In 2022, having your online orders reach you “later than usual” wasn’t as surprising as it was back in 2019. From the automotive to the technology sector, the supply chain crisis has affected almost all industries.
A reason for the crisis is shipping issues. Another is producers not anticipating their diminishing stocks of intermediary goods. A McKinsey survey revealed that only 2% of smart device manufacturers, for instance, know when they will be able to source their subsequent batch of chips from their suppliers to use in their next production cycle (see Figure 1).
BOM (bill of materials) is a document that contains a detailed account of the type and number of intermediate inputs that go into the production process of a good. So having an accurate and up-to-date BOM is one way to gain deeper visibility into your supply chain. Using automation technologies, such as RPA, can help producers in that regard.
In this article, we will explain what BOM is, what RPA BOM is, and 6 ways that using RPA can improve your BOM generation and reduce the adverse effects of the supply chain crisis on your business.
What is a bill of material (BOM)?
A Bill of material (BOM) is a document that lays out the type and the quantity of needed intermediary goods to create a specific output.
Conceptually, a BOM is similar to a mathematical function that specifies how many inputs will result in the production of a certain amount of output (see Figure 2).
What is a real-life example of a BOM?
Figure 3 is an example of a BOM for a bicycle:
- Level 0 is the finished product;
- Level 1 contains the structural pieces of a bike (2 wheels, a handlebar, the main frame, etc.);
- Level 2 contains the subcomponents that are housed atop the substructure (the seat, the grips, the rims, etc.).
The bike assembler schedules the production of the bike with respect to the delivery timeline and the sourcing of the parts. BOM is important because it gives the producer visibility into:
- What exactly is needed,
- How much of it is required,
- The delivery of which part should take priority over the others,
- And the sequence by which parts should be assembled.
- For instance, it is quite meaningless if all the parts are sourced bar the actual bike frame to house everything on it. So the sourcing of the bike frame should take priority over, say, the handlebar grips. BOM contextualizes this.
What is RPA BOM?
Most of the steps that go into the creation, maintenance, and usage of BOM documents are rules-based and repetitive. The good news is that RPA can automate 70-80% of rules-based processes.
RPA BOM is setting up RPA bots, that do not require any APIs, and can connect with a company’s inventory management and supply chain management software, to automatically create and update their BOMs.
We will go into the specifics next.
What are the use cases of RPA in BOM?
1. Accurate calculation of the required amount of input
Each product’s design sheet details the quantity and categories of intermediate goods needed to make it.
Same as with contract generation automation, companies can create standardized BOM templates, which RPA bots will then fill by extracting documents from the design sheet.
RPA bots can extract the product’s order amount and by combining the BOM’s and the order’s data, can calculate precisely how much of each intermediate good is needed.
The benefit will be a data-driven and error-free BOM that exactly tells the floor manager the quantity of goods and the types of tools he/she needs to create a finished product (see Figure 4).
2. Digitized storage of the BOM
Cloud-based automation solutions allow you to store and access your BOMs on the cloud. This eliminates the need to keep physical records of BOMs.
Moreover, companies can leverage RPA-enabled chatbots that can allow managers, engineers, assemblers, and other relevant personnel to ask the chatbot to give them a specific BOM by providing its “name” or “ID number,” on demand and without having to manually search and look for it.
3. Real-time stock monitoring
Smart shelves in retail are already being used.
Warehouses can equip their shelves with similar IoT sensors that:
- Monitor, in real-time, the inventory levels of the intermediate goods,
- And send an alert to the manager each time a certain item is picked off a shelf alongside the remaining stock.
RPAs can then be set up to extract each item’s remaining inventory level and include it on the BOM.
For instance, the BOM might indicate that to manufacture each computer monitor, one LCD panel is needed, and 12 of them are now in stock. That number would then decrease/increase every time it’s added to/taken off the shelf.
Companies can also program the RPA bots to send a notification to the purchasing manager whenever the inventory level of intermediate goods falls below a certain threshold, so they can approve an automatic reordering.
4. Real-time shipping monitoring
Not all raw materials that go into the production of a product are sourced from nearby locations.
For instance, the parts that make up an Airbus A321, arrive from different regions across 4 different European countries (see Figure 5).
RPA bots can be connected to supply chain/logistics software that keeps track of the delivery of intermediate goods. They can scrape the data off of that software, create a new “ETA” column on the spreadsheet that houses the BOM’s data, and input it there.
The outcome would be a BOM that not only specifies how many screws the assembly of a good needs, but also the real-time ETA of the next batch.
Fleet management is also becoming smarter these days, thanks to motion devices. So whenever there is the slightest of disruptions in the shipping trucks, for instance (i.e., a blown tire), the:
- The software will adjust the ETA on the supply chain software automatically – your Google Maps increases your initial ETA too, whenever you stop on the side of the road.
- And the RPA bot will update the product’s ETA on the BOM accordingly.
The benefit is that warehouse managers will know when to expect deliveries, so they can inform the sales team and prepare themselves to accept the deliveries accordingly.
5. Real-time BOM updates
Product updates are changes that producers make to a product after listening to consumers’ feedback. Product updates are usually small tweaks, such as changing the supplier, shape, or material of an intermediate good.
Let’s say a kitchen sink manufacturer decides to use polyester resins instead of phenolic resins because the former gives higher heat resistance to the sink. Once the change is made official, the design sheet and the BOM should immediately reflect the new changes.
RPA software can be configured to continuously monitor the company’s vendor list and the products they supply in order to flag any changes to either category. Therefore, the RPA bot can use its OCR capabilities to read the previous item on the BOM, delete it, and replace it with the new one as soon as the supplier of a given input changes, along with them, their supplied input, according to rules-based frameworks.
In addition, if the new input is more efficient and less of it is needed in the product, the bot can extract the new quantity from the design sheet and change the previous amount on the BOM.
6. Digital footprint
Digitized storage of the BOM also makes compliance checks and audits more streamlined, accurate, and less stressful.
For instance, if safety inspectors visit the shop floor of an elevator manufacturer and ask for the specific quantity of the oil that the manufacturer puts in the elevator’s oil break, the RPA bot can provide it on command. Moreover, because the older versions are also archived digitally, the inspectors can compare and contrast the current levels with the previous ones to see improvement/deterioration.
For more on RPA
To learn more about the use cases of RPA, read:
- Top 9 Use Cases of RPA in the Automotive Sector
- 4 Ways RPA Will Transform Marketing
- Top 8 Use Cases & Benefits of RPA in Manufacturing
To gain a comprehensive insight into RPA, download our RPA whitepaper:
If you believe your business would benefit from adopting an RPa solution, head over to our RPA list to find a data-driven list of vendors.
Reach out to us to help you choose the best one based on your needs:
Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.
Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.
Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.
He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.
Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.
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