Many readers of my blog know I am on a bit of a rant about all-in-one software… I promise that today I will only spout an itsy-bitsy rant. (And it will not be until way down near the end)! Manufacturing companies comes in all shapes and sizes.
Type 1 – Full In-House Manufacturers
The first are those ones who control all aspects of their processes internally. They buy raw materials, and they produce finished goods. There is a labour component and a manufacturing overhead component. They need a production scheduling software that manages labour and raw materials. They need a production scheduler and planner. The most complex production and accounting challenges emerge from these companies.
Type 2 – Production is Partially Outsourced
The next grouping are those who outsource part of the production to an outsourced manufacturing supplier/partner. They essentially assemble the finished goods. They are less labour intensive than the first type. They would likely not need a complex production scheduler component as part of their software requirements.
Type 3 – All Production is Outsourced
The 3rd group are those that outsource pretty much all the work to a partner and buy back the finished goods. Think Canadian and USA manufacturers who outsource production to a Chinese company/Partner.
A Few Examples
Imagine a company making organic food from scratch. They process raw materials into finished goods. There is a production team in-house. There is an internal labour component built into the finished product. There are labour variances and material variances. What is a variance? It is the difference between what you expect something will cost to make a finished good and what it actually costs you. You will start with a recipe of exact amounts of each ingredient, plus the labour cost, plus an applied manufacturing overhead cost. When you start a production run of a batch of product you expect to get an exact amount of finished product from a recipe of raw materials and labour. The reality is that it will not always go the way you plan. Your production team was either more efficient or less efficient. If more efficient, you will have a positive variance. This means it cost you less to make the product than you planned for. If you are inefficient it could be for a number of reasons. Raw material costs may have been higher than planned. You may have used more quantities than planned. The same goes for the labour component.
Choosing the Right Software
When you pick software for your business you want to pick one with the right features for you. For simpler manufacturing operations – ones that do not need complex production scheduling – Unleashed Inventory software is a great choice! It allows for many features you need without the extra complexity. You can track batches (critically important for food manufacturers). You can track serial numbers – vital for computer sales, as an example. Unleashed (great name, eh?) will allow for recipe creation (technically called your Bill of Materials) as well. What is does not have is extensive production scheduling for labour and raw materials. For that you will need MRPEasy. It is an amazing software that offers in-depth production scheduling for a full-service, in-house manufacturer. Both these awesome mid-tier cloud-based software programs sync beautifully to Xero or Quickbooks Online.
In Summary
Now, for my small rant. The people that designed these awesome, extremely focused software programs for manufacturers knew their limits. They did not keep going and add elaborate accounting modules. Why not? Because accounting for them – like for you – is not their area of expertise. They smartly created a link to software that does accounting better than they ever could. Together you get the best of both. If you need help choosing which software is best for you, message me on LinkedIn. Thanks for reading…