Beaulieu of America Covers Product Costing with ImpactECS

28 January 2015
Atlanta, Georgia
FOR IMMEDIATE RELEASE

Beaulieu of America Covers Product Costing with ImpactECS

Beaulieu of America, one of the largest manufacturers in floor coverings in the world, has selected ImpactECS by 3C Software to consolidate their existing residential, raw materials and commercial costing requirements for their 22 manufacturing facilities.

ImpactECS will allow Beaulieu of America to focus on building an actual, standard and predictive cost system. With ImpactECS, Beaulieu’s finance and accounting team will have the ability to go beyond product costs to calculate landed costs, value inventories, manage BOMs, build budgets and forecasts, analyze scenarios, and a wide range of other business analysis activities.

“It’s always great to get a hometown win, so we’re excited about welcoming Beaulieu of America to the ImpactECS family,” stated Scott Adams, Director of Sales at 3C Software. “3C Software has a long history working with carpet manufacturers to deliver cost and profitability systems, and the opportunity to expand our reach to another industry leader further solidifies our expertise in this area.”

About 3C Software
3C Software, developers of ImpactECS™ and Impact3C®, was founded in 1988 and is a leader in detailed cost and profitability management systems. Headquartered in Atlanta, Georgia, 3C Software serves clients in several industries including process manufacturing, distribution, and financial services. 3C Software’s rapidly implemented solutions work with all accounting methods, are simple to maintain, and handle unlimited calculations and variables. For more information about 3C Software or ImpactECS™, visit www.3csoftware.com or call 800-226-2036.

Upcoming Webinar: Better Mill Decisions Through Detailed Grade Cost Analysis

Date: Thursday, Jan 15, 2015
Time: 12:00 pm Eastern
Cost: Free

Today’s papermakers are competing in an exceptionally challenging marketplace that requires better visibility into the true costs generated at the machine, grade and run levels. Organizations require actionable intelligence to make better decisions on a daily basis. One of the major challenges to achieving this objective is the inability to effectively utilize data from disparate systems to create meaningful and actionable information.

This webinar will demonstrate how papermakers can leverage their existing systems investment and create an end-to-end cost analysis solution with the ability to analyze and predict costs, laying the foundation for lower costs and improved profitability.

Paper mill grade costing models can provide mill management and shop floor operators with:

• Detailed standard and actual costs by paper machine, grade, bwt, color, etc.
• Calculations of raw material (furnish, chemical, etc.) usage
• Forecast cost, consumption, loading, and profitability
• Analyze operational variances by comparing actual results with standards for each• run
• Scenario analysis that trends run costs and performs direct comparisons between runs on the same or comparable paper machines

What you can expect from this webinar:

• Demo of paper mill grade costing models
• Discussion of what data is required and where does it come from
• Examples of how you can move from measuring results to planning for success … and more

Food & Beverage CFO Challenges

A recent study performed by Plante Moran and The Ohio State University Fisher School of Business takes a look at the challenges that food and beverage CFOs are facing in today’s market.  With soft demand and rising commodity prices, hedging is one of the leading issues for mid-sized companies followed closely by escalating labor costs in food manufacturing.

Source: GE Capital

The study identifies three “key growth ingredients” for food and beverage companies to maintain their competitiveness.  First, consumers tastes are changing which is forcing more product innovation to remain relevant and competitive.  Developing new products that taste great, promote good health, and come from sustainable resources is important, but they must also be profitable.  Compliance issues are also an important factor, and one that can drive costs into the production and supply chain.  Finally, understanding the effects of changing commodity prices, go-to-market and labor costs is paramount to remaining competitive.

Source: GE Capital

To read more of GE Capital’s study, click here.  And to learn about how ImpactECS helps food and beverage companies get a better understanding of their costs and profits, visit our Food & Beverage overview.

3C Software Makes List of Top 20 Most Promising Enterprise Software Companies

This month’s CIOReview highlights the top 20 most promising enterprise software companies, and we’re thrilled to be included in the list!

Check out the interview with 3C Software President & CEO, Matthew Smith, where he discusses the importance of including a robust cost and profitability enterprise solution in your overall technology footprint.

Excerpt from 3C Software: Catering to The Needs of Finance And Operations Leaders And Practitioners:

In today’s business environment, one way companies look to cut costs and increase profits is by deploying a high impact analysis process that provides access to detailed cost results. These answers drive business decisions like setting prices for products and services, removing non-value-added activities or adjusting production plans. The continuous “data drown” that many finance and operations teams face creates challenges with consolidating and analyzing data. Organizations are constantly looking for a solution that can address their ability to access the data they need to make informed decisions.

You can read the entire article in the March Issue of CIOReview.

ERP Implemeneters: Stop Reinventing the Costing Wheel

Have you ever advised your customer to customize their erp software? If you’ve been involved in at least one ERP implementation, the answer to that question is probably “yes”. But the first question you should ask before recommending customization is whether the problem you’re solving is tactical or strategic. For tactical or customary processes like purchasing or warehousing, there is little need to make significant modifications to the ERP system. But for strategic processes that can affect the company’s ability to compete, there is a tendency to look toward customization. For process and complex manufacturers, cost accounting is one of those strategic processes that can make or break a company’s ability to be competitive in the market place.

As an ERP implementer, you know that customizing an ERP module can be a time consuming and expensive proposition that will potentially prohibit your customer from taking advantage of future upgrades and maintenance. Even after the pricey modifications, companies who have complex manufacturing processes are still likely to turn to spreadsheets or attempt to build external systems to do the real analysis necessary to run the business effectively. ImpactECS has become the costing system of choice for many process manufacturers because it can handle detailed costing processes while limiting or eliminating the need for ERP customization, spreadsheets or custom development.

With ImpactECS, many of our customers have expanded their ability to perform challenging cost accounting tasks in a fully integrated environment. Don’t believe us? Here are a few examples of world-class manufacturing companies from very different industries that selected ImpactECS to handle their costing instead of customizing their ERP systems:

Paper producer, Domtar Inc., has grown through a number of acquisitions and ended up with a scenario that many companies face – multiple instances of SAP in different parts of the company. Complicating the situation even further was the fact that there were different costing methodologies employed in the different locations, making comparisons and performance management nearly impossible. Instead of choosing to start from scratch by customizing a new SAP costing tool, they selected ImpactECS as a way to both create a standard methodology and bridge the two instances of SAP to manage all of their costing data in one centralized location.

Tyson Foods, one of the leading poultry processors in the United States, faced some more unique problems when attempting to calculate product costs using SAP. The disassembly process, when a live bird is portioned into individual pieces, has lots of complexities that a traditional ERP cost module is not equipped to handle. Since ImpactECS’ model building capabilities is flexible enough to mirror any process, Tyson was able to develop a very detailed costing system that allows them to perform advanced variance analysis. In addition, the commodity nature of their product requires the ability to calculate a daily actual cost so they can price their products appropriately in the market and ensure that they remain competitive.

Understanding the changing prices of raw inputs is a critical need for process manufacturing companies like potato giant, J.R. Simplot. Chances are that if you had an order of fries at lunch today, Simplot produced them. Prior to ImpactECS, Simplot used JD Edwards along with a full complement of spreadsheets to establish their standard product costs. This month-long, manual process was reduced to a fully-automated process that only takes matter of hours to perform. Beyond product costing, Simplot uses ImpactECS to analyze scenarios like “What happens to my product costs if the price of cooking oil goes up 5% next quarter?” Instead of an analyst spending hours building a standalone spreadsheet that is likely based on faulty logic and incomplete data sets, ImpactECS has the tools to run what-if scenarios using the same logic and data used for product costing. The result is more confidence in the results and a better tool to make decisions.

The semiconductor industry has a unique set of costing challenges due to the complexity of their manufacturing process and the lifespan of their products. Analog Devices uses ImpactECS as its costing platform because it provides granular cost results at every WIP point in their fabrication process. By combining production data from PROMIS, spending information from SAP and costing logic stored in ImpactECS, Analog developed a completely automated costing process with a common methodology that works for their seven manufacturing facilities. Beyond costing, Analog Devices has expanded the use of ImpactECS beyond product costing by building a subcontractor pricing engine within their costing system. Analog now has visibility into standard costs at the vendor level to accurately develop budgets, track subcontractor spending, and make decisions on how and when to outsource parts of their manufacturing process.

So, what makes more sense? (A) Asking your customer to commit time and resources to a customization project that will ultimately cost more and deliver less, or (B) looking to ImpactECS to get a fully integrated costing tool that can enhance your customer’s ability to make better operational decisions. If you’ve chosen B, then we invite you to learn more about the ImpactECS Enterprise Cost System by visiting www.3csoftware.com.

Three Requirements of an Effective Cost System – Part Three

In the first two parts of this blog, we’ve talked about the importance of having a complete view of costs and how multiple sets of product costs are critical for decision making.  In this final chapter, we’ll talk about the importance of integrating the cost system within the enterprise and how buy-in across the organization is a vital component for success.

Full System Integration

In an article from Business Performance Magazine in 2008, the author opened with the following quote from an operations manager from a Fortune 500 company.  “Do you know what we think of our cost accounting system?  It is a bunch of fictitious lies – but we all agree to it.”  As you read further, the article describes the lack of depth of cost analysis and how limited data integration leads to faulty and misleading cost data.  That misinformation is then used to analyze business performance – a problem that many cost managers face at manufacturing companies across the globe.

The biggest concern for cost managers is that they do not have the ability to accurately calculate costs.  Production data lives in one system and general ledger spending is somewhere else.  The cost manager is in spreadsheet hell building formulas based on their interpretation of how costs should be calculated.  None of these processes are connected, the potential for error is huge, and the business leaders are using this data to as a basis for their critical production and sales decisions.

By fully integrating accounting and production data, the integrity is maintained and potential errors are essentially eliminated.  With all of the data points connected, integration expands the depth of cost data analysis and mangers can learn more about their true manufacturing costs.  For example, you can determine the effects of a changing raw material price on all of the products in your catalog that use that particular material.  Or, you can compare costs of producing the same product in two different locations and account for the differences in the manufacturing process at each location.

Organizational Buy-in

The above statement from the operations manager isn’t just about the system, it’s about the people, too.  Costing is one of those business functions that crosses department lines, and agreement is critical for the success of any enterprise-level costing system.  Senior managers and executives must engage as coaches, referees, and judges to ensure that the project moves forward and achieves its goals.  Many times cost system implementations require rethinking and reengineering business processes in accounting, finance, operations and sales. Without executive involvement, the project can easily become stalled or sidelined.

In addition to leadership, the front-line also needs to play a critical role in implementing the cost system.  These are the people who know how things work: They are on the shop floor when the product is manufactured; they manage the countless spreadsheets in an attempt to calculate product costs; they are face-to-face with the customers closing deals.  Building an effective costing system means linking these groups together to make decisions that are aligned with the company’s goals, drive the desired behaviors, and ultimately help business leaders make decisions that improve profitability.

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Three Requirements of an Effective Cost System – Part Two

In part one, we examined the role of having a complete view of costs that extends beyond just the cost to manufacture products. Here, we’ll drill down on product costs and discuss how multiple sets of product costs are vital in helping manufacturing companies make sound, informed business decisions.

Multiple Cost Sets
One of the most important concepts in effective cost management is having access to multiple views of production costs. To benchmark and analyze performance, comparisons between cost sets can expose problems or advantages that exist in the manufacturing process. The differences among these cost sets can be as distinct as apples and oranges, and understanding how to use them can make a significant impact on how you make decisions for the business. While you can have a number of cost views, we believe that the basic set includes Frozen Standard Costs, Current Standard Costs, Actual Costs and Going-to Standard Costs.

Frozen Standard Costs
To ensure consistency in financial reporting, frozen standard costs are used as the basis. Frozen standards allow companies to compare budgeted versus actual spending to expose variances that occurred during the period. These standards are generally set annually based on current supplier prices and market conditions and are usually stored in ERP or data warehouse systems for financial reporting.

Current Standard Costs
While frozen standards allow a company to take a snapshot of performance from year to year, current standards are much more fluid. Current standard costs are the production costs occurring today based on raw material prices, production efficiencies and utilizations and other changing business conditions. These costs are used to predict spending for the period and help manufacturing and cost managers make better business decisions.

Actual Costs
This cost view is the ultimate indicator of cost performance. Once the finished goods are produced, actual costs are the tally of what was spent to produce them. It is a historical view of production that aids in predicting future costs. This number is not consistent over time because it incorporates the changing costs over the period analyzed.

Going-to Standard Costs
While analyzing past cost performance is useful, predicting future costs is equally valuable. Going-to standards allows cost managers to estimate spending for future orders and is useful as a simulation tool for building budgets for future periods.

But just having multiple views of costs is not enough. The true value comes from the ability to report on variances between these different cost sets to determine problems or opportunities within the manufacturing process. For example, if current standard costs are significantly lower than the actual costs could indicate that machine efficiencies are lower on a particular production line. Using multiple views allows companies to peel back the layers and gain a level of analysis unparalleled by traditional ERP systems.

The final installment of this series will discuss why integration of your cost system is critical to its acceptance in the organization and why system design must include input from all areas of the business. Want to get a tweet when the next post is available? Follow us on Twitter.

Three Requirements of an Effective Cost Management System – Part 1

In this three part blog, we’ll discuss the three requirements of building and implementing an effective cost management system for complex manufacturers.  First up is the need for complex and process manufacturers to have a complete view of costs.

Complete view of costs
When you think of manufacturing or casting costs on a high level, the basic cost categories come to mind: raw materials and direct labor.  But in process manufacturing, these basic categories are flooded with complexities like processing yields, machine variances or supplier costs.  To get a true picture of manufacturing costs, consider three components – Product Costs, Logistics and Distribution Costs, and the Cost to Serve.

Product Costs
Product costs include the materials and labor required to convert raw materials into finished goods.  Calculating product costs is a significant challenge for process manufacturers who have multiple production lines or locations.  Why?  Because it is virtually impossible to manufacture the exact same product for the exact same cost in two different places.  In a typical ERP environment, cost managers are forced to pick one cost for a particular product, but in reality there are multiple unique costs – one for each location the product is manufactured.  Without this level of detail, manufacturers loose the true cost picture and can inadvertently make poor operating decisions that could potentially hurt the company’s profits.

Additional factors like yield and scrap can play a significant role in understanding overall costs.  Scrap that is reintroduced into the production process must be credited properly.  Yields can vary due to changes like substituting raw materials or using a different manufacturing route to produce the finished good.  Beyond these factors, each manufacturing process will have its own unique issues like tool and die costs or set-up and clean-up costs that also affect the overall product cost.

Logistics and Distribution Costs
Overhead costs like logistics and distribution are often arbitrarily distributed to products or SKUs based on formulas that have little to do with the actual customer order.  These costs can make up a significant portion of the overall cost of deliver to the end customer, so developing a method to more accurately assign logistics costs (see post) is critical.  To develop an accurate depiction of profitability, cost managers must appropriately allocate these overhead costs by only working with the best logistics companies Sydney. As your business grows, material needs will increase. Once a warehouse or space is full, storage containers provide a cost-efficient solution. You can find container hire prices here.

Cost to Serve
Knowing how much it costs to service your customers is a vital component to overall manufacturing costs.  Sales and marketing, accounting, and other business activities incurred can become a significant overhead category and appropriately allocations are needed to ensure you have an accurate view of the costs to serve a particular customer.

Stay tuned for part two where we’ll discuss the importance of maintaining multiple cost sets to improve your operating decisions.  Get instant updates on new blog posts by subscribing to our RSS feed.

Picking the Right Driver Is Important To More Than Just Your Golf Game

In the beginning, cost accountants used allocation rates as the way to distribute overhead costs to the products manufactured.  These rates were based on direct labor hours since manpower was typically the most significant driver of production costs.

Slowly, automation crept into factories, and the direct labor basis for allocations began to deliver less-accurate results.  Why?  Because automation means there is less human involvement in the production process.  Let’s say the plant has some half of the factory’s lines are automated.  The products made on the automated lines are assigned less overhead while the more conventionally produced products are overcharged.   As you can imagine, some really poor decisions can occur with the wrong allocation rates.

With more mechanized manufacturing processes, companies began using a different base for allocations – machine hours.  This approach makes sense because it accounts for the more intensive use of machines during the production process.  But there are times when using machine hours falls short as an effective allocation base. If you want to immerse yourself in gaming after a day’s hard work, sites like dadu online would be more than helpful.

Activity-based costing (ABC) was borne out of the desire to identify every driver that could exist in a manufacturing process and to use them to allocate spending dollars to manufactured goods.  In theory you can come up with a driver for every activity that occurs in the plant.  But in practice, data to support those drivers is not captured making the allocations impossible or arbitrary.  We’re often asked is ‘How many drivers do I need?’  The answer is, ‘it depends’.  But one thing we do know is that building an effective costing process relies on taking the dollars that you are spending and assigning it using the most appropriate set of drivers you can realistically capture.

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