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Accurately calculating manufacturing costs is essential, but it’s a huge, complex challenge for Original Equipment Manufacturers (OEMs) in the automotive industry. Relying on off-the-shelf software or old-school methods like Excel often means juggling cost, product quality, and time-to-market, leading to costly errors.
Even a tiny miscalculation can have a massive ripple effect. It’s not just about numbers—missteps can derail your entire production cycle and supply chain, hitting your profits and customer satisfaction harder than expected. Let’s face it: precision isn’t just important; it’s game-changing.
Worry not! Cost estimating software can solve all these challenges while ensuring perfection in your calculations. Let’s explore the critical role of this dedicated software for the manufacturing industry, particularly for Indian automotive OEMs, and how it can transform operations.
Let’s dig deeper into the tool and learn how it helps you.
How Can Accurate Cost Calculations Benefit Your Business?
Imagine you manufacture electric vehicles (EVs). To set a competitive price for the EV, you need to estimate the costs of every part of the vehicle, including labor and design aspects that impact the final product price.
What if you did the wrong calculation or missed something? The final price of the EV would be less or more than the market threshold, hurting your profit margin.
Contrary to this scenario, the accurate manufacturing cost analysis will lead to the following impact:
Better Deals or Negotiation
Accurate estimation gives you a fair chance of negotiating the part price with suppliers and vendors, saving you from surprises during production.
Better Resource Allocation
Knowing how much to invest will help you hire the right labor and stock the right parts/components and other resources for production.
Managing Overhead Costs
Predicting your overhead costs, such as factory maintenance, utilities, and other indirect costs, will prevent you from making unnecessary investments that could erode profit margins.
Setting the Right Selling Price
Accurate manufacturing cost calculation helps you finalize the actual price of your product, in this case, the selling price of the EV.
Huge Profit Margins
Accurately analyzing manufacturing costs can help you achieve expected profit margins. For example, if you aim for a 10% profit margin, you can easily plan the exact production cost to achieve this when finalizing the selling price.
Competitive Advantage
Only a good product does not give a competitive edge in the automotive market; the right cost estimation is also important.
Imagine if your competitors are not using software for estimation and costing; they will miss the cost-saving opportunities. On the other hand, you can offer similar quality at a lower price, earning huge profits and ensuring dominance by using the software.
You would need a specialized tool—cost estimating software— to gain all the above advantages. Our next section is about this software.
Introducing Cost Estimating Software for Manufacturers
It is a comprehensive solution designed to ease and speed up the tedious and complex process of calculating manufacturing costs.
The software does not miss a single parameter that could affect the final product price or profit margin. It considers everything in the results, from direct costs such as raw material prices to indirect costs like labor costs.
Integrated with various data points and systems, the software promises that only current data is used for calculation and that everyone can access it in one place.
It also uses sophisticated algorithms to automate the entire process, saving time and effort. With this automation, your team needs to keep track of the price inflation of each component, which is often overlooked in the Excel sheets.
5 Benefits of Using Cost Estimating Software
The adoption of cost-estimating software offers several benefits for automotive OEMs:
1. More Reliable Cost Estimates
Manual calculations often lead to errors. Cost estimating software automates the process, reducing manual effort, and ensuring accuracy in each calculation.
2. Streamline Quotation
With features like automation RFQ, manufacturing estimating software helps you generate detailed quotations quickly. It also ensures a fair and transparent RFQ process for vendors and manufacturers.
3. Effective Comparison of Vendors
The software tracks all current and past vendors, including their history, performance, and other KPIs. This tracking helps you efficiently manage and compare vendors side-by-side to get the best possible deal and product/part quality.
4. Better Decision-Making
Like every other market, the automotive equipment market is also impacted by frequent changes in demand and price inflation. With software to track these changes, you can avoid inaccurate stocking or high production volumes that do not meet your customers’ needs.
It helps you adjust production volumes or manufacturing costs by running different cost scenarios and gaining real-time insights.
5. Improve Product Development
Quick and accurate cost estimation speeds up the production cycle, as you do have to engage in multiple revisions, negotiations, and adjustments. This means you can start designing new products early and meet market demands before your competitors do.
7 Key Features of Automotive Estimating Software
You can get the above benefits by choosing the right automotive estimating software. How do you know if it is the right fit? These key features will help you:
- Approval Workflows: It has a customizable process for cost estimation review and approval by the right stakeholders before implementation.
- Access Control and Permission: It secures the confidentiality of data with user roles and permissions, ensuring that only you have control over it.
- Cost Analysis and Management: It tracks key cost drivers such as raw materials, labor, and overhead expenses, helping manufacturers identify opportunities to save costs throughout the product life cycle. With detailed MHR calculations and multi-currency management, the software ensures you can deal with vendors and suppliers worldwide without hassle.
- Vendor Management and RFQ: It simplifies your relationships with vendors and suppliers, enabling comparison between them before making the final negotiations. With a streamlined request for quotation process, vendors can easily make bids and submit proposals to do business with you.
- Reporting and Analytics: It provides in-depth cost breakdown and what-if analysis to help you optimize your cost estimation strategies.
- Integration with Existing Systems: It integrates with ERP, CRM, PLM, and other tools to automatically pull all the relevant and fresh data for manufacturing cost analysis. Some software also uses AI/ML to give insights into future changes in material cost and market trends.
- User-Friendly Interfaces: The software’s simple interface helps non-technical users use it without guidance. This is particularly important for small—to medium-sized manufacturers without dedicated IT staff.
3 Must-Know Tips to Select the Right Manufacturing Estimating Software
More than ensuring the software you introduce in your business has the above features is required; more is needed. You must also check other non-technical features. These might be generic, but they are very important for your business.
Let us have a look at them:
Scalability: A scalable software adjusts with your business and can incorporate as many factors as you need for precise cost analysis. This is especially important for manufacturers who produce complex products and machines.
Customization: A generic software would not work for you, as multiple factors go into the calculations in the automotive industry. Choosing a generic one would be nothing more than an unnecessary investment. Instead, get custom software for estimation and costing that can fit your process and integrate with existing systems.
Ease of Use: The automotive industry has more non-technical users than others. Investing in software that even such users can use easily would be the right asset for your team. A complex system will increase your cost as it requires additional user training.
Conclusion
The manufacturing industry is not untouched by technical advancements, though it is slower to adopt them than other industries. Cost estimating software is an advanced tool for automotive OEMs to reduce manufacturing costs.
It automates the complex cost analysis process while enabling businesses to procure the right components in the right amount for production.
Ready to take the next step? Explore our advanced and innovative software, Cost It Right, which is continuously bringing a positive impact, saving millions of Fortune 500 companies.
