Understanding the True Cost of Production in Food Manufacturing

Food manufacturers face significant challenges in determining the true cost of production, with fluctuating ingredient prices, unpredictable waste, and rising overhead often eating into profit margins. Did you know that over 60% of small and medium-sized manufacturers struggle with accurate cost tracking? Addressing this issue is crucial for maintaining profitability and staying competitive. The fluctuating nature of ingredient prices, production waste, and overhead adds complexity to cost calculations. Microsoft Dynamics 365 Business Central along with solutions from Harvest ERP help food manufacturers uncover the true cost of production, delivering actionable insights and improving operational efficiency. Here’s a detailed look at how it works and the advantages it brings.

Calculating the Real Cost of Items Produced

Food manufacturers often face challenges in tracking and analyzing the actual costs associated with production. Microsoft Dynamics 365 Business Central and Harvest ERP simplify this process by delivering transparency and control over every aspect of costing:

      1. Advanced Costing Methods

Microsoft Dynamics 365 Business Central enables manufacturers to track costs using various costing methods, including FIFO (First In, First Out) and average costing. These methods help account for inventory costs in ways that reflect production realities and financial preferences. This flexibility ensures accurate representation of production costs, accounting for real-time fluctuations in ingredient prices and other variables.

      2. Work Centers and Job Costing

Work centers and job costing features allow manufacturers to attribute labor, overhead, and material costs to specific product batches. This granular tracking reflects seasonal changes in ingredient pricing, production waste, and other dynamic factors, ensuring precise cost calculations.

      3. Production Waste Tracking

The system captures data on production waste, enabling manufacturers to account for all losses when calculating per-unit costs. This functionality provides a clearer picture of actual expenses, improving cost accuracy.

      4. Integrated Analytics and Reporting

With integrated Power BI capabilities, Microsoft Dynamics 365 Business Central provides real-time financial insights, such as identifying cost overruns in specific production batches or forecasting the impact of rising ingredient prices on future product margins. Manufacturers can monitor cost trends, compare planned versus actual production costs, and analyze the impact of raw material price changes. These insights empower smarter pricing and production decisions.

Benefits to Food Manufacturing Operations 

By leveraging Microsoft Dynamics 365 Business Central and Harvest ERP to uncover the real cost of items produced, food manufacturers can realize several key operational benefits:

      1. Improved Profit Margins

Accurate costing ensures products are priced appropriately, enabling manufacturers to maintain healthy profit margins while staying competitive in the market.

      2. Enhanced Decision-Making

Data-driven insights allow manufacturers to make informed decisions about sourcing, production planning, and pricing. This reduces the risk of overproduction or underpricing.

      3. Optimized Resource Allocation

Detailed cost tracking identifies inefficiencies in labor, material usage, and overhead. Manufacturers can adjust operations to allocate resources more effectively, reducing waste and improving productivity.

      4. Scalability and Flexibility

As production scales or market conditions shift, Business Central’s costing tools adapt to new scenarios, ensuring manufacturers always have accurate, up-to-date cost data.

      5. Regulatory Compliance

Accurate costing supports better financial reporting and compliance with industry regulations by providing detailed documentation of production expenses.

Partnering with Harvest Food Solutions 

Identifying the real cost of items produced is a cornerstone of efficient food manufacturing. The combination of  Microsoft Dynamics 365 Business Central and Harvest ERP equips manufacturers with the tools needed to gain accurate, real-time insights into production costs, helping optimize operations and drive profitability.

At Harvest Food Solutions, we specialize in both food manufacturing and software implementation. Our team brings extensive experience and expertise to your operations, improving efficiency and profitability.

👉 Ready to take control of your production costs? Contact Harvest Food Solutions today for a no obligation consultation. Let our best-in-class team show you how we can help transform your food manufacturing operations for long-term success.

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