Cost at Multiple Production Facilities

["Shrader, Patrick" <pshrader@xxxxxxxx>]

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Good afternoon, everyone. I need some ideas from you concerning multiple
costs. I know someone out here is producing the same item at multiple
locations, which is my problem.

I have PDM/IM. I do not have EPDM, PCC, or PMC installed.

I make the same item at three locations: USA, Mexico, and China. Lead times
are different for each -- the more expensive the overhead the quicker I can
deliver it to the customer. In order to accurately record the true cost of
the product, I have set up different part number for each location
(30xyz=USA; 40xyz=Mexico; 50xyz=China). I then set up a standard cost for
each of these part numbers, reflecting the different overhead rates for each
production facility.

The customer only orders the USA part number (30xyz). So, when the items are
transported back to the warehouse and all production is recorded, there is
an IA adjustment that reduces the 40 part number and increases the 30 part
number. Wa-la! I have 30xyz inventory available to ship/sell.

Now, you can probably imagine the problems I have scheduling and maintaining
inventory levels to meet customer demands. Not to mention any paperwork
needed by the customer concerning its device history.

All of this ruckus is designed to keep accurate standard costs for the
product in production, but it does nothing for me in determining accurate
profit (the cost of the sold item (30xyz) is substantially higher than the
true cost of the product).

How are you handling this situation? I need to accurately capture my costs,
creating a combined single standard cost (too bad there isn't a cost for
each location), and determine what the true value of my inventory is.
Additionally, customer service should be able to see one part number and
tell what the demand is, and when it will be fulfilled.

Perhaps I simply need a cost primer. I am certain that we have to change the
way we approach costing. Any hints you have will be appreciated.


Many thanks!

Patrick Shrader
White Knight Engineered Products