FinanceJuly 28, 2020

Align Production Goals and Financial Reality with CCH Tagetik Production Cost Planning and Control Software

For many, production cost planning is a messy, uncontrolled and overly complicated process that is in desperate need of centralization. Here’s why.  

Let’s say you have a mass production plant in Italy, another in Spain, a distribution warehouse in France. Each one has different data pertaining to stock, material costs, salary, rent, shipping, utilities, and so much more. When production spread across many plants, and geographies, and local data is fragmented along with it, corporate finance teams struggle to track costs, understand how production costs relate to sales, and attain a true understanding of the drivers influencing profitability. 

Then, let’s say, you add a pandemic into the mix. Some companies have been forced to test new, unchartered courses of action in order to survive. For others, demand has accelerated rapidly or stopped entirely — with little to no notice. With the state of the world in a moment of incredible flux, costs can quickly get out of hand in a time when costs need to be most under wraps.  

Production costs are innumerable, subject to change, and managing them is critical to survival. What’s holding us back? 

3 Common Challenges to Production Cost Planning and Control (PCPC) 

1. Fragmented Planning Processes:

In a single organization, it’s natural to see many different software and data hubs, like ERPs, vertical solutions, department-based sales budgeting, planning, and even simply Excel files. But this complicates PCPC. The data necessary for planning and controlling production costs processes are scattered across the organization, not stored in a single hub. Further complicating the process, is that the PCPC process is, by its very nature, decentralized. There are many different people, departments and job functions involved in managing one or more steps of production cost planning. What’s more, players across logistics, manufacturing, purchasing, sales, demand and finance influence production costs without the whole picture of how they’re impacting the bottom line. When compounded, this foundational decentralization means that a comprehensive picture of production costs is hard to attain, much less control.  

2. Manual Processes: 

As a direct result of the fragments in the PCPC process, everyone involved ends up doing a lot of menial grunt work. Collecting data from all corners of the organization and then subsequently running calculations on data takes time. This becomes especially problematic when the urgency to make decisions and plans based on production cost data is time sensitive. As a result of these manually driven processes, it’s common to see duplicated efforts, differing business rules across functions and processes, and of course, data errors and redundancy.  

3. Transparency: 

Plans will change. Market conditions will flip flop. But will your production cost plans adjust in stride? For many, the cascading impact of operational changes is lost along the way to the P&L. For example: If sales plans had to change, due to something as a large as a COVID-19 lockdown, or as small as an additional raw material cost, can you see how either will impact in the production profitability? Without transparency across the entire PCPC process, critical decision-making information is lost. 

With the goals to 1. Connect all the contributors, data, and departments involved in production 2. Automate error-prone, time-consuming tasks and 3. Give organizations a comprehensive view of the domino effect of production cost changes, we created CCH Tagetik Production Cost Planning and Control

How Does CCH Tagetik Production Cost Planning and Control Help You? 

So production costs don’t become a proverbial wrench in your production line — or your organization’s survival — CCH Tagetik Product Cost Planning and Control enables you to integrate this keystone process into your financial management mix, giving logistics, manufacturing, purchasing, sales, and finance departments the insight they need to align around realistic, profit-centered budgets. Since controlling costs is critical to a dialled P&L, our solution equips you with the tools to perform profitability analysis, what-if scenario modeling, and financial and operational reconciliation. What does this look like in real life? You can play out production scenarios, changes to the MRP, changes to COGS, and see how they all show up on the P&L and impact other drivers.

Because production involves so many vested interests, transparency is critical. Is each department working with the latest data? Is finance creating budgets based on the most accurate numbers? To ensure the answer to these questions is a big resounding Y-E-S, the Analytic Information Hub centralizes granular data from all departments and automatically populates plans with real-time information. Of course, the pace of change in today’s business context is rapid. To enable you to make adjustments on the fly, our solution equips you to optimize costs by individual plant and at the global level. When you need a cohesive, bottom-up approach to production cost planning, our solution comes with everything you need.  

3 Ways CCH Tagetik Production Cost Planning and Control Improves Your Decision Making 

1. Put Finance, Production and Operations on the Same Page — In Real Time 

In addition to a single hub for financial and operational data, CCH Tagetik PCPC simplifies the process by keeping communication and interaction with data and between users within the software. Production managers, logistics managers, and sales managers no longer have to rely on data solely from Excel files or their vertical solutions; Nor do users have to worry about inconsistencies in data or being limited to aggregate views. In CCH Tagetik, you’re free to drill into results to explore how that number came to be, confident that it’s a single version of the truth you’re working with.

2. Understand the Impact of Operational Decisions

Having a connected data hub and unified platform enables you, and all managers impacted by production, to trace back numbers from the bottom up and gauge the impact of your operational decisions. In CCH Tagetik, you can gauge P&L impacts from all operational perspectives. For example, you could investigate how the production of a specific line impacts the P&L, or determine how incremental raw material costs will impact the P&L. Whether you need to play out what-if scenarios or analyze the profitability of prospective decisions, our solution gives you the transparency into the numbers to justify operational courses of action from the bottom-up. 

3. Give the CFO P&L Transparency

CFOs need to know the nuances of COGS and the connection between how operations impact the P&L. CCH Tagetik gives CFOs the ability to justify the routing inputs, loading of production line, the bill of materials and buy policy by automatically playing out the effects of their assumptions on the P&L. Our solution provides transparency into the process by showing the financial effect of operational causes — and vice versa.  

CCH Tagetik Production Cost Planning & Control is a central hub for all engineering, planning, manufacturing, sourcing, and finance data, all people, all processes, and all departments. By controlling scattered costs in our unified platform, you’ll get a bottom up approach to production cost planning that will result in controlled costs, improves decisions, and maximized profit. Learn more about our solution here.

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