How to Manage & Control Production Costs With Food and Beverage ERP
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How to Manage & Control Production Costs With Food and Beverage ERP

It doesn’t matter what you make, reducing the cost of doing business and optimizing processes to save money is on the to-do list of any food and beverage manufacturing company. If you can cut overhead and operating costs, that means more investments can be made in R&D, hiring additional employees, or offering your products at a more competitive price then the competition- but doing so is not easy. There are several features in food and beverage ERP systems that help you manage and control production costs related to inventory, work in process, and finished goods.

ERP software enables manufacturers to implement lean manufacturing for justi-in-time purchasing and just-in-time manufacturing with built-in processes to capture and track all costs – material, labor, overhead, and other costs so you know exactly how much it costs to manufacturer your products. Food processing ERP systems also include recipe and formula management systems alongside production routings so you have a clearly-defined method of manufacturing to improve operations with controls to monitor quality control throughout the entire production cycle.

ERP software allows you to manage your fixed, variable, average, and marginal costs, promote building multi-level cost categories, routinely develop forecasts and budgets, predict the influence of different organizational decisions on costs, and perform what-if analysis to see how cost changes affect inventory valuation, pricing, and your overall bottom line. Cost control also allows you to measure actual cost variances against standard costs, and can allocate costs based on number if hours, quantity produced, or other factors For instance, if there is a difference between the standard and the actual cost, ERP allows you to analyze the variance with multiple tools to better understand how the costs differ, in order to make an executive decision. Some ERP systems also allow you to utilize first-in-first-out (FIFO) or last-in-last-out (LIFO) costing methods which may be preferred due to financial strategies implemented in your business.

Here’s another factor to think about: how much money are you losing due to manufacturing waste?

Many companies accept a certain amount of food and beverage manufacturing waste as part of the cost of doing business. However, a recent study found that the average manufacturer in this industry throws away 2.4 billion pounds of waste each year- equal to $59 million dollars! Surely you could think of something better to do with that money than toss it out with the trash. Click below to learn how to utilize food and beverage ERP to reduce waste and increase profit margins.

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