Company Overview and Challenges

Company B is a mid-sized process manufacturing company that produces and sells a wide variety of industrial chemicals in small lots. Traditionally, cost accounting was done using rough departmental allocations, which made it impossible to accurately grasp product-specific costs or lot-by-lot cost variances. As a result, identifying low-margin products and implementing cost reduction measures did not progress. In addition, fluctuations in raw material prices and energy costs could not be immediately assessed for their impact on profits, and paper/Excel-based management created an information gap between the shop floor and management.

Background of IFS Implementation and Project Overview

Management positioned “cost visibility” and “profit margin improvement” as the highest priorities and decided to implement IFS Cloud. The project covered all areas—sales, procurement, production, quality, and accounting—and went live in about 12 months.

Key Points of Cost Management Reform

Detailed Breakdown and Template of Cost Elements

Cost elements such as material costs, labor costs, machine costs, outsourcing costs, and expenses were templated and set in detail for each product and process. For example, even within the same “mixing” process, machine operating time and labor time could be registered individually for Product A and Product B, enabling cost calculations that reflect actual conditions.

BOM, Recipe, and Process-Based Cost Build-Up

Multi-level BOMs and recipe structures unique to process manufacturing were registered in IFS. Input materials, workers, machine operating times, and unit costs for each process were reflected to calculate both standard and actual costs on a lot basis. This made it easier to analyze the causes of cost variances.

Standard Production Volume and Lot-Based Cost Management

Standard production volumes were set for each product, and actual production volumes were compared to automatically calculate per-unit cost fluctuations. Cost increases due to small-lot production or yield deterioration could be immediately identified.

Voices from Managers

Head of Production Management Department

“Before implementing IFS Cloud, cost calculations were very rough, and many on the shop floor questioned whether the numbers were really accurate. After implementation, costs became visible by process and by lot, allowing both the shop floor and management to discuss based on the same figures. In particular, clarifying the causes of cost variances has greatly accelerated the speed of shop floor improvements.”

Manager, Corporate Planning Department
“We can now quickly identify low-margin products and reflect this in sales strategies and price revisions. The time required for cost calculation and report preparation has been significantly reduced, and the speed of management decision-making has dramatically improved.”

Implementation Results

Cost variance (difference between standard and actual cost): 8% → 2% (approx. 75% reduction)
Ratio of products with profit margin below 5%: 15% → 5%
Time spent on cost calculation and analysis: 40 hours/month → 8 hours/month (80% reduction)

Through the implementation of IFS Cloud, Company B achieved both “cost visibility” and “profit maximization.” The shop floor and management now share the same data in real time, enabling a fast PDCA cycle for cost reduction and profit margin improvement. Going forward, the company plans to leverage cost data for new product development and optimize the entire supply chain.

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