When it comes to controlling factory costs, most executives fix their gaze on the “Direct Materials” used to make the product. But did you know there’s another cost — like an “invisible leak” — quietly eating into the factory’s profit every month: “Indirect Materials & Tooling”?

Picture cloth gloves, face masks, machine lubricant, blades, drill bits, all the way to spare parts. These things don’t look expensive, but when staff draw them at will, hoard them, lose them, or purchasing orders duplicates, by year-end the figure for this line can spike alarmingly!

So how do world-class factories control these “small bits and pieces” without letting the budget run away? The answer is an ERP (Enterprise Resource Planning) system.

Why does the consumables budget run away, out of control?

Before fixing the problem, we have to understand the source of these leaks in factories still running on handwritten records or Excel:

Written in a notebook, impossible to audit afterward: Staff walk up and write their name to draw goods in a book; when stock runs out, more is ordered. No one sits down to check which shift or which employee is drawing supplies abnormally.
Can’t find it, so it’s ordered again: Some spare parts are in the warehouse, but no one knows where they’re stored. When a machine breaks and it’s needed urgently, purchasing has to rush an order at a higher price.
No quota limits (No Limit): Some staff draw safety equipment to stash in their personal lockers, draining warehouse stock faster than planned.

Plug the consumables leak with ERP-based management

Bringing in an ERP isn’t just about accounting — it’s about building “discipline” and “transparency” into issuing across the whole factory. Here’s how an ERP helps keep money in your pocket:

1. Check issuing history by individual (Employee Tracking)

An ERP can tie each issue to an employee ID or a Cost Center (department/shift). When goods are scanned out through the system, a manager can instantly pull a report on how many pairs of gloves Mr. A drew this month. If the draws exceed what’s reasonable, the system shows the figures clearly so they can be questioned and corrected.

2. Set up an approval workflow for high-value items (E-Approval Workflow)

For expensive tools or specialised machine spare parts, the ERP can be configured so that ordinary staff can’t simply walk up and draw them — they must submit a Request through the system, and the chief technician or manager must Approve it via computer or mobile before the warehouse issues the item. This prevents valuable items from going missing 100%.

3. Set automatic minimum reorder points (Min/Max & Reorder Point)

No more fear that a critical spare part will run out and leave a machine idle. The ERP lets you set Min/Max for each type of consumable. When draws reach the defined Reorder Point, the system alerts purchasing to order more immediately, reducing over-hoarding (Overstock).

4. Allocate hidden costs into real production cost (Overhead Allocation)

This is the highlight of using an ERP! The system can take the consumables and maintenance spare parts issued each month and accurately allocate them as “Overhead Cost” added into the cost of each product, so executives see the “true profit” of each order without fooling themselves.

Conclusion: small items, but controlled they become a big sum

Don’t overlook the importance of consumables and machine spare parts, because every baht saved here turns straight into added “net profit” for the factory. Switching from a homespun issuing system to a standardised ERP is a worthwhile long-term investment.

Consumables cost soaring? How to use ERP to control spare-part and tool issuing so nothing goes missing and the budget holds