How to prevent loss of expertise in product costing

The demographic shift poses major challenges for industrial companies. In the coming years, many experienced employees will retire. With them, valuable expertise will disappear from companies. Losing long-standing know-how in costing is particularly difficult. Skilled employees have detailed expertise in production processes, materials and hidden cost drivers. This knowledge is often based on years of experience and is not recorded in documents. When these experts leave the company, dangerous knowledge gaps arise.

Companies must therefore take measures in good time to prevent this loss of expertise. Professional costing software can play a key role here. It helps to preserve existing knowledge and make it usable for future employees.

This blog article explains why the impending loss of expertise in product costing poses a serious threat to industrial companies and how professional costing software can effectively address this problem. You will learn about the weaknesses of traditional Excel-based solutions and the specific advantages of professional software. The article also highlights the long-term benefits and makes specific recommendations for action. These findings will help you to better assess the strategic importance of digitalised costing processes for your company and to initiate the necessary measures in good time.

The traditional approach to product costing harbours considerable risks for industrial companies. Three central problem areas stand out in particular: firstly, the widespread use of Excel as the primary calculation tool, secondly, the strong dependence on personnel-related experience and, finally, the inadequate documentation of calculation processes. These weaknesses reinforce each other and make companies particularly susceptible to a loss of expertise when experienced employees leave.

Excel has been the standard tool for product costing in medium-sized companies for many years. The reasons for this are obvious: the software is inexpensive, widely used and offers basic calculation functions.

However, Excel's clear limitations become apparent when it comes to complex product costing. The tables become confusing and error-prone with increasing complexity. Formulas are difficult to understand, and changes are risky. There are often different versions of the same calculation file, which leads to uncertainty and errors.

The lack of traceability of calculation decisions in Excel is particularly problematic. Important assumptions and empirical values are often only available in the heads of employees. The spreadsheets themselves offer hardly any options for documenting this basis for decision-making.

Data maintenance in Excel is also time-consuming and error-prone. Master data such as current material prices or machine hour rates often have to be transferred manually to different files. This not only ties up valuable working time, but also increases the risk of transfer errors.

Person-dependent knowledge represents a considerable risk in product costing. Experienced cost estimators have extensive implicit knowledge that they have acquired over the years. They are familiar with the special features of different product groups and know which factors to pay particular attention to when calculating costs.

These experts have developed a keen sense for hidden cost drivers. They know from experience which production steps are particularly costly or where reworking is often required. Such findings are often automatically incorporated into their calculations without being explicitly documented.

The evaluation of quotations and the assessment of suppliers is also often based on years of experience. The estimators know the strengths and weaknesses of different suppliers and can assess their prices well. They know where there is room for negotiation and what alternatives are available.

When these experienced employees leave the company, this valuable knowledge is lost. New employees have to painstakingly acquire this knowledge anew. This not only costs time but also harbours the risk of miscalculations and the associated economic damage.

The lack of documentation of costing processes is a widespread problem in the industry. Important decisions and assumptions are often not recorded in writing. This applies to both the basic calculation methodology and individual calculation decisions.

The traceability of calculations suffers particularly from a lack of documentation. It is often not clear why certain surcharge rates were chosen or which empirical values were used in the calculation. The reasons for deviations from standard specifications also often remain in the dark.

Special calculations and exceptions are particularly critical. Individual adjustments are often made here, the reasons for which are only known to the original calculator. Without appropriate documentation, employees working later cannot understand or evaluate these decisions.

The lack of documentation also makes quality assurance of the calculation more difficult. Without transparent decision-making processes, it is almost impossible to systematically review and improve the costing processes. Errors or inaccurate assumptions may be carried forward for years without being noticed.

Professional costing software offers three essential technical cornerstones that can effectively prevent the loss of expertise in companies. Centralised data storage ensures a standardised and reliable database. Standardised calculation processes ensure methodological expertise within the company. Automated calculations and workflows increase efficiency and reduce sources of error. These three elements interlock and create a robust infrastructure for product costing. They transform the personal experience and knowledge of long-serving employees into a structured, digital knowledge system that is permanently available to the company.

Centralised data storage forms the foundation of professional costing software. All relevant information is stored in a single, structured database. This includes material prices, hourly machine rates, labour costs and other basic data relevant to costing.

The centralised database ensures that all employees work with the same up-to-date information. Changes to basic data take effect immediately for all users. This prevents errors caused by outdated or inconsistent data, which often occur with decentralised data storage.

The software enables targeted management of access rights. Sensitive data can be protected and changes can only be made by authorised persons. At the same time, every change can be logged if required. This creates transparency and increases data security.

Another advantage lies in systematic data maintenance. Regular updates of prices and cost rates can be imported centrally. The software supports this with automatic plausibility checks and warnings. This ensures the quality of the calculation basis and relieves employees of routine tasks.

Standardised calculation processes are a key added value of professional costing software. The software provides a standardised procedure and guides users through the calculation process in a structured manner. This ensures a consistently high quality of calculations, regardless of the employee carrying out the work.

The software maps proven calculation methods and makes them binding for all users. Important work steps cannot be inadvertently skipped. In addition, input errors are recognised at an early stage by plausibility checks and can be corrected.

The ability to define company-specific calculation standards is particularly valuable. Proven procedures of experienced employees can be stored in the software. These standards are then available to all users and secure the expertise within the company in the long term.

Standardisation also makes it much easier to train new employees. They can orientate themselves on the predefined processes and are introduced to correct costing step by step.

Automated calculations and workflows significantly increase the efficiency and reliability of costing. Professional costing software takes over time-consuming routine calculations and prevents typical sources of error in manual calculations. Complex calculation formulas are permanently stored in the system and are automatically applied to the data entered.

Predefined workflows control the entire calculation process. They guide the estimators through all the necessary steps and ensure compliance with defined approval processes.

The automatic processing of changes is particularly helpful. For example, if a material price is updated, the software can calculate the effects on all affected calculations. This not only saves time but also minimises the risk of overlooked adjustments.

Automation also enables systematic quality control. The software continuously checks compliance with defined rules and highlights any conspicuous deviations. Unusual values or missing entries are recognised immediately and can be corrected promptly.

A digital knowledge database is a core component of professional costing software. It not only stores pure figures and formulas, but also the underlying empirical values and decision-making principles. Important findings from past calculations are systematically recorded and thus remain available for the future.

The software makes it possible to store additional information for each calculation element. Experienced employees can document their knowledge of special production requirements, typical problem areas or proven solution approaches directly in the system. This information is then available to all authorised users.

Version management is a central component for securing costing knowledge. Different versions of a calculation remain permanently available and comparable. Professional costing software makes it possible to call up previous versions at any time and retrace their origins. This is particularly valuable when analysing cost trends or reviewing previous projects.

A particular added value lies in the ability to manage different costing variants in parallel. The software makes the differences between the variants transparent and documents the reasons for different approaches. This enables well-founded decision-making and ensures knowledge of alternative costing methods.

The implementation of professional costing software pays off for industrial companies in many ways. The long-term benefits go far beyond simply making work easier. Four key aspects stand out in particular: The consistently high quality of the calculations ensures a reliable basis for decision-making. The reduced dependence on individual employees strengthens organisational stability. Last but not least, the software increases the company's competitiveness through more precise and faster quotation processes. These advantages reinforce each other and create lasting added value for the company.

Ensuring calculation quality is a decisive advantage of professional costing software. The software guarantees a consistently high quality of all calculations through integrated control mechanisms. Incorrect or incomplete calculations are systematically prevented.

The software ensures that all relevant cost factors are taken into account. Important aspects such as material price fluctuations, set-up times or reject rates cannot be inadvertently overlooked. The underlying calculation logic is based on proven methods and many years of experience.

The high calculation quality pays off directly in terms of profitability. Precise calculations enable optimal pricing and prevent loss-making orders. The company can rely on the fact that its quotations are based on solid calculations.

The reduced dependence on individuals strengthens the stability of the company. Professional costing software makes the collective knowledge of experienced employees accessible to the entire team. This makes the company significantly less susceptible to personnel changes.

The system preserves expert knowledge in the form of standardised processes, calculation logic and documented decisions. The company retains this digitalised expertise even after key employees have left. New colleagues can access it directly and benefit from it.

The software also enables a better distribution of calculation tasks within the team. Several employees can work on calculations in parallel and with consistent quality. Holiday and sickness cover becomes much easier as all team members work to the same standards.

It is also much easier to pass on specialised knowledge. Special calculation rules for certain products or customers are stored and documented in the system. This transparency reduces the dependency on individual knowledge carriers and makes the company more flexible in its personnel deployment. In addition, the use of technology specialists is also being reduced in favour of more generalists, who can now make valid calculations thanks to the software's capabilities.

Improved competitiveness results directly from the use of professional costing software. The greater precision and speed in preparing quotations enables the company to respond to customer enquiries faster and in a more informed manner. This is a decisive advantage, especially in dynamic markets.

The software makes it possible to analyse different costing scenarios in detail. Different production variants or material options can be quickly calculated and compared. This allows the company to respond more flexibly to customer requests and offer optimised solutions.

The reliable calculations also create a solid basis for strategic decisions. Management can make well-founded make-or-buy decisions and plan investments effectively. The transparent cost structure enables precise identification of optimisation potential.

The software also provides important advantages in price negotiations. Precise knowledge of its own cost structure strengthens its negotiating position. The company can utilise price concessions in a targeted manner and at the same time secure its own profitability. This leads to a more stable market position and higher profitability in the long term.

The conclusions for industrial companies are clear. The implementation of professional costing software is not an optional measure, but a strategic necessity. Two aspects in particular need to be considered: Firstly, demographic shifts mean that there is an urgent need for action that cannot be delayed any longer. Secondly, the investment is justified by a clearly demonstrable return on investment, which is made up of various components.

The need for prompt action on the subject of costing software is obvious for many industrial companies. The demographic shift is progressing steadily. More and more experienced employees will be retiring in the coming years. The risk of irretrievable loss of expertise increases with every month of waiting.

The implementation of professional costing software takes time. Capturing existing knowledge, standardising processes and training employees are important steps that should not be rushed. The earlier a company starts with the implementation, the better the existing experts can contribute their knowledge to the new system.

The current market conditions also speak in favour of quick action. Competitive pressure is increasing and customers expect fast and precise quotations. Companies that have already digitalised their calculation processes have a clear advantage. Those who wait too long risk losing touch with this development.

The return on investment from securing expertise can be proven both qualitatively and quantitatively. The investment in professional costing software typically pays for itself in the first year through efficiency gains and avoided errors. The time saved when preparing quotations and the greater calculation accuracy lead to directly measurable cost savings.

The long-term preservation of company knowledge is particularly valuable. The software preserves the expertise built up over the years and makes it permanently usable. The value of this knowledge retention usually exceeds the pure acquisition costs of the software many times over. The cost-effectiveness of the investment becomes particularly clear when compared to the potential costs of miscalculations. The reduced dependence on individual employees also reduces personnel risks and the associated potential costs.