What is a bill of materials and why do I need one?
If you manufacture products—whether that's mixing ingredients for a protein bar, assembling skincare kits, or producing beverages—you need a bill of materials. A BOM is simply a complete list of every component that goes into making one unit of your finished product, along with the exact quantities required.
Here's the thing: without a BOM, you're guessing at raw material needs. And guessing leads to two expensive problems. Either you run out of a key ingredient mid-production run and halt everything, or you overbuy materials that sit in your warehouse tying up cash and potentially expiring.
For CPG brands especially, BOMs are critical because your products typically have multiple ingredients, packaging components, and often regulatory requirements around lot tracking. Getting this right from the start saves enormous headaches later.
The core components of a BOM
A well-structured bill of materials includes several key elements that work together to give you full visibility into your production requirements.
Parent item and child components
The parent item is your finished SKU—the product that sits on a retail shelf or ships to a customer. Child components are everything that goes into making that parent item. For a granola bar, the parent might be "Honey Almond Bar 12-pack" and child components would include oats, honey, almonds, packaging film, cartons, and cases.
Quantities and units of measure
Each child component needs a specific quantity expressed in the appropriate unit. This is where precision matters. If your recipe calls for 15 grams of honey per bar, and you're making a 12-pack, your BOM should show 180 grams of honey per finished unit. Mixing up grams and ounces or forgetting to multiply by pack size creates ordering disasters.
Yield and scrap factors
Real production isn't 100% efficient. Some ingredients get lost in mixing. Some packages tear during filling. A good BOM accounts for this with yield percentages or scrap factors. If you typically lose 3% of your packaging film to machine adjustments and tears, your BOM should include a 1.03 multiplier on that component.
How to create a BOM for your products
Step 1: Start with your recipe or formula. Work with your production team or co-packer to get the exact quantities of each ingredient per production batch. Convert everything to consistent units of measure.
Step 2: Add packaging components. Don't forget primary packaging (bottles, pouches, jars), secondary packaging (cartons, sleeves), and tertiary packaging (cases, pallets). Each level matters for planning.
Step 3: Calculate per-unit quantities. If your production batch makes 1,000 units and uses 50 pounds of flour, each unit requires 0.05 pounds of flour. Do this math for every component.
Step 4: Document supplier information. For each component, note the vendor, their lead time, minimum order quantities, and pricing. This context helps when you're deciding when to place orders.
Step 5: Account for waste and yield. Review historical production data to understand your actual consumption versus theoretical consumption. Adjust your BOM quantities accordingly.
Using BOMs for demand planning
Once you have accurate BOMs, you can work backward from your finished goods forecast to calculate raw material needs. This is the core of material requirements planning (MRP).
Say your demand forecast shows you'll sell 10,000 units of your protein bar next month. Your BOM shows each unit requires 20 grams of whey protein. Simple math: you need 200 kilograms of whey protein for that month's production.
But there's more to consider. You need to factor in current inventory of that ingredient, any existing purchase orders in transit, and your desired safety stock levels. The real calculation becomes: Demand × BOM quantity - Current inventory - Incoming orders + Safety stock = Order quantity.
Planster handles this calculation automatically. When you enter your BOMs and connect your inventory data, the system generates raw material demand based on your finished goods forecast, accounting for what you have on hand and what's already on order.
Common BOM mistakes to avoid
Not updating BOMs when recipes change. Your product team tweaks formulas regularly. If the BOM doesn't reflect the current recipe, your material planning will be wrong. Build a process to update BOMs whenever formulas change.
Forgetting indirect materials. Labels, adhesives, shrink wrap, pallets—these "small" items add up and can halt production just as easily as running out of your main ingredient.
Using inconsistent units. If your supplier sells flour by the pound but your BOM lists grams, conversion errors will creep in. Standardize units across your BOMs and purchasing.
Ignoring co-packer differences. If you work with multiple co-packers, they may have different yields or use different packaging configurations. Maintain separate BOMs for each production location.
Setting it and forgetting it. BOMs need regular audits. Production realities change, suppliers change pack sizes, and small inaccuracies compound over time.
Key takeaways
- A bill of materials lists every component needed to make one unit of a finished product, with exact quantities
- Good BOMs include yield factors to account for real-world production waste
- BOMs enable backward planning from finished goods forecasts to raw material needs
- Keep BOMs updated when recipes, packaging, or suppliers change
- For multi-location production, maintain separate BOMs to reflect actual consumption at each facility
Frequently asked questions
What's the difference between a BOM and a recipe?
A recipe typically refers to the ingredients and proportions for food products, while a BOM is broader—it includes all components like packaging, labels, and indirect materials. In practice, your BOM should encompass your recipe plus everything else needed to create the finished, shippable product.
How detailed should my BOM be?
Include every purchased component that goes into your product. If you buy it separately and use it in production, it belongs in the BOM. The test: if you ran out of it, would production stop? If yes, it needs to be in your BOM.
Should I include labor in my BOM?
Traditional BOMs focus on materials, not labor. Labor and overhead are typically handled in costing and production planning separately. Your BOM should answer "what materials do I need?" not "how much does production cost?"
How do I handle shared ingredients across products?
Each finished product should have its own BOM, but the same ingredient can appear in multiple BOMs. Your planning system aggregates demand across all products to calculate total ingredient needs. This is where software like Planster helps—it rolls up requirements across your entire product catalog.
What if my co-packer manages the BOM?
Even if your co-packer tracks production details, you should maintain your own BOM for planning purposes. You need to know material requirements to forecast costs, negotiate with suppliers, and plan cash flow. Your BOM might be simplified compared to your co-packer's internal records, but you need visibility into what goes into your products.