For businesses manufacturing their own products, obtaining accurate costs for making each item can be a real challenge. With many manufacturers managing multi-level BOMs each with multiple revisions or bespoke options and labour and equipment costs also greatly varying, it is difficult for businesses to provide their sales staff with a precise figure of the cost of each build. Therefore many manufacturing companies will rely on calculating estimated costs, striving to make these as truthful as possible.
However the issue is that a lot of businesses will simply look at the estimated cost of making the item without taking other factors into consideration. Firstly in most cases the cost of building an item will vary from revision to revision, as a lot of the time they will contain different components. This means that by calculating an estimated cost for making the item itself, businesses aren’t costing for the actual version of that item that they will end up building for the customer.
Additionally, in many instances there will be various fixed costs such as set up and clean down costs, consumable components and more for each works order a company manufactures. So if manufactured items are built to order, then the cost of the build will be cheaper the larger the quantity that the customer buys. Therefore in order to gain a better idea of how much an item will cost to build, gain a better understanding of the margin this will create and provide this to staff so they are able to maximise each sale, businesses should ensure they are using an estimated cost calculation method that takes these elements into account.
Providing this simple and even more accurate method of obtaining estimated costs for manufactured products in version 10.6 of OrderWise, businesses using OrderWise Manufacturing can now indeed use revision costs to calculate the estimated costs displayed within sales orders. With this feature activated by the relevant settings, the estimated cost of the revision will be used on the sales order instead of the estimated cost of the variant itself, with the revision cost also divided by the volume being built. As an example, if a manufactured item is added to a sales order in a quantity of 100, when using this feature OrderWise will take the fixed costs of the revision, divide it across the 100 and add in the variable costs.
What this new feature provides to OrderWise Manufacturing users is a much accurate estimated costing method to use when raising sales orders, with the costing based on the individual revision and the cost of making it in the quantity the customer requires. From this businesses can obtain a clearer picture of the profitability of each sale and therefore identify more accurately where there is room to negotiate on price, allowing more sales to be closed and increased revenue to be generated.
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