I am also an M.E. Erik so I feel your pain with some of this. The reason I understand this to be is your accounting method you want to use determines the cost. For example, if you use standard cost the cost of the material on the job doesn’t change until you change the cost. The varying costs you see from the vendors are variances to the standard cost. This can be scary as the last company I worked for got in some real trouble with standard cost. They were not doing a good job of updating their costs and were losing money on lots of parts due to steel price increases. I may be slightly wrong on this as I am like you, but this is what I understood. At the end of the day, it all comes down to accounting cost rules your company uses which is what makes them do it this way. Someone else can correct me if I am wrong.
I think the way it works is very understandable and useable.
I just want to convey, I think it is natural to think ‘I want to enter in a cost for a part, so I will just open up Part Entry, find the ‘cost’ field and type in a number.’
When you actually get in and find it is not that simple it can be frustrating.
It’s beyond frustrating.
Keep in mind Erik, that “Costing” in Epicor is accounting costing, not engineering costing. The cost comes from the PO/invoice for what you actually paid for it. Just because you were to put a number on the part master, doesn’t mean the supplier is going to sell if to you for that price. You highlighted reasons why that may be, like volume, lead time, supply and demand etc.
So the cost on parts, is related to the cost on the PO for when the inventory was actually received. And if you are doing average costing, it’s to calculate the true value of your inventory for accounting purposes, not give you an average of what you’ve paid for the part historically.
This site is really good at explaining and teaching accounting basics. I had to work through this myself to even attempt to understand what’s going on. As you’ve found out, a lot of stuff related to costing seems counterintuitive, but it does have a logic at the base of it.
This is actually an epicor thing. This is standard accounting practices. So if you do with another product, you’ll have the same issue. That’s why I can link you to do a totally unrelated website to explain it. It’s actually standard.
Welcome to the deep dark world of costing… I wish it was just a number. Great link Brandon, I use that often.
Cost is not Price. Price is not cost. They are different worlds.
I always conflated the two, but my old boss (the plant controller) drilled this notion into me, and it helped me a lot.
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Cost = what the part is worth to your company.
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Then there’s the price you pay for it (Supplier Price List).
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Then there’s the price you sell it for, if applicable (“Price List” - which, like “Order Entry”, assumes the word “Sales” in front of it)
Your accounting department determines the company’s “costing method” (usually for the whole site, but you can do every part differently). You must abide by their rules.
Some options:
- Standard cost means you set the value of the part with a “cost adjustment” (typically once per year). Sometimes you win (buy or make it for cheaper than that number), and sometimes you lose.
- Average is what it sounds like, and it maintains itself
- Last is what it sounds like, and it maintains itself
- FIFO is a neat concept, and does maintain itself but it is the most finicky of all of them
Everything but standard has a lot of gotchas. For example, this messes up any of them (but standard):
- Imagine a job to make 9 parts
- Issue all the material and charge all the labor to it
- Receive 1 EA of the job to stock
- Receive the other 8 to stock
At step 3, I think the system values the 1 part at the full value of everything that went into the job. At step 4, the other 8 have no value, so now:
- The last cost is zero
- The average is probably skewed because it depends on current on hand at each recalc
- And for FIFO, you now have
- A “layer” worth 9x the value of 1 part
- And a layer worth zero for a quantity of 8
We use standard, so I may need to be corrected on some of the last bits.
Oh also, if you buy direct or make direct
- Average cost does not get updated or reflect the direct transaction
- Neither does Last
- No idea about FIFO, but I assume similar
This is true even of parts that you normally buy to stock or normally sell from stock.
That’s a very good point @JasonMcD . This highlights that the costing is for Accountings version of inventory costing. And if it doesn’t hit inventory, you don’t update costing information.
And you and everyone else made very good points.
For me the aha was price <> cost. It’s simple enough to become a mantra.
Thanks for all the answers… Epicor seems designed for multi-departmental companies. We have 2 users. It’s too big for us, we do not understand it. I have to come to terms with that. I made a very poor decision in purchasing this software.
I should just be using Quickbooks Enterprise.
My decision to go with epicor is going to damage my company, possibly put me out of business. Sadly that’s my reality.
Oh man, I see the original post where you talked about regrets, so we don’t really need to rehash all that.
But I’ll just echo what everyone else has said, I do believe that you can make it work for you - I mean, I think you, Erik, can do it.
You should reread that post. Lots of encouragement and educational guidance in there.
And I knew NONE of this stuff 6 years ago. And we are doing great. It can be done.
Finding a good teacher helps. We rarely have that luxury though.
One of the most inconsistent uses of the word “Cost” within Epicor is the term “Costing Method”. I’ve always thought it should be called “Inventory Valuation Method”.
“Cost” is two things: first, it IS what your PO says (the cost to purchase from your supplier), and second, it IS the “value” you are carrying it for… or looked at from the other side, the cost assigned to the value of whatever you’re creating with it.
Took me YEARS to figure this out… but that’s because “Costing Method” (which is really "Inventory Valuation Method, see above) is only useful on INVENTORY transactions… which Buy Direct and Make Direct are not. PUR-MFG and MFG-STK transactions do not go through Inventory.
Yeah, with that attitude, that will certainly happen.
Is is complicated? Yes. Is it rocket science? no.
This isn’t even specific to Epicor. This is ERP software in general. You’d be at the same place with any software. And if you want to grow any larger than a garage manufacturing operation, you’re going to have to learn it.
So buckle up buttercup! At least you have this forum to help you. With many other softwares, this kind of community doesn’t exist.
Even as we speak, Erik, I’m working with a company of 3 people (yes, I realize it’s 150% of your headcount, but still…), and already they’re seeing beyond the pain of this implementation process
@Ernie thanks - we’re in touch with you guys already - we plan on talking more after the first of the year. I am going to give it one try - if we can have a consultant help us learn some basics, we might be able to make this work. If not, I am pulling the plug and moving on.
Everyone else - sorry my posts end up negative. I don’t mean them to, but as I run into brick walls every time I try to move forward, I get pretty discouraged and the reality of it really hits hard - we might have to pull the plug if we can’t make sense of what we have.
You’re not the first, you won’t be the last. I think you’re at the anger, or maybe depression stage. lol
Anger and depression stage are literally where I am at. I’ve sat here and stared at my screen for a week, lost. Lol.
Well… yes.
In my post, I really had to fight every urge to say “the costs charged to the job” or things like that.
But a job is the sum total of the (let’s say standard) costs of the components and you’re receiving the finished part at its (standard) cost.
Cost is what you pay; price is what you charge. But the supplier is a company just like the one I work for. So for them they are charging a price to me. But to me, it’s a cost I pay to them.
I try to stay me-centric and just look at costs as value to us and prices as things on invoices. It helps an accounting newbie stay in line.
Hi Erik. Considering that you have the wherewithal to earn a degree in mechanical engineering from Youngstown State and then either start or buy Industrial Robotics, there is no doubt that you have the capacity to learn and conquer Epicor ERP!
Have you attended any user group meetings, either virtual or in-person? If not, I suggest that you really consider doing so. The Americas - Western PA & Southeast Ohio regional group is currently planning a meeting for February 16, 2023. Go! You won’t regret that!