Use Process Manufacturing ERP to Build Better Cost Models
Process manufacturing ERP such as Sage EM (formerly known as Sage X3) can help you build better cost models, especially in the chemical manufacturing industry. Many companies overlook the additional costs of transporting, storing, and securing chemicals when they compute the costs of manufacturing each item. By using process manufacturing ERP, you can track all the elements related to the cost of goods and build more accurate costs into proposals and estimates for your customers.
Estimating Accurate Costs in the Chemical Industry
Chemical manufacturing takes into account more than the cost of raw materials, labor, and markup when it comes to pricing its products. Among the special considerations the industry must include are specialized packaging, transportation, and storage.
Packaging for chemicals needs to meet specific safety requirements. Drums, jerry cans, and other containers must meet safety requirements, sometimes requirements across borders if exporting products for sale in other countries. Specialized materials may also be needed for packaging to prevent reactions and leaking.
Transportation can also add costs onto the item that is over and above estimates for costs of goods. When determining shipping costs onto the item costs, you must estimate specialized containers, hazmat shipping charges, and other factors.
Lastly, storage fees may increase the cost of goods. Refrigerated storage may require specialized warehouses. Other storage considerations must also be taken into account for accurate pricing.
Best Practices: The True Cost of Chemical Manufacturing
Added to these clear-cut costs are the additional costs of health, human safety, and environmental safety. These costs may need to be estimated or amortized over the manufacturing run of one or many products, but they are important considerations nonetheless.
Some best practices to control the costs of manufacturing include:
- Purchasing only the materials needed to fulfill confirmed orders. This avoids the costs of long-term, specialized storage.
- Reduce inventory. Store only what is needed.
- Increase environmental regulatory compliance.
- Increase operational safety for workers.
- Improve communications among facilities, warehouses, and business locations.
- Use data to improve estimates, inventory management, and more.
Process Manufacturing ERP Data Improves Decision Making
Using a process manufacturing ERP system can help you improve decision making throughout the supply chain. The data derived from your ERP system can be used for:
- Forecasting accuracy
- Improving supply chain management
- Estimating and processing orders
- Boosting inventory management
- Enhancing communications
To control costs, it’s important to use what you have in inventory first, in a first in-first out method of inventory control. It’s difficult to make inventory decisions, however, when you don’t have all the facts at your fingertips.
Sage EM (formerly known as Sage X3) can help. You can get more done in less time, using centralized data to track inventory, manage orders, and approve expenses. Inventory management becomes easier, as well, with tighter control over your inventory and the ability to see at a glance if items are available in other warehouses or locations in your company. With more data, more control, and better insights, you can control costs to boost profits.
Chemical manufacturing is an important industry that contributes millions of dollars to the economy and adds good jobs, too. With the right cost controls and management tips, you can improve profits and grow your business.
IWI Consulting Group
IWI Consulting Group helps businesses gain insights into their operations, inventory, and profitability. We provide software and support for a wide range of industries throughout Canada. For more information, please visit IWI Consulting Group or contact us today.