---
title: How to create a matrix/grid BOM for raw materials
description: Maxtrix Bill of Materials (BOM) can be a very usefully tool to calculate ROI of your investment inventory.
---

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# [How to create a matrix/grid BOM for raw materials](https://www.rklesolutions.com/blog/matrix-bill-materials)

 Written by [RKL Team](https://www.rklesolutions.com/blog/author/rkl-team) | Jun 21, 2015 1:35:22 PM

So, what is a [*matrix bill of materials*](http://www.finance-lib.com/financial-term-matrix-bill-of-material.html), and why is it important?

A matrix bill of materials, or matrix BOM, is typically presented as a grid with produced items across the top of the grid and raw materials as row headings. See the accompanying figure for an example.

A '1' or a hash mark in the grid at the intersection of the raw material (row) and produced item (column) indicates that the raw material is a component in the correlated finished good. The raw material may be a component at *any level* in the BOM for the finished good—not necessarily only in level 1.

## Why is a matrix BOM an important tool?

While "tribal knowledge" within your organization can likely identify those inventory items that are used in lots of end-items, tribal knowledge is probably less clear on precisely which end-items are correlated to which raw materials. The specifics are more difficult to pinpoint than are the generalities.

However, in order to calculate with reasonable accuracy the return-on-investment (ROI) value of stocking specific quantities of any given raw material, it is essential to know, not only *how many finished goods* are affected, but also *which finished goods* are affected. After all, not all finished goods are created equal. Some finished goods are more profitable than others; some finished goods have greater demand than others; some finished goods have shorter customer tolerance times than others; and, some finished goods have greater variability in demand than others. All of these factors play into calculating the ROI of carrying specific supporting inventories.

## Leverage points

A glance at the accompanying excerpt from a matrix BOM tells us at once that raw material items 'RTX' and 'B5C' are consumed in the production of eight (8) different end-items. When seeking to maximize the ROI on your inventory investment dollar, carefully evaluating the impact of inventories of raw materials beginning with those that affect the greatest number of end-items and / or largest demand is an excellent place to start. The matrix BOM gives you a clear picture of the order in which to begin your evaluation for maximizing the leverage of your inventory investment dollars.

Many systems do not offer a matrix bill of materials out-of-the-box. Nevertheless, with many databases, it is not too difficult to produce one. The figure shown was produced from a [Sage 500 ERP](https://www.rklesolutions.com/sage-500-erp/) system using a [Transact-SQL](https://technet.microsoft.com/en-us/library/aa260642(v=sql.80).aspx) data view using the *with cube* function, and a [Microsoft](https://www.microsoft.com/)® [Excel](https://office.live.com/start/Excel.aspx)™ spreadsheet, where the *pivot table* capabilities were employed.

Please leave your comments or questions below. Do you have a matrix bill of materials available to you? How do you leverage your inventory investment dollar to maximize your ROI?

[View full post](https://www.rklesolutions.com/blog/matrix-bill-materials)

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