After evaluating a scenario, the savings or percentage savings figures are unusually high, low, or not as expected.
Sourcing Optimizer provides a means of comparing historical costs from your previous sourcing events with the costs submitted for your current sourcing event. If you configure an historical cost column, you can review any potential savings and percentage savings after you evaluate your scenarios.
The figures displayed in the Savings and Savings % columns in the table on the Scenarios page are calculated based on the event's cost calculation formula versus the historical cost. If these figures are not as expected, there may be an error.
Causes and Solutions
There are a number of causes which can lead to high or inaccurate percentage savings. Understanding how your cost calculation formula is configured and what column your historical cost is assigned to is key to correcting any issues or anomalies that may arise in your calculated savings.
If you have to adjust your cost calculation or your historical cost, you must first pause the event and make your adjustments. Then, validate and resume the event, and re-evaluate your scenarios.
Cause: Comparing annualized costs with unit costs
If your cost calculation is annualized, your historical cost must also be annualized. Similarly, if your cost calculation is based on unit cost, your historical cost must also be based on unit cost.
For example, an annualized cost calculation could be Unit Cost * Volume. If your historical cost is assigned to a column that is just the historical unit cost, the calculated savings will be inaccurate as a result of comparing two disparate calculations.
Solution: Ensure you are comparing similar calculations
Review your cost calculation formula. Is it annualized or is it based on unit cost? Then, review your historical cost. Is it assigned to a column with annualized cost or unit cost?
Update your cost calculation or historical cost column as required.
Cause: Assigning the historical cost to the incorrect column
If after reviewing your cost calculation and historical cost and making any necessary adjustments, you discover that the issue persists, you may have assigned the historical cost to the incorrect column.
Solution: Ensure you assigned the historical cost to the correct column
Check what column the Historical price role is assigned to by navigating to the Roles page. Is it assigned to the correct column? If it is clear that the Historical price role has not been assigned to the correct column, reassign it to the correct column.
If it is not clear that you have the Historical price role assigned to the correct column or you cannot be certain from reviewing the Roles page, inspect the output of the cost calculation and the output of the historical cost.
You can download a Bidding Analysis Report to compare the Historic Price column against other columns in your Bid Sheet. For example, you may have a Total Cost column configured that evaluates the new cost that you are gathering from suppliers. You can compare this Total Cost column with the Historic Price column to assess if values are as expected. If a Total Cost column does not exist, you can leverage other bid sheet columns that you have already configured in the bid sheet design
This side-by-side comparison helps you review the differences and fluctuations between the cost calculation and the historical cost at the lot level and identify whether the correct column is being used to calculate the savings and percentage savings.
If the variation in costs looks significantly high, low, or unexpected, review the column that historical cost is assigned to. You may have chosen the incorrect column or the values in the column may have been entered incorrectly. For example, instead of the unit cost, the values may be for the case cost or pallet cost.
Update your historical cost column as required.