Job costing / BLinfo Getty
A main component of “job costing” is a deep understanding of shop-floor activities, combined with an up-to-date understanding of inventory.

Transparency Through Technology

Focusing on production costs as well as capital project costs reveals how metalcasting businesses perform, while ensuring business objectives are met.

The major manufacturing trend in 2019 is the focus on and desire for cost transparency. Companies that know their costs win, regardless of economic swings. “To win, foundries must have a deep understanding of their costs and easy access to timely information,” according to Sam Schlosser, president of Plymouth Foundry, and one of our customers.

As an ERP provider, we work with hundreds of metalcasters; two of the main areas we are seeing metalcasting companies request additional cost information on are: Job Costs and Capital Projects.

Job Costs — A main component of “job costing” is a deep understanding of shop-floor activities, combined with an up-to-date understanding of inventory.

Metalcasting shop floors are hectic places to work with a transient work force. When I entered the industry 20 years ago it was this way, and it remains the same today. However, we are seeing more metalcasters employ high-technology on the shop floor, especially with robotics. Twenty years ago, Data Collection consisted of recording times, quantities, and castings worked on a piece paper or even a brown paper bag (seriously). Or, for the technologically advanced, big clunky devices that simply scanned in all the pertinent information…except for quantity, which is not only the most critical data point to capture, but the most often mis-keyed! With such a system, management was left with old stale information or, worse, inaccurate information. Of course, this led to wide fluctuations of inventory and the resulting inventory write-offs.

But with current technology, knowing your costs, inventory and even scheduling has never been easier. Recently I walked into a foundry that has over 100 shop-floor data-collection stations: the shop-floor data is fed into interactive, on-line dashboards, reports, and other tools so that managers and key employees (Customer Service, Scheduling, Sales, Quality, Finance, etc.) may review the  current results.

Occasionally, I still visit plants where production is written down and tabulated later. Operations that are not leveraging all that today’s technology can offer are at a distinct disadvantage. Metalcasters that collect and analyze data have a competitive edge over the others.

Our ERP customers tend to be technology "adopters." While many companies rely on employees to enter the quantities produced (and run various edits against the number to ensure it makes sense), more our customers are directly connecting their data collection requirements into the PLCs on the shop machine (e.g., Sinto, Hunter, DISA, even machining operations, etc.) This eliminates potentially costly rekeying of data and cuts down on human error.

Now, when we visit our customers we see data collection software that with just a few clicks automatically captures who jobbed on, start date, start time, operation, casting number, job number, etc.

In addition, employees can view on-line work instructions, quality alerts, and other job-critical information right at their station. “Jobbing Off” consists of two clicks, then entering the quantity or pulling the production data directly from the PLCs! When the employee clicks those buttons, his production records are updated with his ID, “job off” date and time, operation, casting number, job number — and the quantity is updated! Hands-off production entry allows managers instant access to production information, including: inventory levels, scheduling, etc. Real-time data and one set of information equals transparency into costs.

One of the most difficult elements of total job cost is overhead, or burden. We recommend monitoring the overhead rates for direct labor, variable overhead, and fixed overhead by comparing the Flexed Budget versus the Actual. The data used to drive this comparison is the same numbers gathered from the shop floor. “Data sharing” permits cost analysis to a specific vendor invoice or other cost element in an account.

Capital Projects — Nowhere in business can expenses run over as much as in this area. Planning for and then running a capital project requires tight coordination on multiple fronts. Transparency into that data allows managers to monitor project status – and in our current age, having the right information instantly available can be the difference between success or a costly error.

Recently, B&L upgraded our Capital Projects software to allow for additional cost controls, to reduce the amount of data entry and rely even more on the Odyssey integration — all software enhancement made at the request of our customers. We define Capital Projects broadly, per customer request: not just machinery but also tooling (molds and dies) or any project that requires cost tracking. We have one large customer that tracks any project over $500!

In a nutshell, the Capital Projects module is used to track capital project appropriations. The appropriations amount is entered; then the committed amount (Purchase Orders and REQs not yet converted to Purchase Orders) and spent amount (AP invoices + material issues + maintenance transactions) are updated from a variety of different ERP modules. In keeping with industry trends, our metalcasting customers have requested more control over projects and Odyssey 6.1 reflects that with Capital Projects enhancements that include:
1. Email notifiers when spend amount exceeds the appropriated amount.
2. Interfaced the Tool Order system to Capital Projects. (So, when Production, AP Invoices, or material issues are updated, the Capital Project associated with the tool is updated too.)
3. With some of our customers tracking dozens and dozens of capital projects, they need an easy and fast way to fix and posted AP Invoices. The Odyssey Capital Project module allows users (based on their security) to change the order number, tool number, and/or capital project number on a posted AP invoice to easily reverse the original transaction. This would also allow the user an option to reverse the original G/L entry and create a new one for the account associated the new information.

We recognize the 2019 focus on cost transparency, but this effort needs to be managed daily to succeed. Often metalcasters focus primarily on production-related activities and their related costs. However, there is a greater demand to manage Capital Projects too, to ensure the businesses stay within budget as well as have a deeper understanding of job costs. Both fiscally-based activities and others found in a robust ERP system will deliver great insight to the workings of a business while ensuring company objectives are met.
Matt Gacek is VP-Business Development for B&L Information Systems. Contact him at [email protected], or visit www.blinfo.com

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