Why accurate costing is essential for manufacturing success

Apr 17, 2024
  • discrete manufacturing

In today’s competitive and fast-changing manufacturing industry, it is crucial that businesses have a clear and reliable picture of their costs and profits. Without it, profit margins, operational efficiencies, and stakeholder investments can suffer tremendously. 

For many manufacturers however, leveraging accurate insights is no easy feat. Production variances between actual and budgeted costs, a lack of knowledge around costing methods, and unreliable reports all hinder the availability of accurate costing.  

Despite this, it’s important that manufacturers seek to overcome the aforementioned challenges and gain a holistic, reliable account of their costing. 

Here’s why:

Improved pricing strategies 

Accurate costing helps improve pricing strategies by providing manufacturers with the data and insights they need to make informed decisions. By knowing the true cost of each product, component, or service that is offered, businesses can set their prices based on the value they deliver to customers, the demand for products, and the competitive landscape.  

What’s more, they can also monitor their costs and profitability over time and adjust their prices accordingly, to ensure that they’re maximising margins and meeting financial goals. 

Reduce waste  

With accurate costings, manufacturers can reduce waste and inefficiencies thanks to a clear and detailed picture of their production processes. By tracking and analysing their costs and performance at every stage of the production cycle, manufacturers will know exactly how much each input, activity, and output costs, enabling them to pinpoint any areas where they are overspending, or where they are losing value or quality.  

They can also utilise this data to identify and eliminate any sources of waste, error, or delay, as well as optimise their inventory management, resource allocation, and quality control. They can then implement changes to streamline operations, improve productivity, and minimise expenses, ensuring they are producing at the optimal level and meeting customer expectations. 

Achieve up to 85% more accurate forecasting utilising the latest technology.
Statistic from McKinsey & Company, Capturing the true value of Industry 4.0

Enhance reporting and compliance 

By having accurate and timely data on their costs and profits, manufacturers can generate comprehensive and consistent reports that demonstrate compliance with all relevant accounting standards, tax regulations, and industry best practices. 

This is not only essential for avoiding any penalties, but is essential for producing reports that can be shared with both internal and external stakeholders.  

Increase innovation 

Armed with accurate and actionable insights on the business’s costs and profits, manufacturers can make informed decisions about their product development and market strategies to boost innovation. 

By benchmarking their performance against competitors and industry standards and identifying new opportunities, trends, or customer needs, manufacturers can utilise this information to invest in research and development, product improvement, and/or market expansion, and explore new possibilities for product differentiation, customisation, or diversification. 

Find out more

Accurate costing is essential for manufacturing success, and having the right tools and processes in place can help businesses achieve a clear and reliable picture of their costs and profits. 

Learn more in our latest eBook here..

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