Name: Adding Cost Components to Total Cost Events in SAP Ariba Guided Sourcing
Uploaded: 2024-12-4
Duration: 268 s
Description: Learn how cost components are added to total cost events in SAP Ariba Guided Sourcing. Understand the impact of terms like adders, multipliers, and discounts on supplier bids and total cost calculations.

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<div><div><div><div>Learn how cost components are added to total cost events in SAP Ariba Guided Sourcing. Understand the impact of terms like adders, multipliers, and discounts on supplier bids and total cost calculations.</div></div></div></div>

Adding Cost Components to Total Cost Events in SAP Ariba Guided Sourcing

This video will see how cost components are added to total cost events in SAP Ariba Guided Sourcing. Cost components are terms that contribute to the total cost of a lot or a line item. Creating sourcing events with total cost calculations allows buyers to add cost components to total cost formulas, enabling them to perform various calculations with the quoted price. New cost components can be added to factor in fixed and variable costs such as transportation, taxes and so on, thereby gaining a holistic view of the total cost involved. During supplier bidding and evaluation, the results of the various item-level total cost formulas are summed or rolled up to arrive at an event grand total with ranks ordered by best unit cost. Seeing the cost components and total cost is a key factor when comparing suppliers. Separating total cost formulas into cost items allows the side-by-side comparison of suppliers' responses on a per-component basis. You can configure different values for cost items for each supplier or participant-specific values. Total cost allows you to perform various arithmetic operations on the quoted price to factor and additional costs. Let's see how terms are added to the total cost formulas, using the different options within the include in cost term setting. Cost terms can be defined as adders, subtractors, multipliers, and percent discounts. Terms added to the total cost as an adder, subtractive, multiplier, or percent discount will appear in the formula calculations. When terms are included in the cost as adders and multipliers, they force suppliers to lower their bids to compete. Adders represent costs associated with working with a supplier and are added to the supplier's bids during the event. They will be driven to lower their prices to help counteract the added costs. Multipliers also represent costs that you incur by working with a supplier. Sales tax is an example of a multiplier. Multipliers cause suppliers' bids to be multiplied by a certain number, so setting it to one does not affect the total. Use decimals if you use multipliers and if you set it to be greater than 1. It acts as a cost and penalizes the supplier. Multipliers can act as a percentage discount if between 1 and 0. Percent discounts and subtractors reward suppliers who are cheap to work with. Percent discounts represent savings gained by working with a supplier. Percent discounts cause suppliers' bids to be reduced by a percentage. Subtractors represent savings you gain by working with a supplier, so a supplier refund is an example of a subtractor. Subtractors are taken off of a supplier's bids during the event. Since you save money by working with these suppliers, they remain competitive even when charging a higher price. Now that we understand how the terms can be included in cost, let's start from the beginning. We will create a guided sourcing single event and choose the RFP template with total cost. This template has the embedded total cost formula function set to include anything that we add to include in cost. We will add a line item to our event, add a new term and change the include in cost field to factor this term into the total cost formula. The initial value is required, so set the initial value field to 0 if creating an adder or subtractor. If creating a multiplier or percentage discount, set the initial value field to 1. We can check the formula includes the new cost components within the formula by hovering over the total cost on the term table. Cost items are costs that automatically contribute to total cost formulas but are not awarded as a separate item. This helps aggregate cost components that are not intended to be awarded, like a total discount or when using product sourcing scenarios. Please consult our product documentation for additional information on cost items within total cost events and their components.