Symposium Conference Proceedings

Procurement Cost Impact Analysis Tool

Authors: Jane Wu, Jason Zhang, Philip Cheng, Ryan Zheng, Ellen Xu, Celine Chong
Company: IBM Integrated Supply Chain
Date Published: 4/17/2013   Conference: Symposium

Abstract: The growing complexities within today’s supply chain along with different supply chain strategies continue to increase the difficulties for maintaining a smooth end-to-end process in a global environment. Global concern over sustainability is causing companies to put additional emphasis on reducing consumption of resources and optimizing supply chain logistics. Meanwhile, most of companies are facing challenges during the end-to-end procurement process including rising raw material prices, increasing labor costs, and fluctuations exchange rates as well as logistic cost enhancement. It is quite important for company executives to understand the overall cost impact (amount or percentage) which results from these factors. By doing so, more timely purchasing and price strategies can be implemented with their suppliers.

In order to do this end-to-end smarter procurement cost analysis tool to come out the constructive financial result for strategy, we have to link the cost structure of component level, product level and purchase spending split with those variable factors. However, it is still the difficulties for most of procurement companies to have easier approaches and currently they just make the cost impact data based on the inaccurate assessment. In addition, the financial data result can't be regarded as the actual cost impact on the business unit at the company level.

This paper describes a procurement cost analysis tool that performs a comprehensive cost impact analysis by commodity level, procurement level, product level and company level. This tool combines cost structure and raw material cost data systems into enterprise resource planning (ERP) with four finance resource management modules. This tool helps with procurement data cost analysis and builds up strategic analysis as the reference.

Key Words: 

Cost Impact Assessment Tool, purchase strategy, accurate result

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