1. Using Procurement
  2. Respond to Cost Factors

Respond to Cost Factors

When creating a new negotiation, a category manager can add cost factors to any line in the negotiation. Cost factors identify additional costs associated with a line which must be negotiated in addition to the line price.

When you respond to a negotiation that includes cost factors, you can view these specific line details (if allowed by the buyer) and enter the additional information requested.

You can define three types of cost factors:

  • Fixed amount: A fixed amount can be specified for the entire negotiation quantity.

  • Per unit: Charges are applicable per unit of the line item.

  • Percentage of line price: Charges are applicable as a percentage of entered line price for the line item.

Your final response price for the line is calculated by adding all the cost factors for the line per unit.

When you review the cost factors for the negotiation line, consider how each is calculated as you prepare your response. The negotiation creator may have also displayed target values for some of the cost factors.

The following scenario shows how Vijay Singh responds to the cost factors on a negotiation line. Vijay works for an import company with business in Asia and South America.

Respond to Cost Factors

  1. Vijay accesses the negotiation and navigates to the Lines tab. He sees an icon in the Required Details column for the line he is responding to. He clicks the icon and accesses the Lines: Edit Line page.

  2. On the Lines: Edit Line page, he sees that there are three cost factors associated with the line. He also notices that there is a target of $100 for the shipping charge.

    Cost Factor

    Pricing Basis

    Shipping

    Fixed amount per line

    Hazardous material charge

    Amount per unit

    Insurance

    Percentage of line price

  3. Vijay enters $200 as the unit price offered, $125 for the Shipping cost factor, $50 for hazardous materials charge, and 20 for Insurance. Since Vijay is offering to sell 100 units, this results in a response price of $6251.65 for the line: (200*100 + 125 + 50*100 + 200*20/100)100

  4. Once he has entered the values for the cost factors, Vijay continues responding to the negotiation.