In 2004, I published two of my most popular posts—on the four problems with ERP. Now, over 20 years later, I’m updating my analysis, including how to solve those problems.
Growth or sale of business often leads to a switch from actual to standard costing basis. Actual often stems from jobshop / project based business run by founder entrepreneurs for profit on each contract. Standard costing stems from discrete repetitive product based businesses run by accountants for management teams. Private equity acquisition hotshots will often come in and dictate changes are made at the drop of a hat. Hopefully most robust ERP systems now have system wide configuration flags to switch from one to the other in a controlled process.
Hi Clive, thanks for the note. I used that example, because I've actually seen it. It involved a well known cloud ERP system that at one point only was able to do actual costing, I believe just weighted average. One poor company implemented it and then decided to switch to standard costing (I forget the reason), so they built a customization using this provider's "platform." Not a good idea.
But I do agree with you, in most cases today, ERP systems of any scale tend to support a variety of product costing methods.
Growth or sale of business often leads to a switch from actual to standard costing basis. Actual often stems from jobshop / project based business run by founder entrepreneurs for profit on each contract. Standard costing stems from discrete repetitive product based businesses run by accountants for management teams. Private equity acquisition hotshots will often come in and dictate changes are made at the drop of a hat. Hopefully most robust ERP systems now have system wide configuration flags to switch from one to the other in a controlled process.
Hi Clive, thanks for the note. I used that example, because I've actually seen it. It involved a well known cloud ERP system that at one point only was able to do actual costing, I believe just weighted average. One poor company implemented it and then decided to switch to standard costing (I forget the reason), so they built a customization using this provider's "platform." Not a good idea.
But I do agree with you, in most cases today, ERP systems of any scale tend to support a variety of product costing methods.