The purpose of this report is to provide the one making a sourcing decision (buyer) with a means to quickly identify differences and/or inconsistencies in quotes, whether they are quotes from different suppliers, or quotes for different revision levels from the same supplier. It can also provide meaningful insight to the cost drivers for a single quote. Regardless of the purpose, the buyer is encouraged to use these insights to ask the supplier why the numbers are what they are.

A few thoughts regarding Confidentiality…

It is important to keep in mind that all quote data is confidential to the supplier that provided it. As such, we must be careful to not disclose that information to anyone else. It is strongly encouraged that we offer cost performance feedback to each participating supplier, and that feedback must be generic enough so as to not be viewed as breeching this confidentiality. Here are a few good guidelines to consider:

  • Never mention any other supplier by name. Our suppliers do not typically have a need to know their competitors.
  • Avoid using any finite comparative numbers. When making comparisons, use phrases like “somewhat higher”, “significantly more than”, or “20 to 60 percent higher”. Remember, you are merely trying to communicate where, and roughly to what degree, they need to improve.

Report Usage

The Quote Data tab displays the data from each quote in tabular form, enabling the three pivot tables also in the workbook. Note that each row represents a row from the associated quote form, and the sequence of the rows is identical to the sequence on the uploaded quote form.

It is important to be clear about the use of a few key terms in this report. The Total Cost is the sum of multiple Cost Types, some of which may have discrete Cost Elements.

  • The cost type is the section of the quote form that the data comes from.
  • The cost element is the further subdivision of the three cost types that have discrete rows on the quote form: Material, Process, and Purchased.

Analysis is expected to be done in stages. The first stage provides a high-level review of the total quoted cost by cost type. If this high-level review identifies a need to investigate further, a second stage review can then be conducted by each cost element.

Basic Assumptions

  • The subject quotes have been properly completed and uploaded to TCS
  • All quotes in the analysis utilize a consistent currency
  • All quotes in the analysis utilize a consistent unit of measure
  • All processes generate zero scrap (column e on the quote form)
  • All raw materials (steel, paint, consumables) are reported as Raw Material on the quote form

All of these can be verified at a glance in the Quote Data sheet.

Description of the columns in the “Quote Data” sheet

  • Supplier: This is the supplier name associated with the supplier number that submitted the quote in TCS.
  • Quote Date: The date that the quote was uploaded into TCS.
  • Part: This is the part number for the quote as recorded in TCS.
  • Cost Type: This describes which section of the quote form the data came from. Note that this is the same categorizations that are used in the “Summary Data” report in TCS.
  • Cost Element: This field defaults to the Cost Type, but is intended to be overwritten as needed for deeper analysis. See instructions further below.
  • Description: This is the exact text that the supplier entered on the quote form.
  • For each Material row, it is under the heading of “Type/Grade”
  • For each Process row, it is under the heading of “Process Desc.”
  • For each Purchased row, it is under the heading of “Part Description”
  • UOM: This is the relevant unit of measure for each material row. All other rows are blank.
  • Qty In: This is the relevant measure of quantity.
  • For each Material row, it is the input quantity
  • For each Process row, it is the process time in minutes
  • (calculated as 60 ÷ pieces per hour)
  • For each Purchased row, it is the pieces per assembly
  • Utilization: This has unique meaning per cost type.
  • For each Material row, it is the utilization efficiency of each material
  • (output weight ÷ input weight)
  • For each Process row, it is number of people on each process
  • The field is not used for all other cost types
  • Bill Rate: This is the billable rate.
  • For each Material row, it is the cost per unit of measure
  • For each Process row, it is the cost per hour of each process
  • (# of people x the labor cost per person, plus machine burden rate)
  • For each Purchased row, it is the cost per piece
  • Scrap Rate: For material rows, this is the credit per unit of measure for recycled scrap. For processes this is the percent of parts that are expected to be scrapped, sometimes referred to as the fallout rate.
  • Reported Cost: Static cost of each cost element as it is displayed in the quote form.
  • Calculated Cost: Dynamic cost of each row as it is calculated from the data in the Quote Data table. This is useful for calculating "what-if" scenarios with altered input values. These are summed in the Cost Comparison pivot table for each supplier, quote date, and part number combination.

Stage 1 Review – Cost Type

Upon download the first action would be to review the three pivot tables by cost type. This is the default when downloaded. If this high-level review identifies any anomalies, then the user can proceed to the Stage 2 Review.

Cost Comparison: This pivot table shows the cost breakdown by cost type, and in its default form it is essentially the same as the Summary Data report in TCS. It provides an easy side-by-side comparison of the cost types from each downloaded quote. Note that zero values in the material, process, and purchased cost types indicate that the supplier did not include any cost details. In this case, the user must use legacy quote analysis tools and processes.

Rate Comparison: This pivot table shows the average rate for each cost type. The material line shows the average cost per UOM for all materials, the process line shows the average cost per hour for all processes, and the purchased line shows the average cost per part for all purchased subcomponents. Note that these are simple averages of the values from each row of the quote form. They are not weighted averages considering the various quantities of each material or process. As such, they are “quick-n-dirty” numbers that can be used to identify outliers worthy of further investigation. This table also shows the supplier’s Acquisition Overhead rate and the SGA&P rate.

Quantity Comparison: This pivot table shows the total quantity for each cost type. The material line shows the total input quantity for all material, the process line shows the total processing time for all processes (in minutes), and the purchased line shows the total quantity of purchased subcomponents.

Stage 2 Review – Cost Element

If desired, the user can make easy comparisons across quotes for similar materials, processes, and purchased subcomponents. This second level of review will not enhance the understanding of any of the other cost types.

To enable this level of analysis, the user must first categorize each row using the cost element column in the quote data table. Cost element categorizations for material may be as simple as the material itself (copper, aluminum, steel), the material form (2” round bar, ½” tubing), the specific material chemistry (A13C, AR400), or any combination of these as fits the need. Process cost element categorizations will typically be the common process name (cut, form, weld, machine, paint). Similar logic can be used for purchased components. The sole purpose of this is to group like-items onto a common line in the pivot tables for quick, direct comparisons.

After the cost element column in the quote data table is re-populated with more detailed categorizations, the pivot tables must be refreshed to show the updates. Once complete, a new level of cost awareness can be achieved.

Cost Comparison: This pivot table now shows the subtotaled cost by each material, process, and purchased component. In this form, it is immediately apparent when a supplier completely misses a part or process. Note that the sum of all the cost elements is shown on row5, displaying the total quoted cost.

This table readily quantifies the cost contribution of each cost element. For instance, this may show that machining is 45% of the total part cost. With this understanding, there may be sufficient motivation to reconsider the design requirements that are driving that cost.

Rate Comparison: This pivot table now shows the average rate for each cost element. The material line shows the average cost per UOM for each specific material (i.e. average cost per pound for A13C steel), the process line shows the average cost per hour for each process (i.e. cost per hour for welding), and the purchased line shows the average cost per part for each purchased subcomponent. Note once again that, if a particular cost element has multiple rows of data, these are non-weighted averages. For example, if there are two machining process for one part number, this report shows the average of those two rates irrespective of the amount of machining each may contribute.

This comparison can be used to identify inconsistent assumptions about the material requirements (buying the more expensive DTW 716 steel instead of the more generic A13C). It is also useful to provide useful feedback to the suppliers, identifying where they can best focus their attention for cost improvement. This practice, when used consistently over time, should lead to a more efficient supply base overall.

Quantity Comparison: This pivot table now shows the total quantity for each material, process, and purchased component. The input weight of each specific material can be compared across all suppliers, as can the time for each process. For what it’s worth, this also shows the quantity of each purchased subcomponent.

Stage 3 – What-If Calculations

This report format also provides the easy ability to quickly re-calculate a quote with one or more input values changed. For example, if a buyer knows that a supplier has offered to reduce their material cost per pound by 3 cents, the buyer can quickly calculate what the resultant part price would be.

To do this, the user can simply copy the entire set of rows for the subject quote in the Quote Data table, and then paste those rows at the bottom of the same table. For only those copied rows, modify the supplier name to be unique (i.e. append an “X” to the beginning of the name). The user can then modify the quantities, rates, and utilizations as the situation warrants. The “what-if” scenario will be displayed in the three pivot tables once they are refreshed.