I recently saw this question posted on a manufacturing association portal. “We are manufacturer, and we use [Brand X] ERP under a “actual costing” method within the ERP (an alternative costing method would be “standard costing”). I am wondering what costing method other manufacturers are using in their ERP and if they have found any benefits to one way or the other.”
To add to this, they were using a very well-respected ERP software application. This is a common question ERP consultants will ask when configuring any ERP system for manufacturers.
I think it is a false choice. Here’s why:
You need to do both/and, not either/or. For a 21st century manufacturer, throughput and lead times are where your focus has to be. With variations in labor, supply chain issues, etc. – actual costs will vary so much as to become meaningless. Use your information systems to filter out the noise and get information that supports your process improvement initiatives. One wise manufacturing manager answered my question of – what is the labor cost of this item? His answer “That depends on if its Tuesday morning after Monday Night Football, deer hunting season, Friday before a 3-day weekend…”