Cost Ratio Calculator for Vendor Rating
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Quick Guide to Use Vendor Rating Cost Ratio Calculator
- You can select your currency using the dropdown button.
- Enter the price per unit quoted by the vendor. Input all costs associated with quality control, delivery, and other relevant expenses.
- Enter the total value of the order in the ‘total order value’ field.
- Click the ‘Calculate‘ button and the calculator will display the ‘Cost Ratio‘ and the ‘Net Adjusted Unit Price‘ in your selected currency.
- To clear all fields and start a new calculation, click the ‘Reset‘ button.
Formula Used For the Vendor Rating Cost Ratio Calculator
- Cost Ratio factor=(Individual Cost / Total Value of Purchase) X 100%
- Calculate Total Cost Ratio by summing all individual cost ratios: Total Cost Ratio=∑Cost Ratio factor
- Net Adjusted Unit Price=Quoted Unit Price X {1+ (Total Cost Ratio/100)}
Details About Vendor Rating Cost Ratio Calculator
Quoted Unit Price: It is the quoted price per unit provided by the supplier. It reflects the price set by the vendor for individual units of the product.
Quality Costs: These are the internal expenses associated with maintaining or ensuring product quality. These could encompass expenses related to quality control, testing, or adherence to quality standards.
Delivery Costs: These are the internal expenses linked directly to the delivery or shipment of the purchased goods or services. It includes costs related to logistics, transportation, or shipping arrangements.
Other Relevant Costs: Here, users include any additional internal operating expenses relevant to the purchase. These costs might cover various factors like handling, storage, or any other incidental expenses related to the procurement process.
Total Order Value: It is the total value of the purchase order, considering the overall cost incurred for the entire order placed with the supplier.
Cost Ratio (%): Displays the calculated cost ratio as a percentage, obtained by summing quality costs, delivery costs, and other relevant costs divided by the total order value.
Net Adjusted Unit Price: This shows the adjusted unit price considering the cost ratio.
How to Declare Which Vendor is Preferable?
- Compare the Net Adjusted Unit Price of each vendor.
- This price includes not only the quoted unit price but also adjusts for additional quality, delivery, and other relevant costs.
- The vendor with the lowest ‘Net Adjusted Unit Price’ is typically the most cost-effective option.
- This figure shows which vendor offers the best value when all factors are considered.
What is the Cost Ratio Method in Vendor Rating?
The cost ratio method in vendor rating involves assessing the total cost of a purchase, inclusive of the selling price and the buyer’s internal operating costs tied to quality, delivery, and service aspects.
These internal operating costs are converted into cost ratios, representing the percentage of the total purchase value. The cumulative cost ratio is then used to adjust the supplier’s quoted unit price, resulting in the net adjusted cost. In this method, the supplier with the lowest net adjusted cost is regarded as the most preferable supplier.
Who Can Use Vendor Rating Cost Ratio Calculator?
- Procurement Managers: For vendor performance evaluation and decision-making.
- Supply Chain Analysts: To optimize vendor selection and supply chain efficiency.
- Business Owners: Seeking cost-effective and reliable vendors.
- Financial Analysts: Useful for analyzing cost management and operational efficiency.
Industries That Can Use Vendor Rating Cost Ratio Calculator
- Manufacturing: Assessing component/material suppliers.
- Retail: Evaluating merchandise suppliers.
- Services: Analyzing service providers like IT support, consulting firms, etc.
Benefits of Using Vendor Rating Cost Ratio Calculator
- Vendor Evaluation: Allows for a systematic assessment of vendor performance.
- Cost Efficiency: Helps in identifying cost-effective vendors.
- Decision Support: Assists in making informed decisions regarding vendor selection and relationships.
Where is This Method Useful?
- Vendor Management: Facilitates maintaining effective relationships with vendors.
- Cost Optimization: Identifies areas for cost reduction and efficiency improvement.
- Quality Control: Helps in ensuring quality by assessing cost-effectiveness.
FAQs
How often should the cost ratio be calculated?
It depends on the frequency of transactions and the criticality of cost control.
Can this method be used for multiple vendors simultaneously?
Yes, it can evaluate various vendors concurrently for comparative analysis.
Conclusion
the Vendor Rating Cost Ratio Calculator streamlines vendor assessment, enabling businesses to make informed decisions for optimal efficiency.
This tool facilitates strategic vendor management, fostering improved collaborations and favorable financial outcomes.
