Name: Using Total Cost Events within SAP Ariba Sourcing
Uploaded: 2023-10-19
Duration: 274 s
Description: Learn how to use total cost events in SAP Ariba sourcing to capture true costs of goods or services, including hidden cost components. Understand the benefits of total cost and how to configure cost terms for each supplier.

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<div><div>Learn how to use total cost events in SAP Ariba sourcing to capture true costs of goods or services, including hidden cost components. Understand the benefits of total cost and how to configure cost terms for each supplier.</div></div>

Using Total Cost Events within SAP Ariba Sourcing

This video will provide an overview of how to use total cost templates when creating requests for proposals and auctions within SAP Ariba sourcing. Total cost within SAP Ariba refers to the summation of cost terms that have been added to a line item to capture the true costs of a good or service, accounting for cost components that may not be evident in the price alone. By adding these cost terms to a line item, you can make an apples-to-apples comparison of supplier pricing by capturing additional costs other than just unit or total price. This helps account for dissimilar supplier offers, like transportation and logistics costs, import duties or taxes, or the costs of switching to a new supplier, for example. You can also configure different values for cost components for each supplier using participant-specific values. Cost terms can come in the forms of numeric adders, subtractors, multipliers, or percent discounts. These are options within an include in cost field when setting up line item terms, and are determined by the buyers when creating the event. Then during bidding the suppliers will enter pricing for cost terms. These terms can be set as per unit, which means that the term is applied before the price is multiplied by quantity, or it can be set to all units which applies cost terms after the price is multiplied by the quantity. Unlike price breakdown, these cost terms are not required to create a line item, but are added to account for all associated costs. When using the total cost templates, participants are allowed to edit the cost components and bid on the item price and other cost terms that are attributing to the total cost. The cost components are not hidden from the participants and they all see the same bid to beat. Let's go through a common example of when total cost can be used to account for shipping or import duties. I will have an extended price which the supplier provides in addition to shipping costs and import duties, which are also supplier provided. The total cost formula will summate the terms to give me a total cost, which is the system calculation visible to both the buyer and the supplier. Here I have a reverse auction created with the out of the box reverse auction with total cost template chosen, and I have the content step when creating the event. I want to add a line item to my auction and I will notice that the total cost term has a formula from the template that automatically updated with any adders that I include in my cost. After I have my item name, quantity, unit of measure, and header level information, I can add my new terms for shipping and handling and import duties. When I add new terms, I can choose from the standard list of terms or from the term library, which can be used to store new terms that are created which will be reused over time. In our example, I will select a new term. On the name, I will title it import duties and then ensure that I choose a value for the include and cost field. This is going to add to my company's cost when factored in so I will choose adder. The applied to cost will be a per unit and I will ensure that I have the answer type set to my liking. So I will choose money and then the final field I want to ensure is that the response required field has participant required as I want the suppliers to enter the pricing for this term. Now I am going to do the same thing on a new term for my shipping costs added as the per unit adder with the money type and participant required. Because this is an auction I need to enter in my bidding rules so I will enter the minimum at what bids must be raised at 2% and then protect the lead bid with a buffer of 2% on each side. These bidding rules will not change throughout the auction. Now with my item and two terms added, I will check to see that there is a formula with the total cost that is automatically totaling everything for me. For additional information on the total cost event templates and adding terms to line items, please consult our product documentation.