What is Bill of Materials (BOM)?
Nexa Consultancy | Startup & Finance Glossary
A Bill of Materials (BOM) is a comprehensive list of all the raw materials, components, sub-assemblies, and quantities required to manufacture a finished product. It is a critical document for manufacturing and hardware startups, serving as the recipe for production.
For Startups: A detailed and accurate BOM is essential for several reasons. It is used to calculate the Cost of Goods Sold (COGS), which is crucial for pricing decisions and determining profitability. It also guides the procurement process, ensuring that all necessary components are ordered in the right quantities. An inaccurate BOM can lead to production delays, cost overruns, and incorrect financial reporting.
Example: The BOM for a smartphone would list items like the specific screen, battery, processor chip, memory, and even the screws and adhesive needed for assembly, along with the quantity of each.