2. Introduction to M3 BE costing solution

M3 BE Product Costing offers a flexible solution for determining the product cost as well as the cost of purchased items and distributed items. The solution makes it possible for the company to make sure it is selling its products with a satisfactory net profit. In this document, the focus is on purchase costing and distribution costing. (For information about the product costing solution, see Managing M3 Product Costing and related documents.)

All three types of costing are based on a combination of actual costs and cost estimates.

• Purchase costing vs. distribution costing

  Purchase costing is the act of calculating the cost of acquiring items and to get it into the company's inventory. The items can either be the material required to manufacture a product or items to be sold off-the-shelf.

  Distribution costing, on the other hand, is the act of calculating the total cost of a product or material transferred from one facility to another. The result of the calculation – the distribution cost – is used as the new inventory value in the receiving facility. One case in which the cost must be transferred is when preparing for the costing of a product that is composed of items from more than one facility and therefore, can have different costs in different facilities.

  Currently, there is one major difference between purchase costing and distribution costing. In purchase costing, you can review and adjust the costing model already when creating the purchase order (PO). For distribution costing, the costing model to apply for distributed items is selected directly in the costing program instead of for the distribution order.

  In this document, the term purchase/distribution costing refers to the combined solution in terms of process and functionality. For links to documents with description of the purchase/distribution costing processes, see the See also section.

• Benefits of costing

  Purchase/distribution costing in M3 BE enables the company to:

  • Capture actual costs for purchased items and distributed items so that each item has a true inventory value based on the landed cost in each facility.
  • Ensure that it never undercharges for a product, but still keeps its competitive edge.
  • Decide whether to make the product themselves or buy it from a supplier based on the results of the costing.
  • Analyze the costs and overheads related to purchased or distributed products.
  • Simulate and forecast costs.
  • Negotiate supplier pricing to buy the required items at the lowest total cost, inclusive of all material, taxes, transportation, and resource costs.
  • Streamline the company's purchasing and import processes.