SCLCI’s Back-to-Basics.
The series breaks down similar concepts in quick comparisons and makes a clarification simple to understand. Follow topics into greater detail within SCLCI Early Edition’s case studies and articles.
March 03, 2024 Authored by Hilary J. Schmitt, SCMP S&Co., Supply Chain Logistics Consulting SUBSCRIBE HERE.
Procurement Costs:
Purchasing Cost + Contract Value – Cost Savings
The definitive reason that supply chain management procurement is a strategic function within any business is that;
- Cost savings from proper execution of procurement can be quantified, and
- Influence of sourcing activities on product development and service delivery are substantial, and
- Business unit leaders can align with corporate strategy through procurement.
Download the Free Infographic
Cost of Procurement
Purchasing Costs
- supply chain management business operations
- procurement services,
- tendering,
- order management systems,
- authorization, contract formation,
- compliance, and
- vendor information management
- documentation and records management
Post Contract Award, Account Management Costs
Account Management Costs
- debt financing costs,
- insurance costs,
- litigation costs,
- contract management costs,
- dispute handling costs,
- non negotiated or out-of-scope item processing costs
- non compliant documentation and rework
Cost of the Product or Service
Consideration
- Contract Award Amount
- Lifetime Contract Value
- Total Cost of Ownership (TCO)
Cost Savings
Quantitative amount of realized reduction in spending and processing expenses
References:
Quantitative amount of realized reduction in spending and processing expenses
S&Co., Supply Chain Logistics Consulting Inc. Infographic https://www.buymeacoffee.com/sclci/e/226304
Related Reading: SCLCI·MAR 2 2024
SCLCI’s Back-to-Basics: 5 Minute Explanation of “Acquisition Costs”
Back-To-Basics, Supply Chain Management
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