The price of the material is not the full cost of the product
The production cost requires materials, labor, and operational expenses according to the approved distribution policy. If you only follow the quantity of the finished product, you will not know the reason for the decline in margin: high price of the material, excess waste, or long operating time.
Start with a list of testable materials
Specify the standard quantity, unit of measurement, product components and their permitted substitutes. Do not build a complex materials list before ensuring that the units and conversions are correct. Try a small batch and compare the actual consumption with the estimate, then adopt the appropriate version.
- Clear components and compatible units of measurement.
- Production operations and stations when needed.
- Policy for recording dead and restarting.
- Approval of changing the list of materials before using it.
Example: Production of 100 pieces
The listing expects a consumption of 200 kilograms, while the order disbursed 220. The extra ten percent is not a number that disappears in the accounts; Review and record their reasons. Has the quality of the material or product specifications changed, or has incorrect dispensing occurred? Compare quantities and then cost.
Link planning to inventory and sales
RedERP helps link production order to materials, movements and cost, but planning accuracy depends on realistic time and capacity data. Do not promise a delivery date to the customer before reviewing existing materials, resources and orders.
In the experiment, ask for a scenario of disbursing raw materials, production, receiving a finished product, and selling, then review the financial report. This series reveals the quality of implementation more than viewing the Bill of Materials screen alone.