Hi! We have some parts that are manufactured, but that in some occasions we will purchase from overseas, to get a lower price. Our manufacturing std cost is manually captured for the part, and we have a customization that shows it in Quote entry, so sales team can calculate profitability for that quote. However, for capturing the cost of overseas procurement, the practice has been to create a new part and capture the std cost of it manually as well.
What is the best practice, to create 2 separate parts one for locally manufactured and one for purchased overseas or to have same part and maybe use supplier price list for this?
Has anyone encountered a similar scenario?
If the overseas purchased part has that same fit, form, and function as the locally manufactured, it should have the same part number. Best practice I see across many companies is to have the usual process be the standard and the less often method generate a variance.
This gives you good data for knowing when costs are higher or lower so you can try to drive your process to more of the lower cost, or at least see why you have differences, plus you can post to the appropriate GL accounts so the appropriate managers (purchasing, operations, etc.) see the variances that pertain to them.
Also curious why a customization is being used to show profitability on the quote? In Quote/Line/Worksheet, profitability is shown, along with breakdown between material, labor, subcontract, and misc. All standard functionality.
Thanks Jeff for the insight!
It’s a great question. I guess it’s the solution that was found back when it was implemented, since our company handles a mix of Engineer-to-order projects, dropshipments, and “retail”. So a Quote could have 2 stock items, and a third line that is a very complex job with it’s own Method of manufacturing.
Sales has a baseline % of what a quote should have as profit, so they need to see all the costs per line for both manufactured, stock and even purchased parts. Then they play with the unit price per line to achieve the quote’s overall desired profit, if that makes sense.
I wish there was an inbuilt functionality to see costs per quote line for stock and RFQ’d parts that need purchasing.
Something that has given the company a big headache is how to calculate freight costs, as they would also have a 4th line for freight charges for example, but no way to input costs to calculate the overall profit for the quoted project.
Ahh… makes sense. My head’s been in the MTO world recently (BPM to capture the worksheet temp values) so I wasn’t thinking about purchased or stock parts. Can definitely see it being useful for sales folks.