Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Product costing ppt

Product costing ppt

  1. 1. PRODUCTCOSTING www.techprana.com
  2. 2. What is Product Costing? Product costing is the process of tracking and studying all the various expenses that are accrued in the production and sale of a product. It is roughly comprised of raw material expenses, process costs (e.g RM profit, wire gas etc.) and other cost elements such as transportation, tool cost, staff cost, spot welding etc. Product costing is reflected using Bill of Material (BOM) in ERP Systems.
  3. 3. Existing Problems with the Product Costingprocess Since TIER-1 vendors maintain these customer side BOM in Excel, a range of issues are created  Costing becomes person dependent: If the costing person leaves the organization, other people cannot understand the files he has maintained.  Costing becomes non-auditable: Its impossible to track which person has made which changes and the reason behind those changes.  Costing is not easily available to the management: Since BOMs are maintained on someone’s machine, its hard for management to easily retrieve the BOMs and study them.  Change management and version control becomes a problem: Since costing is maintained in an Excel file, new files need to be created for every BOM change. It becomes very hard to track what changes were made between revisions etc.  No simulation support: If a price of raw material, process cost etc. changes, there is no easy way to determine their impact across multiple products, plants, customers. Everything has to be performed manually and the provision amounts can be computed incorrectly causing huge losses to the company.
  4. 4. Existing Problems with the Product Costingprocess TIER-1 vendors need to maintain 2 separate BOMs as they do not manufacture everything in-house and have to rely on TIER-2 vendors for certain components. They are the customer BOM (in Excel) and the actual in-house BOM (in SAP/ERP). This opens up a new set of issues for the vendor  Vendors cannot systematically compare on a component level the difference between customer and actual BOM. They rely on heavy manual calculations and rule of thumb to identify and mitigate the differences.  It can very well happen that TIER-1 vendors are receiving 100 INR to manufacture a component and they are giving out 101 to get it manufactured. This creates severe losses to the organization.  They cannot figure out the profit margins on a vendor level in real-time to adjust pricing and generate the maximum profit for their firm.
  5. 5. Features provided by our software for ERP Clients Simulations:  Simulations can be defined as forecasting product prices with respect to changing Product Costing components (such as raw material prices, process costs, transportation costs etc.). In short a ‘what-if’ analysis similar to Excel.  Simulations help both the OEMs and Vendors know the impact of changing prices before they actually happen in the real world.  In particular for TIER1 vendors, simulations help in calculating provisions before the actual amendments come from the OEMs (which can take from 3 months to 2 years depending on the OEM).  Currently many TIER1 vendors do not have any process in place (other than manual Excel calculation) to verify the FG amendment rates sent to them by the OEMs. Hence they cannot effectively challenge the FG rate amendments which can potentially cause them losses.  We can integrate Foreign Exchange feeds into the software for export oriented clients to simulate changing FX rates.  Simulations can be highly customizable and can be run across a span of time (e.g 1st Jan to 1st April) where the underlying raw materials change on different dates (e.g CRCA D steel changes on the 10th Jan while HR changes on 25th Jan). Here the FG price will be different from 1st Jan to 9th Jan, 10th Jan to 25th Jan and 25th Jan to 1st April.
  6. 6. Features provided by our software for ERP Clients Gap analysis between Customer and Actual BOMs:  TIER 1 vendors receive product costing from OEMs in an Excel format (everything considered to be in-house) and then according to their internal processes, they can create the sub-assemblies either in-house or buy them from TIER 2 vendors. This creates a BOM gap on the TIER 1 vendor side.  This BOM gap can cause real issues on the TIER 1 vendor side as they may be passing on more than required costs to their TIER 2 vendors and incurring losses in that process.  Currently many companies check this manually using thumb rules, however it becomes increasingly hard for clients having multiple FGs to keep a systematic track on this aspect. Customer TIER 1 TIER 2 OEM Actual BOM BOM Vendor Vendor Gap analysis
  7. 7. Features provided by our software for ERP Clients BOM versioning by date and type (Change Management)  In our software, we can keep as many versions of a BOM by date and type and do costing and simulation operations on them.  We can also compare and do gap analysis on BOM across different versions. This gap analysis not only shows the costing changes but also highlights the engineering changes over the time period.  This can be helpful for clients to do historic trend analysis per FG and help them in making crucial strategic decisions.  Clients tend to store historic BOMs in Excel files on their machines which is prone to various issues such as data corruption, fat fingering and accidently editing files etc.
  8. 8. Features provided by our software for SAP Clients Other strong product features  We provide easy uploading of SAP BOMs and product costing components using Excel into our system which provides a rapid return on investment to the client.  All data can be uploaded using or downloaded to MS Excel which makes the software easy to use as traditionally costing people in organizations are not SAP savvy.  Support for multiple OEMs and multiple plants.  No extra SAP licensing or hardware costs.  It runs using cloud computing. So no need to install any additional hardware and software on the client side. Since it’s a web-based application, it can be viewed from anywhere in the world through internet and hence can effectively synchronize client operations across multiple plants.  We support some basic business intelligence reports using BIRT and provide details such as realtime pnl per product.
  9. 9. How can ERP Clients benefit?(Cost savings and peace of mind) Both OEMs and TIER 1 vendors can benefit from the various features provided by the software. OEMs can primarily benefit from simulations while TIER 1 vendors can benefit from all the features provided by this software. Gap analysis between customer and actual BOMs has saved our clients lakhs of rupees per month as they were not aware of higher cost being given to their TIER 2 vendors in many of their FG sub-assemblies. (A client had savings of > 10,00,000 INR) Simulations can be used to verify the FG amendments provided by OEMs and also for calculating provisions for the accounting team. This saves clients a lot of man-hours during quarter-end and also protects them from future losses due to under-pricing. Product Costing is a sensitive area and hence requires a lot of auditing (even a single rupee can translate into huge losses). We tag every BOM and RM change to the user and hence any discrepancies can be easily traced back to the user) Thus our software product not only saves the client huge amounts of
  10. 10. Screenshots
  11. 11. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Main Login Screen
  12. 12. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings BI widget showing FG count and the associated plant location
  13. 13. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings BI widget showing Profit/Loss per FG
  14. 14. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings BI widget showing raw material Gantt
  15. 15. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Running simulation for CRCA D price change
  16. 16. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Products affected due to CRCA D price change
  17. 17. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Detailed BOM for a single product affected by CRCA D change (components with changes in price are highlighted)
  18. 18. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Multiple reports to gain further insight into costing
  19. 19. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Report showing RM Price changes per customer * plant
  20. 20. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Report showing FG Price trend across multiple years
  21. 21. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Difference report to show pricing differential between customer and actual inhouse
  22. 22. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Summary of Difference
  23. 23. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Detailed difference – Red shows Loss
  24. 24. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Vendor wise difference – Red denotes loss
  25. 25. • Login• BI• Simulation s• Reports• Price Differential (Customer vs Actual)• Settings Various settings to add customers, plants, vendors, products, raw materials etc.
  26. 26. Tech Prana Team Saurabh Chobe (CTO)  7+ years experience in software and finance domain  Worked at top companies such as Microsoft and Goldman Sachs USA. Software Development team of 6 engineers based in Pune with a combined experience of 15+ years Contact details: Email : saurabh.chobe@gmail.com / saurabh.chobe@techprana.com Mobile : +91 88888 06272

×