Issue
After evaluating a scenario, the savings or percentage savings figures are unusually high, low, or not as expected.
Overview
Sourcing Optimizer provides a means of comparing historical costs from your previous sourcing events with the costs submitted in your current sourcing event. If you configure a historical cost column, you can review any potential savings (value and percentage) 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 values in the historical cost column. If these figures are not as expected, there may be an error.
Causes and Solutions
Several factors can lead to inaccurate or unexpectedly high percentage savings. To fix these issues, you need to understand how your cost calculation formula is set up and which column is assigned as your historical cost.
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 1: Comparing annualized costs with unit costs
The method of calculating the historical cost must match the primary cost calculation. If your cost calculation is annualized, your historical cost should 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, if your annualized cost calculation is "Unit Cost * Volume," but your historical cost column only contains historical unit costs, the calculated savings will be inaccurate because you're comparing two different types of calculations.
Solution 1: Ensure you are comparing similar calculations
First, check your cost calculation formula. Is it annualized or based on unit cost? Then, review your historical cost values. Is the historical cost assigned to an annualized cost column or a unit cost column?
If it is discovered that the two calculations are not alike, adjust either the cost calculation or historical cost column as needed.
Cause 2: Assigning the Historic column role 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 2: Ensure you assigned the Historic column role to the correct column
Go to the Roles page and verify which column the Historic column role is assigned to. Is it the correct one? If it's clearly assigned incorrectly, reassign it to the right column.
If it's not obvious from the Roles page, inspect the output of both your cost calculation and your historical cost.
- You can download the Bid Analysis Report to compare the Historic Price column against other columns in your Bid Sheet. For instance, you might have a Total Cost column that evaluates new costs from suppliers. Compare this Total Cost column with the Historic Price column to see if the values are as expected.
- If you don't have a Total Cost column, you can use other configured bid sheet columns.
- This side-by-side comparison helps you see the differences and fluctuations between your cost calculation and historical cost at the lot level. This will help you determine if the correct column is being used to calculate savings.
- If the cost variation appears significantly high, low, or unexpected, you might have selected the wrong column, or the values in the column might have been entered incorrectly (e.g., case cost or pallet cost instead of unit cost).
Update your historical cost column as required.