As a result of this training, attendees will have a heightened professional level of
evaluating supplier financial status and conducting cost analysis. They will learn how
to use lessons taught in their day to day activities as a prerequisite to effective
negotiating maximize lowest value added price. Participants will do cost analysis using
real life case studies that emphasize the key elements of analyzing proposals.

Day 1
a) Total Cost of Ownership (TCO)
Purpose: To familiarize the student with the various types of costs related to the purchasing
function and to experience financial analysis with in-class simulations.
Topics:
• Definition of Cost Analysis
• Purchase Price: But One Component of Cost
• The Importance of Total Cost of Ownership in SCM
• Three Components of Total Cost
• TCO, Net Present Value Analysis (NPV), Estimated Costs
• Supply Management Action
b) Pricing
Purpose: To help the student better understand the law of supply and demand and the impact
on pricing considerations.
Topics:
• General Economic Considerations
• Price Analysis
• Purchasing Design Work
• Documenting a Price Analysis
• Discounts
2
c) Cost Analysis
Purpose: To introduce and give an overall understanding of financial tools used to calculate
and manage cost.
Topics:
• Cost Analysis
• Sources of Cost Data
• Direct Costs
• Learning Curves
• Application of Learning Curves
• Tooling Costs
• Indirect Costs
• Activity-Based Costing
• Target Costing
• Profit
Day 2
d) Cost Measurements
Purpose: To introduce and give an overall understanding of financial tools used to measure
and report cost.
Topics:
• Standard Cost
• Purchase Price Variance (PPV)
• Cost Savings
• Cost Avoidance
• Cost Containment
e) Financial Measurement Formulas
Purpose: To present various ways to measure the financial status of a supplier.
Topics:
• Return on Assets Employed
• Return on Total Assets
• Net Operation Margins
• Current Ratio
• Quick or Acid Test Ratio
• Gross Margin
• Rate of Return of Sales
• Rate of Return Net Worth
• Earnings per Share
• Debt to Equity
• Debt to Net Full Assets
• Assets Turn Over
• Inventory Turn Over
f) Cost definitions
Purpose: To introduce and gain a better understanding of financial costs and how they
are used.
Topics:
• Total cost
• Standard costs
• Purchase price variance (PPV)
3
• Direct costs
• Indirect costs
• Fixed costs
• Variable costs
• Semi-variable costs
• Relevant vs. Irrelevant costs
• Life cycle costs
• Opportunity cost
• Activity based costing