Reduce Manufacturing Costs: Cost Analysis & Insights with Odoo MRP

As global supply chains shift and raw material prices fluctuate, manufacturing businesses in 2025 face new challenges in managing operations efficiently. For companies dealing with increasing production costs, having accurate cost visibility is critical. This is where a powerful ERP like Odoo 18 comes into play. In this blog, we’ll explore an in-depth Odoo manufacturing cost analysis, covering material, labor, and overhead breakdowns, how to run costing reports, and how to leverage standard vs. actual costing to optimize margins and improve decision-making.

If you’re a business owner or decision-maker looking to control your bottom line, this guide is tailored for you.

Why Manufacturing Cost Analysis Matters More Than Ever in 2025

The road ahead requires laser-focused cost control. Rising energy prices, labor shortages, and economic volatility are pushing manufacturers to seek smarter tools for planning and analysis. Odoo 18, released in late 2024, introduced major improvements in the Manufacturing Resource Planning (MRP) module, making it easier than ever to gain actionable insights and reduce manufacturing costs without compromising quality.

With Odoo MRP, organizations can run real-time manufacturing cost analysis with precision, allowing them to adjust operations, modify pricing strategies, and increase profitability through effective resource utilization.

Understanding the Core Components of Manufacturing Costs

Before diving into Odoo 18’s features, let’s break down the three key types of manufacturing costs:

1. Material Costs

These are the raw materials and components needed to manufacture your products. Whether you’re sourcing locally or globally, material costs can account for 50% or more of total production expenses, making tracking essential. Odoo allows complete transparency in component-level costing, including price variations and supplier terms.

2. Labor Costs

Labor costs include wages, benefits, and allowances tied to production workloads. With Odoo’s integrated Timesheets and Work Orders features, businesses can assign hours to specific manufacturing jobs and associate labor rates to get real-time labor costing insights.

3. Overhead Costs

Indirect costs such as utilities, maintenance, depreciation, and factory administration fall under overhead. While often harder to attribute per unit, Odoo 18 improves how overhead allocation is handled within BoMs (Bill of Materials), allowing more accurate per-unit costing.

How to Perform Costing Analysis in Odoo 18 MRP

Odoo’s MRP module in version 18 comes with upgraded analytics features and a more intuitive UI. Business owners can now generate cost analysis reports with just a few clicks, and most importantly, visualize cost variances across work orders, products, and time periods.

Here’s how to run a costing report in Odoo 18:

Step 1: Configure Product Costing

Each product can be set to use Standard Cost or Real (Actual) Costing. You can define this under:

Inventory → Products → Product Form → Costing Method

Set cost parameters per product depending on your costing strategy.

Step 2: Set Up Your Bill of Materials with Cost Details

While creating or editing a BoM:
• Add materials along with their unit costs (Odoo can automatically fetch prices from suppliers).
• Allocate routing steps and attach work center operations (Odoo will compute labor costs from these).
• Define overhead allocations, either as fixed costs or based on duration/rate/hour formulas.

Step 3: Run Manufacturing Cost Reports

Navigate to:

Manufacturing → Reporting → Cost Analysis

From here, you can:
• Filter by product, work order, or date
• Compare Standard Cost vs Actual Cost
• Identify where cost overruns are happening
• Use Pivot View to export data to Excel or Google Sheets for deeper analysis

Standard vs. Actual Costing in Odoo: What’s Right for You?

One of Odoo 18’s biggest strengths is in standard vs actual costing comparison. Both methods serve different but complementary purposes.

Standard Costing

Standard costing uses estimated costs defined in advance. It’s ideal for:
• Planning and budgeting
• Price setting
• Performance comparisons

With standard costing, any difference between the expected and actual costs becomes a variance, which can be favorable or unfavorable.

Actual (Real) Costing

Actual costing tracks real-time data including market fluctuations, waste, or shortages. It’s ideal for:
• High-variability production environments
• Businesses with frequent BOM changes
• Operations with frequent supplier cost variation

Pro Tip for 2025: Many manufacturers are now using a hybrid method. With Odoo 18, you can use standard costing for baseline planning and switch to actual costing for monthly or quarterly reviews. This dual approach helps spot trends early and reduce cost leakage.

New in Odoo 18: Enhanced Cost Forecasting & AI Insights

Odoo’s 2025 roadmap has leaned heavily into AI-powered insights. The latest version introduces smart alerts and forecasting features. For instance:

• Automated Cost Alerts: Receive alerts when material or labor costs increase beyond predefined thresholds.

• Predictive Costing: The AI engine considers historical usage, supplier trends, and seasonal data to predict future costs per product batch.

Odoo 18’s predictive analytics module is integrated directly within the MRP dashboard, allowing decision-makers to take preemptive action.

Real-World Example: Reducing Costs with Odoo

One of our mid-sized manufacturing clients implemented Odoo 18 in Q1 2025. By using detailed Odoo manufacturing cost analysis, they identified:
• A 7% cost increase in a key supplier’s materials over 3 months
• An inefficiency in machine operation causing excess labor hours
• Product lines where actual cost per unit was 12% higher than standard

By adjusting supplier negotiations and automating certain routing steps, they reduced unit costs by 9% within the first 6 months alone.

Best Practices for Using Odoo to Reduce Manufacturing Costs

To maximize your cost-saving initiatives using Odoo MRP in 2025, follow these tips:
• Set up accurate BoMs and Routings: The more complete your data, the better the insights you’ll get.
• Review costing reports monthly: Use standard vs actual comparison trends to inform decisions.
• Integrate inventory with MRP: Ensure Odoo’s inventory app is synced to reduce stock-outs and overproduction.
• Train supervisors on cost tracking: Empower your team with knowledge to identify inefficiencies.
• Enable smart alerts: Catch anomalies before they impact profitability.

Final Thoughts: Moving Forward With Smarter Manufacturing

In a competitive manufacturing landscape, staying ahead means embracing deeper analytics and cost optimization. With the enhanced capabilities of Odoo 18’s MRP and cost management tools, businesses no longer have to rely on manual spreadsheets or guesswork.

An effective Odoo manufacturing cost analysis gives you end-to-end visibility on where your money goes – and where you can cut waste.

If you’re ready to gain better control over your manufacturing operations and reduce costs, our Odoo experts are here to help you implement tailored solutions that fit your business.

Connect with us today to discover how Odoo 18 can reshape your manufacturing future.