Create Cost Factors

Cost factors identify charges associated with a negotiation line in addition to price. For example, these could include charges for shipping and handling, retooling, or import duties.

Cost factors are calculated in one of three ways: fixed amount per line, fixed amount per unit of line, and percentage of line price. You can use these pricing bases to reflect the nature of the extra cost. The table shows a possible example cost factor for each type.

Cost Factor	Pricing Basis
Shipping	Fixed amount per line
Hazardous materials charge	Flat amount per unit
Import tax	Percentage of line price

Vision Corporation is expanding into a new branch of its items and services. Negotiations dealing with this new area will need to negotiate new transportation-related costs with suppliers, specifically with the new Chicago office. The procurement application administrator is going to define several new cost factors. Once the cost factors are defined and enabled, they become available for buyers to use individually or as members of a cost factor list.

Cost Factors

1. In Navigator, go to the Setup and Maintenance work area.

2. In the Setup and Maintenance work area, use the Manage Cost Factors task:

   Offering: Procurement

   Functional Area: Sourcing

   Task: Manage Cost Factors

3. On the Manage Cost Factors page, the category manager reviews the existing cost factors to ensure there isn't already a cost factor that would be appropriate for the list. Not seeing one, she clicks the icon to add a new cost factor.

4. When the new line appears, she enters Shipping as the name, General shipping charge as the description, and enters CHI_SHIPas the unique code. She selects Fixed-amount for the pricing basis lets the status default to active.

5. She clicks the plus icon to add additional rows and enter the information for Hazard materials charge and Import tax cost factors.

6. When finished, she clicks Save to save the new definitions.