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One of the major objectives of having an ERP LN in an ever-growing business environment is to achieve cost control. Along with cost control, it also increases efficiency, improves quality, productivity and profitability. A properly implemented ERP system provides a distinctive level of visibility and control which is simply not otherwise possible in a complex modern business.

There are few techniques of cost reduction and cost control available in ERP LN. Some of them are: –

  1. Standard Costing: Standard costing is one of the prominently used systems for cost control. It is defined as the preparation and use of standard costs, their comparison with actual costs, and the measurement and analysis of variances to their causes and points of incidence. ERP LN gives the below reports to control costs and take corrective action –
  • End Item Unit Cost
  • Estimated vs Actual Material Cost
  • Estimated vs Actual Hours Cost
  • Print Estimated vs Actual Production Order Cost
  • Print Production Order Costing Overview

Corrective Action: Remedial measures are taken to avoid the recurrence of variation in future and for revision of standards wherever necessary.

 

  1. Budgetary Control: Budgetary control is a system of controlling costs through preparation of budgets. In ERP LN, flexible budget gives option to view defined single dimension budgets per year. Budgets are displayed by dimension and by reference. Budgets also show the sum of fixed, variable and total budget amounts, budget cost rates/surcharges, and effective rates/ surcharges. ERP LN budgetary control helps in performing the below action –
  • Establishment of budget for each function/department of the organisation
  • Comparison of actual performance with the budgets on a continuous basis
  • Analysis of variation of actual performance from that the budgeted performance to know the reasons
  • Taking suitable remedial action, wherever necessary
  • Revision of budgets in view of changes in condition

 

  1. Inventory Control: The process whereby the investment in materials and parts carried in stock is regulated within predetermined limits set in accordance with the inventory policy established by management. In ERP LN The Inventory Analysis (INA) module enables users to perform the following tasks –
  • ABC analysis (You can perform this analysis by warehouse and/or by item. ABC analysis can be based on standard cost, sales price, or quantity. Each ABC class can be assigned a counting interval, which is used for cycle counting)
  • Slow-moving analysis (You can base this analysis on inventory turnover rate {inventory versus periodic issue of an item})
  • Inventory valuation (You can calculate the inventory value by Item type, Item valuation group, Warehouses & Warehouse valuation GP)

In addition to these analysis, the Inventory Analysis (INA) module enables you to –

  • View the inventory receipt transactions and consumption
  • View and process the inventory variances
  • Print and view the inventory-valuation methods
  • View the moving-average unit cost (MAUC) history
  • View and enter lower cost or market value (LCMV) prices

 

Posted on May 01st, 2018
Posted by Manoj Kurien

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