Bill of Materials and Production Orders in a Small Factory

A bill of materials and a production order are two simple ideas that bring order to a factory. The first says what a product needs. The second says how many you are making now. Together they let you plan purchases, control the store and learn your real wastage. This guide explains how to set them up, using a simple example, and what to watch for on the factory floor.

What goes into a bill of materials

A bill of materials, or BOM, lists every material required to make a standard quantity of one product, which might be one piece or one batch. Choose a standard quantity that is easy to measure. For a biscuit maker the standard might be one batch of a specified number of packets. For a chair maker it is one chair.

• Raw materials: quantity of each per standard output, in a consistent unit.
• Packaging: cartons, wrappers, labels, tape.
• Expected wastage: a percentage per material based on experience, not hope.
• By-products: trimmings or off-cuts you can sell or reuse.
• Labour and machine time: expected hours, if you cost by time.

An example: simple wooden shelf

Material	Quantity per shelf	Expected wastage
Board sheet	One sheet	Trimming loss as you measure it
Edge strip	Several metres	Small cutting loss
Screws and fittings	A packet	Few breakages
Polish or paint	A measured amount	Spillage
Packing material	One set	None

The numbers in your BOM come from measuring a few real runs, not from a catalogue. Weigh or count what is actually used and average it. Update the BOM when you change a supplier, a grade or a method.

Raising a production order

A production order records a decision: make this quantity of this product by this date, for stock or for a customer. It shows planned quantity, planned materials from the BOM, the start date, the target date and status. When an order is created, the software can tell you whether the store has enough material and what needs to be bought.

1. Choose the product and the quantity.
2. Check the requirement list against the store balance.
3. Raise purchase requests for shortages.
4. Confirm the order and assign a supervisor and start date.

Issuing raw material

The store keeper issues material against the order, not against a person. Each issue slip names the order, the material and the quantity. The system compares total issues with the BOM requirement. If more is issued than planned, it should ask for a reason. This single control often reveals the biggest hidden waste in a small factory.

When material comes back unused, record the return with the order number. If you do not, the order will look more expensive than it was and your store balance will drift.

Recording output and wastage

At the end of the run, record good output, rejected output and scrap. The system calculates yield and the difference between standard and actual material use. If the shelf order needed ten sheets and took eleven, the extra sheet appears as a variance. You can then ask why: poor cutting, a defective sheet, a design change or theft.

• Record rework separately from scrap so you see how much was saved.
• Record by-products as stock where they have value.
• Note the shift and machine so patterns appear over time.

Closing the order and costing it

When output is recorded, finished stock rises and the order is closed. The software then adds the cost of materials issued, labour assigned and your overhead rate to produce a cost per unit. Compare this with your price list. Do this for the first five orders of each product and you will probably find one or two where the margin is smaller than you thought.

Working with semi-finished goods

Some products have stages. A garment is cut, stitched and finished. A food product is mixed, cooked and packed. Treat each stage as a mini order with its own BOM and output, so that the stitched garments or the cooked mix are inventory in their own right. This helps when the stages happen on different days or in different rooms, and when a stage has its own wastage.

Small habits that make the system work

• No material leaves the store without an order number.
• Output is entered on the same day.
• Changes to BOMs are signed off by the owner.
• The supervisor reviews the variance report weekly.

Common setup mistakes

Many units copy a BOM from a supplier brochure that does not match their real process. Others forget packaging, or the oil used in the machine, or the gas for heating. Some mix units, such as kilograms in the BOM and bags in the store, without a conversion. Test every BOM with a real run and correct it before relying on the figures.

See how the WebsNP factory production software manages recipes, orders, issue slips and costing. Its stock features overlap with inventory management software, which you can compare. Message us on WhatsApp with your first BOM and we will enter it in a demo.

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