Identifying the Key Attributes of Total Cost Events

When creating events in SAP Ariba Sourcing, there are many standard event templates available to choose from, and knowing which one to select may not be instinctive for new SAP Ariba Sourcing users. These event templates are available to accommodate different response options, pricing strategies, cost factors, and other advanced settings within the event rules and the line item and lot settings. This course will help identify key terms like total cost, price breakdown, bid transformation, alternative responses, and help event creators know how and when to use certain pricing strategies.

Total Cost is a way of accounting for other costs of a bid, in addition to its simple price. Total cost lets you include all factors you need to compare the total cost of ownership of the goods or services you source.

• Terms can optionally be included in formula (include in cost field)​
• Term values can be provided by the supplier or the project owner
• Supports participant specific initial values when owner provided​
• Non-numeric terms can be mapped to numeric values
• Allows for detailed comparison of suppliers’ bids based on cost components
• Cost Terms usually visible to the supplier in Total Cost

Total cost applies to a broad range of cases, including total system cost, total landed cost, fixed-plus-variable cost, and switching cost.

A key to total cost modeling is the ability to identify terms in an event that have cost impact. SAP Ariba Sourcing provides a graphical formula-builder to add these terms into a total cost formula. During supplier bidding and evaluation, the total costs of all items will be summed (or "rolled-up"). A valuable capability is the ability to view the terms of the total cost formulas being used, allowing side-by-side comparison of supplier responses on a per-term basis.

The system provides a standard set of cost terms, such as price, quantity, shipping terms, discount, etc., but users can create custom terms of their own. Event creators can even include non-monetary terms (such as supplier responses to a question) into the cost formula. Any term used in the total cost that is a non-numeric field type must require that the supplier choose from a list of acceptable values. This is because the cost formula builder will require that all the possible text values are mapped to some numeric value in order to use them to calculate cost. Since cost formulas are set up before the event is published, these possible values must be fixed.

To create a simple total cost formula, use a template that uses total cost and follow the following steps:

Once the terms that impact total cost have been identified, custom item terms that are used to capture this information from suppliers can be created to use in cost formulas.

As each cost term is added, you indicate how it will be used in the total cost. The system automatically builds the total cost formula for you.

Complete all the required fields for the new term, such as Answer Type and Acceptable Values.

Select Fx beside the Total Cost and the formula will appear in a pop-up window. Be sure your term is part of the formula.

During and after the event, event creators can view the extended and total cost of the event for each supplier by viewing the Content tab. The display can be set to Total Cost to see only the total cost of all suppliers, side by side, or set the display to Extended Price to see only the extended price (Price * Quantity) of all suppliers. These views allow you to focus on specific information.

Play the video below to see how to set up Total Cost events.