Design: Cost Calculation

Building the Cost Formula

This screen allows you to build a cost calculation that’ll be used to evaluate supplier bids and proposals. Sourcing Optimizer displays all number and currency type attributes and RFI questions in the ‘Attributes’ section.

Create a cost calculation by clicking on the required attributes, operators (+, -, /, *, >, <, etc.), and functions (IF, MIN, MAX, AVERAGE, etc.). Purchaser-entered special attributes such as Reserve Price, Historical Cost and Feedback Target are also available for selection.

As you click, the formula bar (see Figure 1) will display the developing formula.

Note that instead of clicking on the buttons, you're also able to:

  • Type attribute, operator, and function names directly into the formula bar or
  • Copy-and-paste from another source such as Excel into the formula bar, as long as the names and functions exist in Sourcing Optimizer

Constants are supported (e.g., multiply an attribute value by 2). Simply enter the value in the formula bar.

Figure 1: Formula Bar
By default, the formula result will be in the Currency format. If needed, it can be changed to the Number format by clicking 'Display Type' at the top right and selecting 'Number'.

Testing the Cost Formula

If the formula you've entered is valid (represented by a green equal bar sign as shown in Figure 1), then you'll see a testing section at the bottom of the screen. Verify the accuracy of the cost formula by entering a sample value for each attribute that’s used in the formula, and clicking ‘Run Test Calculation’.

The test result appears to the right of the values.

Figure 2: Formula Testing Section

Secondary Cost Formulas

You also have the option to evaluate scenarios based on more than one cost formula. For example, you may have one formula that's based on one-year pricing and another formula that's based on two-year pricing.

Follow these steps to create a secondary cost formula:

  • Click on the 'Settings' (gears) icon above the formula bar
  • Select 'Manage secondary calculations'
  • Click 'Add a formula'
  • Give the formula a name
  • Click 'Edit formula' to enter the applicable cost formula (Figure 3)
Figure 3: Secondary Calculations
To delete a secondary cost formula from the 'Secondary Calculations' screen, click the down-arrow icon to the right of the 'Edit formula' button for the applicable formula and then choose 'Delete formula'. 

Once the secondary cost calculations have been created, utilize them in a scenario by clicking the down arrow button to the far right of the scenario, and selecting 'Settings'. Then, select the formula from the 'Cost Function' drop-down field (Figure 4).

Figure 4: Select Cost Function
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