What is a bill of materials?

A bill of materials (BOM) is a detailed list of all the raw materials, assemblies, subassemblies, parts, and components that are required to make a product, along with the quantities of each. In a nutshell, it is a comprehensive inventory of every component needed to make a product.

The directions for obtaining and using the supplies are also included in BOMs. In the process manufacturing sectors, a BOM is also known as a product structure, an assembly component list, or a production recipe.

The bill of materials will list every component needed to assemble 1,000 bicycles, for instance, if a bicycle company wants to make 1,000 bicycles. The list would include the quantity and price of each component, along with the seats, frames, brakes, handlebars, wheels, tyres, chains, pedals, and cranksets. Both physical items and software-as-a-service bill of materials products can be used to build BOMs.

What are the advantages of using a BOM?

The manufacturing process is accurate and effective thanks to a BOM. It puts out a thorough strategy that is simple to implement.

A BOM that is clearly established aids businesses with the following parts of the manufacturing process:

Plan your raw material purchases, monitor and plan your material needs, estimate your material prices, manage your inventory, and keep an eye out for any shortages of supplies, expediting fees, and scheduled and unforeseen downtime;

Control costs, remain on schedule, keep records, cut waste, determine the root reason of a product failure, quickly replace broken parts, look for software component vulnerabilities, and strengthen supply chain security.

BOMs assist in ensuring that third-party contract manufacturers use correct and efficient production techniques.

Companies adopting lean production and continuous improvement techniques might also benefit from BOMs. Minimising waste is one of lean manufacturing’s objectives. A BOM’s up-front blueprint assists in preventing costly production errors.

BOM structure

Usually, a BOM is organised hierarchically, with the finished product at the top. It provides product codes, parts descriptions, numbers, prices, and other details.

The two types of BOM representation most frequently used are single-level and multilayer BOMs.


Adani Power recently reached a fresh 52-week low of Rs. 15.25. The 52-week low was 17.50 a week ago, and I had considered that to be the very lowest point.

I had come to the opinion that this was an unnecessary sell-off after conducting a preliminary study of the stock price chart and all the sell-side equity research reports from one month prior (May 2018).

Most sell-side stock research reports had a hold or sell recommendation, but their target prices were in the mid to upper 20s and their valuations were based on the company’s price in May (when it was trading around 22).

Without completely understanding how they arrived at it, I glanced at the Sotp (Sum of the Parts) valuations and assumed that it would not have changed as it was based on the most recent financials (Q4 2018), which would suggest that the company was undervalued. I then began to think about the investment.

Competition and Peer Analysis:

Because these firms are given preference in the domestic coal supply, Adani Power’s major competitors are the state-owned power companies (NTPC, CESC, and PowerGrid).

Tata Power, which is far more diverse and has been shifting its focus to renewables, competes with Adani in the private sector. You must now be wondering why Adani Power doesn’t use renewable energy.

They do, however, under the name Adani Green Energy. Adani Power thus doesn’t even profit from the industry’s positive trends.

Company P/E P/B Debt/Equity
Adani Power N/A 7.08 16.41
Power Grid Corp 11.85 1.79 2.26
NTPC 12.72 1.27 1.1
CESC 13.88 0.92 1.32
Tata Power 18.59 1.2 3.52


Types of bills of materials

The three main types of BOMs are the following:

Manufacturing. An exhaustive inventory of all the components and subassemblies needed to create a produced, shippable completed product is included in a manufacturing bill of materials (MBOM).

A product’s component relationships are described in an MBOM, which also contains details on the parts that need to be processed before assembly.

All of the integrated business systems involved in placing the order and constructing the product, including enterprise resource planning (ERP), material requirements planning (MRP), and, in some situations, a manufacturing execution system, have access to the data in the manufacturing BOM.

Engineering. A bill of materials for engineering (EBOM) lists the assemblies and components that the engineering department has created.

The engineering BOM is a mechanical or technical representation of a product that depicts the component structure from a functional standpoint.

Sales. Before the product is assembled during the sales stage, the specifics are described in a sales bill of materials (SBOM). In an SBOM, the sales order document contains distinct lists of the final products and the components needed to create them.

Instead of being maintain as an inventory item, the final product is control as a sales item.

The structure and level of detail will differ across each type of BOM. An EBOM might, for instance, list components for a product’s particular function, such chips for a circuit board. Every material use in a product’s manufacture is list in the MBOM.