Let's take an example for this;
Say you have a Pump (Equipment) and its bill of material include following things;
1. Rotating Assembly
2. Pump Housing
3. Mechanical Seal....etc
Now many companies keep complete rotating assemblies which includes the following readily available to handle breakdowns;
2. Shaft Sleeve
6. Keys (installed on keyways)
So we create Rotating Assembly as a material, pump housing and mechanical seal as separate materials. Now parts under Rotating Assembly are also made as materials.
We create Material BOM, which is made for rotating assembly and which will in turn have the above mentioned materials with required quantities.
Now we create Equipment BOM, which is made for the pump and which in turn with have the 3 materials. So when you see the structure under say IH01, you get functional location, pump followed by pump's BOM and then the assembly's BOM.
The material BOM also allows users to procure directly from the manufacturer i.e. the rotating assembly in this case.
I hope this is clear.
Materail BOM: A bill of material that you create for a material is known as a material BOM. Material BOMs are mainly used to represent the structure of products manufactured within your company
Equipment BOM: The system also allows you to maintain BOMs for equipment (technical objects for plant maintenance). Equipment BOMs are used to describe the structure of equipment and to assign spare parts to equipment for maintenance purposes.
Since these BOMs are linked to equipment, they are known as equipment BOMs.
Please refere the below link.