How Manufacturers Can Leverage Technology to Analyze Costs

December 8, 2023
Woman in manufacturing warehouse

Key Takeaways

  • Studies confirm manufacturers who leverage technology hit their cost targets.
  • There are key assessments you can make when determining if your digital environment is enabling effective cost management.
  • Manufacturers who use technology strategically can generate savings.

Cost management is an essential part of manufacturing, as it’s directly tied to profitability and growth. Cost management is often confused as being interchangeable with cost cutting.

However, true cost management looks at capturing savings and new revenue opportunities. By leveraging technology for a more strategic approach, manufacturers can generate savings to reinvest in the company.

Studies show manufacturers that add new digital technologies are the ones that hit their cost targets. Technologies that leverage artificial intelligence and machine learning help organizations understand cost structures and optimize operations.

Is Your Current ERP Enabling Effective Cost Management?

Optimizing your current technologies while considering implementing cost management tools requires an analysis of your digital environment.

Key questions to ask include:

  • Are you maximizing the data from your current software platforms? Do these systems offer the level of detail you need to make strategic cost management decisions?
  • Are you consistently missing your cost savings targets? Perhaps your inventory costs aren’t being captured appropriately in your ERP.
  • Do you have real-time visibility to see specific details beyond the month’s end? Are your reports geared toward cost analysis with better and more timely reporting in critical areas?
  • Are you convinced your organizational workflows mirror best practices that reduce costs? How would you know?
  • Finally, have you automated all the manual processes holding your organization back? Many companies still depend on individual efforts and by-hand calculations, even with an ERP.

Accuracy You Can Count On

Technology also enables manufacturers to track costs more accurately than in the past. The latest digital tools help monitor production costs in real-time, from raw materials procurement to delivery. For example, manufacturers can discern accurate margins with better insight into inventory costs.

When you understand your system, you can better track activity and improve your reporting process. For example, while your ERP might make calculations, it might not be breaking them out in a way that’s helpful to your management and operations team. When conducting a costing analysis, it’s best to break down particular variances to make them more visible, not buried under the cost of goods sold or other variances.


Automation can streamline cost management through real-time data, making it easier to identify and address cost-related issues. Your ERP can automate manual processes while integrating manufacturing silos in inventory management, procurement, production, and sales. These types of process improvements free your employees from busy work and eliminate waste.

Enhanced Inventory Tracking and Visibility

Manufacturers can use technology to track inventory levels and optimize the ordering process. This advancement allows for reduced inventory holding costs, lower volumes of stock-outs, and more timely customer deliveries. With better cost tracking, manufacturers can make informed decisions about pricing, product design, and production processes to maximize profitability.

Quick decision-making is its own form of cost management, and higher visibility enables a faster response. Technology can enable faster decisions, such as when to purchase additional products to fulfill demands and avoid production disruptions.

A Clear Picture of the Supply Chain

Technology has also transformed supply chain management in manufacturing. For example, an ERP system provides real-time visibility into the supply chain allowing manufacturers to see order status, inventory levels, and other metrics. These tools trump manual processes for reducing costs, improving efficiency, and ensuring the timely delivery of products to customers. Earlier visibility into quotes, orders, and inventory allows you to be more responsive to business challenges as they arise.

Real-Time Data to Drive Future Impacts

Finally, better data tracking allows for predictive analytics. Better insight into cost drivers and their interconnectedness within the context of past activities allows business management systems to forecast the cost consequences of our future decisions.

Predictive analytics help manufacturers identify the root causes of waste. Predictive forecasting tools can dictate maintenance and even spot equipment failures before they occur and halt production. These tools can also spot rising cost areas, such as employee turnover, raw material purchasing, or other areas of lost productivity.

Predictive analytics forecast the future based on current inventory, market fluctuations affecting costs, past consumer behavior, and other data points. The benefits of these tools for cost management are staggering.

The Path Forward

Today, technology has become our digital future, and manufacturers are leveraging these tools for better insight into the consequences of organizational activities that drive costs. Technology gives us the visibility manufacturers need to understand the root causes of expenses to help develop a more strategic approach to a better bottom line.

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