Many Moroccan businesses that manufacture or process their products set prices by estimation, without precisely knowing their production cost. The bill of materials (BOM) is the tool that gets you out of that guesswork.
What is a bill of materials (BOM)?
A bill of materials lists, for a given finished product, every raw material or component needed and the quantity used. Once that list is set, production cost is calculated automatically from each raw material's price.
Why calculate a precise production cost
Without an accurate bill of materials, several decisions get made blind:
- Your real margin per product, which can vary sharply from one item to another.
- A fair selling price, neither too low for your margin nor too high for the market.
- Your heaviest cost items, so you know where to negotiate or switch suppliers.
- Your purchasing decisions, by anticipating how a raw material price increase affects your margin.
How to build a bill of materials
1. List every raw material or component that goes into the finished product, with the exact quantity used.
2. Enter the current purchase price of each raw material in your inventory management system.
3. Let the system automatically calculate production cost from the bill of materials and prices.
4. Update the bill of materials as soon as a recipe changes or a supplier is replaced.
Bills of materials and batch traceability
Combined with batch tracking, a bill of materials also lets you trace exactly which raw materials went into a given batch of finished product — useful in food processing and cosmetics in case of a product recall.
tadbeery's solution for your bills of materials
tadbeery automatically calculates your production costs from your bills of materials and raw material prices. Check out our production management module or request a free demo.