supply chain risk, and managing suppliers; greater than at any other time of the year.

Renaud also shares some tips and strategies that importers can implement to plan and prepare for CNY, as well as mitigating risks that may arise from your suppliers.

Show Notes

00:00 - Introduction.

02:18 - Discussing what the Chinese New Year holiday, or Spring Festival, is and some of its unique features.

05:28 - What staff turnover around CNY tells you about the factory. A high turnover is indicative of an employer who has work to do with treating and/or paying staff well.

06:40 - Some problems which typically occur after Chinese New Year. If staff have left, new staff aren't as efficient which may lead to quality issues. Even new quality inspectors may not pick up problems as well until they're familiar with your requirements.

07:17 - Points of stress for importers before CNY. The pressure to clear a backlog of orders and staff starting to leave early for the holiday makes the pre-CNY period quite treacherous for importers. Orders may be delayed, quality may be affected, there is no time to rework defective batches, suppliers may not focus on future orders urgently, etc.

11:00 - The length of time that different factories may be closed for. Assembly factories will typically be closed for 12-15 days, a relatively short time. The problem is with component and material factories. These guys can be closed for up to a whole month.

12:32 - Summarising the problems and risks at CNY. Also includes shipping backlogs, where demand drives up shipping costs and there is enormous demand for quality inspections just before CNY, too, when everyone is (rightly) worried about poor quality.

13:42 - The dates for Chinese New Year 2021 and pre-CNY wind-down.

14:36 - An additional risk for importers: Supplier bankruptcy. It's at this time, the end of the year in China, that suppliers who have been struggling financially may decide to file for bankruptcy and shut down. They may or may not pay off outstanding wages and debts, but either way, it's going to leave you in the lurch. Due to the financial stresses of 2020, this could be a larger problem in 2021 than usual. Big tip: DON'T wire any advance payments for the period after CNY to a supplier just before the new year holiday.

16:31 - Preventive measures that importers should follow to navigate the CNY period securely. Plan ahead diligently, get inventory made Oct/Nov, avoid production too close to CNY due to quality issues, if things may be in a rush, negotiate with suppliers to have smaller orders made better (if possible) to release some pressure on them, arrange post-CNY orders with your supplier so they can coordinate with sub-suppliers in advance in order to get things running faster after the holiday, increase inspection work on products and components/materials pre and post CNY.

21:27 - Will CNY 2021 be any different to usual due to COVID19? At the moment, due to the very low cases of the coronavirus in China, it looks that it won't be particularly affected, unlike in 2020. However, importers should be aware that if the virus spreads due to the holiday, factories could be hampered or shut down in the new year if cases are found.

25:24 - Contingencies to deal with supply chain risks (such as viral outbreaks). Keeping some extra inventory if possible, having more than one supplier per product gives a safety net and this even better if they're located in different areas of China or even different countries (such as one in China, one in Thailand), suppliers can hold some stock or components, etc.

27:48 - Risks other than a pandemic to be aware of. This could be a fire in the factory that puts them out of action, financial problems causing them to go out of business, having IP stolen, disastrous manufacturing and quality issues, and more. Importers would be wise to consider arranging a backup supplier. Plan ahead and have a risk-based approach to cope with risks that you rank from worst to least if they should happen.

Extra information you may find helpful

Renaud wrote about how to manage issues caused by the holiday here: Chinese New Year: how to manage the disruption?
You can learn more about the CNY festival itself, dates, etc, from this handy page: Chinese New Year – China's Grandest Festival & Longest Public Holiday
There are a number of really great posts from Renaud about supply chain r...

Next Episode

Tips For Continually Getting Good Results From A New Supplier | Vetting Chinese Suppliers (Part 11)

In This Episode...

You've tuned into part 11 of our mini-series guiding you through effective vetting of Chinese suppliers that will help you to find the best possible manufacturer for your products (listen back to the entire mini-series on vetting Chinese suppliers here 👍). In fact, this is the final part of this mini-series!

In this mini-series, you will already have learnt about due diligence, factory audits and visits, exploring testing facilities, and much more when it comes to vetting suppliers. But how do you carry on getting the results you expect from your new supplier once you have been working together for a while?

In this episode, Adrian & Renaud discuss some of the common scenarios you may face in your new relationship, such as needing to switch from an underperforming supplier to a new one or facing an unexpected price rise, and what you can do to combat or overcome them.

Show Notes

00:00 - Introduction / Who needs to listen to the series on vetting new suppliers and why / certain things to be mindful of when working with a new Chinese supplier.

04:15 - How and why to develop a backup supplier. Benefits of doing so in terms of reducing the risk of losing supply of key products/components, how to manage a backup, who is and is not going to find keeping a backup appropriate, and much more.

12:45 - When to switch to a new/backup supplier if things are going wrong with your current one? How it can either be the buyer (didn't vet suppliers and chose a bad fit or didn't explain standards correctly and clearly) or supplier (simply not fulfilling what is expected from them or that they agreed to) that causes a situation where switching to a different supplier is necessary and examples.

16:27 - The typical 'vicious circle' a buyer can fall into with a bad supplier even though they should leave.

20:51 - Dealing with unexpected price rises. Having thorough data about material costs etc can help a buyer push back against a price rise. Having a backup supplier provides leverage if needed when negotiating, as it means you can leave the supplier if they don't modify costs.

22:45 - Developing suppliers based on their quality performance data. Assessing how consistent and reliable the supplier is and their quality systems. Small factories will need a lot more hand-holding and more inspections earlier in production. Larger manufacturers probably won't require such vigilance early on, and, if you're able to negotiate favourable payment terms where you pay after receiving items to your country, repeatedly running a lot of inspections may not make sense.

24:57 - Tracking supplier performance and reviewing it over time - Keep track of performance statistics such as quality inspection pass rate, average defect rate, on-time shipments, serious issues found after shipment, and more. This is also the case with lab testing, too. If a supplier shows that they can be trusted, reducing lab testing frequency may be possible, too.

Extra information you may find helpful

Here's how to keep a backup supplier in case things don’t go well with your main option.
Here is how to prepare yourself for if Chinese suppliers raise their prices unexpectedly.
When you have even one bad experience with an unreliable supplier, don’t place a re-order. Go to your backup instead.
Our Contract Manufacturing subsidiary, Agilian Technology, just released this tool to help you assess if you need to switch to a new Chinese manufacturer.
Guidance on how to adapt your quality control strategy to the reliability of each supplier.
Follow this advice about how to develop your key suppliers over time.