Multilevel Bill of Materials — A Practical Guide for Small Manufacturers (+ Excel Examples)

Last updated: April 2026

Once you start creating Bill of Materials (BoMs) for your products, you’ll find that some require more production steps than others. When all your parts live in a single flat list, that list stops representing how the product actually gets built.

That’s where a multi-level bill of materials comes in.

A multi-level bill of materials (also called a multilevel BOM or indented BOM) is a structured product list that organizes all components and sub-assemblies by assembly stage rather than a single flat list. Each level represents a distinct production step, showing what inputs go in and what output comes out before moving to the next stage.

This guide covers what multi-level bills of materials are, when to use one, how to build one in Excel, and when dedicated software makes more sense.

Assembly Levels and Sub-Assemblies — The Building Blocks

Before you build a multilevel BOM, it helps to map out your production process in terms of assembly levels.

An assembly level is any step in your manufacturing process where you take a group of components and turn them into a sub-assembly. That sub-assembly is then used in the next production step, or in some cases sold as a standalone product.

Most small manufacturing businesses keep their multi-level bills of materials to 4-5 levels deep at most. Beyond that, the overhead of tracking each level tends to outweigh the benefit.

Thinking in separate production steps pays off in a few ways:

• You can plan production stages independently: batch sub-assemblies ahead of time and free up your main assembly line
• You get clearer labor cost visibility at each stage, rather than a single lump labor figure for the whole product
• If multiple people work on different stages, you can run concurrent manufacturing steps without one holding up another

Let’s work through a couple of examples.

Say you’re manufacturing lamp shades. A sub-assembly process might look like this:

1. Measure and cut the shade fabric
2. Sew it into a cylinder shape
3. Mount onto the lampshade frame
4. Add a rim to the top and bottom

You now have a finished lamp shade sub-assembly ready to combine with the lamp base. Because this step is documented as its own process, you can batch-produce lamp shades at any point before the base is ready.

For a textile example, a yarn manufacturer might structure their process like this:

1. Fiber is spun into Yarn (sub-assembly)
2. Yarn is dyed to produce Dyed Yarn (sub-assembly)
3. Dyed Yarn is made into finished Garment (final product)

Each stage has its own BOM, and they chain together to show the full production path.

☞ New to sub-assemblies? What Is a Subassembly? Definition, Meaning & Examples covers the concept with more manufacturing examples.

What Is a Multi-Level BOM (Indented BOM)?

A multi-level BOM is any BOM that includes more than one assembly level. It’s also called an indented BOM because when printed or viewed in a table, sub-components sit indented under their parent assembly, making the hierarchy visible at a glance.

The key difference from a single-level BOM: instead of one flat list of every component needed to build the finished product, a multi-level BOM shows which components go into each stage, and what those sub-assemblies are themselves made of.

A multi-level bill of materials helps you:

• See production flow clearly. Each stage shows what feeds into the next, rather than presenting an undifferentiated pile of parts.
• Track material requirements accurately. When you plan a production run, you can calculate material needs at every level, not just the final one.
• Make targeted changes. If you switch a component in a sub-assembly (say, a different fastener), you update it once at that level and the change flows through without hunting through every product that uses it.
• Identify costing gaps. Labor, overhead, or material estimates that are missing become obvious when production is organized by stage.

Not every product needs one, of course. If you’re making something simple with a handful of components and no intermediate steps, a single-level BOM is perfectly adequate.

☞ What is a Bill of Materials? Examples for Small Manufacturing Businesses covers single-level BoMs with worked examples, worth reading first if you’re new to BOM concepts.

Multi-Level BOM Example — The Lamp

Let’s take the lamp shade example and see the difference in practice.

Here’s what a single-level BOM for the finished lamp looks like:

Lamp Product BOM (single-level)

This lists everything accurately, but doesn’t show how things are assembled. You can’t see that the fabric and frame are made into a shade sub-assembly first, or plan those stages separately.

Now here’s the multi-level BOM version:

Level 1 — Lamp Shade Sub-Assembly

Level 0 — Finished Lamp

You can also view this as an indented (exploded) BOM:

• 1x Lamp Base
• 1x Lamp Shade (sub-assembly)
  • 0.5 yard shade fabric
  • 1x lampshade frame
  • Labor 40 mins
• 4x screws
• 1x light bulb
• Labor 20 mins

The indented view makes relationships clear at a glance, showing total material requirements in one place without losing the structural context.

How to Create a Multi-Level BOM in Excel

Excel is the most common starting point for multi-level BOM management for small manufacturers. Here’s a practical approach:

1. Add a Level column. Rather than creating separate sheets for each assembly level (which becomes hard to maintain), use a single sheet with a “Level” column. Level 0 = finished product, Level 1 = primary sub-assemblies, Level 2 = components of those sub-assemblies, and so on. Indent rows to make the hierarchy visually obvious.

2. Structure your columns. A multi level BOM in Excel typically needs: Level, Part Number (optional), Component Name, Quantity, Unit of Measure, Unit Cost, and Total Cost. Add a Parent column if you want to show which assembly each component belongs to.

3. Roll costs up by level. Use SUMIF formulas to sum all component costs at Level 2 and pull that total into the Level 1 sub-assembly row, then sum Level 1 sub-assemblies into the Level 0 finished product row. This way, if a material cost changes, the finished product cost updates automatically.

A simple multi level BOM Excel structure:

The main limitation of Excel for multi level BOM management: it doesn’t deduct inventory automatically when you run production. You still need to manually update stock levels after each batch, which introduces errors, especially for businesses running frequent production runs.

☞ If you’re starting from scratch, download the free multi-level BOM spreadsheet template before building your own.

Multilevel BOM Software for Small Manufacturers

Once you’re managing more than a handful of products, or when your multi-level bills of materials start spanning 3+ levels, dedicated software does things Excel can’t.

Automatic material deduction. Record a production run, and the system deducts the correct component quantities at every level automatically. No manual spreadsheet updates after each batch.

Cost rollup that stays current. If a raw material price changes, every sub-assembly and finished product that uses that material updates its cost automatically. In Excel, you’d need to find and update each formula manually.

Real-time inventory visibility. See current stock for every material and sub-assembly component across all your products, not just what you last typed into a spreadsheet.

Production planning. Enter the quantity you want to produce, and the software calculates exactly what you need at every level, including what’s already in stock and what needs to be ordered.

Craftybase’s bill of materials software is built specifically for small-batch manufacturers who make their own products. It handles multi-level component structures (called “recipes” in Craftybase), automatic stock deduction, and COGS calculation at every production stage.

Want to see it in practice? Robin from Messy Play Kits uses multi-level component tracking to manage 24 different activity kits, each with dozens of components across multiple production stages. Spade to Fork tracks shared materials across hundreds of organic gardening supply SKUs, projecting material requirements for seasonal production peaks.

☞ Not sure whether MRP software is the right fit yet? What Does MRP Stand For? explains how Material Requirements Planning connects to BOM management and when it makes sense for small manufacturers.

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