I sat down with a food manufacturer who proudly showed me a product margin report. It said her jam line was making 34%. Then I asked two questions: did that figure include the extra sugar wasted in changeovers, and did it cover the additional freight from split shipments? She went quiet. Her spreadsheet did neither.
That spreadsheet was actually a 40-column Excel monster, and the cost column was mostly a guess. Here is what ERPNext Consulting discovered during the first week: six of her 28 products were losing money while the report showed a profit. She had been subsidizing them for two years without knowing it.
Where the real cost hides
Here is where the true costs were hiding:
- Material waste on the production floor that never got recorded back into the product cost.
- Changeover time — switching from one flavor or size to another eats hours that nobody bills to a product.
- Freight and returns, which accountants often drop into a giant overhead bucket.
ERPNext Consulting rebuilt the costing model so every production order captured actual materials issued, actual hours worked, and actual waste. The team stopped relying on average costs and started comparing each batch against a standard. The numbers were uncomfortable at first, and that is exactly the point — an uncomfortable truth about cost is worth more than a comfortable guess.
What the fix was worth
Within two months the owner repriced six products, one of them by 19%. She also redesigned the changeover schedule, grouping similar products on the same production day to cut setup time by a third. The margin report now tells her team what is really happening.
Here is a useful test you can run tomorrow: pick your top five products and write down what you think each one actually costs. Then check whether waste, changeovers, and freight are part of that number. If they are not, your margin report is lying to you too — and ERPNext Consulting will tell you the hard truth instead of a pretty one.