- Transforming at any cost
- Analyzing rather than collecting data
- Succeeding through continuous planning
Issues of transversality and of convergence, of aligning sales with operations, are major concerns for today’s corporations. This is true for all the sectors with which DECIMAL works, but especially for manufacturing sector. In this sector, financial managers play a key role by connecting operational issues with strategic ones, and they can use the influence thus acquired to lead transformation within the organization. A fundamental component of this transformation is upgrading existing tools to ones that are flexible and more integrated.
All sectors want to understand their costs: raw material costs, the impact of losses, and payroll. As far as salaries are concerned, often direct labour – as listed in the Bill of Materials (BOM) – doesn’t jive with what is in books, leading to over and undervalued cost prices.
In an environment where organizations need to grasp how their costs (other than direct costs) behave, understanding them has many advantages. It helps businesses establish a more accurate cost price, enables them to bill back certain costs to internal customers and, by extension, influence the behaviour of each department within the organization.
“What-if” scenarios and “should-cost” analyses are also essential to managing inventories, comparing factories to identify best practices, then replicating them and analyzing the resulting efficiencies.
The manufacturing sector loves highly detailed reporting supported by production costs. Basically, all manufacturers need is to understand the reasons why one product is more expensive than another, and an awareness of cost elasticity as a factor of production capacity. Once they grasp why some products cost more to manufacture than others, the company will be better positioned to comprehend the actual profitability of its products, customers and markets. Of course, this understanding also plays a key role in developing many kinds of projections and forecasts.
What this sector primarily needs are integrated and flexible tools that can maintain and improve day-to-day efficiency. Information integration (II) is becoming increasingly important in an environment where rapid reactions matter. Unless manufacturers acquire analytics tools that can integrate with ERP solutions, analysts will spend enormous amounts of time compiling basic data, thereby making companies less agile.
It is a good idea to ensure continuous end-to-end management of accounting and financial processes to quickly align data with actions and perform comparative analyses.
In closing we should mention that, given the current labour shortage and the fact that most of Quebec’s GDP can be attributed to the manufacturing sector, predictive analytics tools will be essential to this sector’s survival in the coming years.
Further reading: “Why are so Many Companies still so Disjointed?”