Purchase Costing

Cost Calculation

It is common that the cost of purchased raw material and components makes up around 75% of the direct cost of a product. The Latest Purchase Price (120), Average Purchase Price (130), and Estimated Material Cost (110)) purchase cost elements have the disadvantages that they are either based on history or have to be manually updated, and also they neither take lot size nor effective date into consideration.

Planned Purchase Price and Purchase Additional Cost Amount

The Planned Purchase Price (140) and Purchase Additional Cost Amount (160) cost elements use the effective date and the standard lot size when fetching the price. The system uses the same logic as when fetching a price for a purchase order line. The logic works as follows for elements 140 and 160:

  1. Collect and calculate planned purchase costs and save information in the Planned Purchase Costs window.
  2. If supplier splits exists, fetch a weighted average price and a weighted additional cost amount.
  3. If primary supplier exists, fetch price and additional cost amount
  4. If not, the Estimated Material Cost will be used as the Planned Purchase Price.

Purch Charge on Supplier for Part

The charges can be entered direct on a purchase order or they can be transferred from a tab in the Supplier window or from a tab in the Supplier for Purchase Part window. The value can refer to three different cases, as follows.

  1. A) NULL, meaning that the whole cost should be taken by only one PO line if such is specified. B) If no PO line is specified the total charged amount should be considered as a cost without connection to the parts on the PO.
  2. Per line, meaning that each line will take an evenly distributed amount of the charged cost, compared to the total number of PO lines.
  3. Per amount, meaning that each line will take a charge cost proportional to the total purchase value per line compared to the total order value.

The existing functionality for calculating latest- and average purchase price considers charges entered on purchase orders. It considers case 1A, 2 and 3.

The Purch Charge on Supplier for Part element will fetch planned charges from the Supplier for Purchase Part window. It will only fetch charges where the Distribute Charge By column has a NULL value. When creating PO lines for parts that have this setup, the system will automatically create case 1A for the user.

The logic works as follows for element Purch Charge on Supplier for Part 170:

  1. Collect and calculate planned purchase costs and save information in the Planned Purchase Costs window
  2. If supplier splits exists, fetch a weighted average charge
  3. If primary supplier exists, fetch the specific charge
  4. If not, return zero.

Inter-Site Material Cost

The cost element Inter-Site Material Cost (510) uses the Multi-Site Costing Rule setup defined in Basic Data for Costing. It will only work for multi site planned parts, defined in the Supplier for Purchase Part window.

  1. Collect and calculate inter-site material cost using Multi-Site Costing Rule and save information in the Planned Purchase Costs window
  2. If supplier splits exists; fetch a weighted inter-site material cost.
  3. If primary supplier exists; fetch inter-site material cost.
  4. If not, return zero.

Sensitivity Analysis

When the user calculates part cost object(s), the system also stores additional information about the planned purchase cost (for example supplier number and currency code) in the cost module. The user can start a background job that simulates of how the cost of an end product or a subassembly will change if a certain currency changes or if a certain supplier adjusts their prices. The job is almost a copy of the normal Cost Rollup logic, but it loops through the logic 11 times for a specific supplier/or specific currency code. It simulates price change variation for a supplier/exchange rate variation of a specific currency in the interval -50%, -40% … 40%, 50%.