Reducing production costs for custom orders

Posted by Jonathan Davies on 30 Aug


Whether you receive custom orders occasionally or all the time, custom orders can be difficult to manage, but having the right ERP system can help you anticipate issues that could affect them.

If your production line has standard and custom products, it may be difficult to process a bespoke order when production is already at full capacity. It can create problems such as interrupting the manufacturing cycle and the associated costs could be significant, leading to a lower profit margin on the interrupted product lines. It can lead to a waste of resources and have a knock-on-effect on other areas of the business. Also, it can cause a backlash if it causes late deliveries because you needed to fit in custom orders into the schedule, your other clients may be forced to cancel their orders.

One way of controlling spiralling production costs is by introducing configurator software and creating a lean manufacturing environment.

How product configurator software can help

Product Configurator software allows users to design accurate and concise BOMs (Bills of Materials) for each tailored order. It takes away the necessity of having to create paper records of all of the potential configurations of products or having to manually generate the data on a job by job basis each time a made-to-order item enters the production schedule. Detailed BoM will list all parts required, so buyers will be able to view outstanding orders on the system and decide what parts and components need to be ordered.

How to go about reducing costsHow to Tell You Need A New ERP System

Custom orders usually have a higher retail price to allow for the extra costs for customisation but, sometimes it may not be enough to cover the real increased cost of manufacture if, the initial quotation is inaccurate in the first place.

Many often fail to account for additional costs that may incur during the manufacturing process; for example, the cost of interrupting production schedules, ordering parts from a different supplier, increase component prices etc.

For accurate calculation of cost and margins, all costs and product data can be uploaded into the product configurator, so staff can track component availability, costings, production through to delivery. The sales team will also be able to accurately quote, create an order that can be easily converted to a BoM by the production team and provide customers with factual lead-times through the use of an accurate, flexible ATP (available to promise) algorithm.

The other benefits of installing product configurator software

A product configurator can also be used to generate commercial reports like sales trends. The sales data can be used to help with marketing, forecasting, purchasing and production scheduling and can assist other activities such as research and development.

Helping companies reduce production costs for both standard and custom orders is one of the key advantages of installing a comprehensive all in one, ERP software with integrated product configuration.

Topics: Manufacturing, Product Configurator, Production Management, Business Efficiency

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