The INDUSTRIOS Purchase Price Analysis Feature Helps Keep an Eye on Costs
In the world of manufacturing, everything starts with raw material; how much do we need, when do we need it, and how much should it cost. In this article, we focus on the last part of that question – cost. The Purchase Price Analysis (PPA) feature in Industrios gathers purchasing data for a defined period and makes comparisons for the user to analyze. In this article we focus on how to use this tool to assist in the buying process.
The pandemic has wreaked havoc on the supply chain. Shortages have forced manufacturers to pay higher prices, and many have had to source out new suppliers. Providing information to buyers can help ensure that they are making the best decisions they can. Industrios allows inventory to be valued using 3 different methodologies: First-in First out (FIFO), Average and Standard cost. We will focus on how to utilize Standard Cost, even if it is not how you value your inventory. If you are using FIFO or Average cost, you can still leverage Standard cost as a “target” to compare against during the purchase cycle and you can use PPA to help you establish the cost to use.
When you calculate the PPA you get to choose what period of purchase history you want to include in the analysis. You should take into consideration the period of history that would be most reflective of the purchases to be made moving forward, particularly if purchasing is very cyclic. In the example below, the previous 12-month period would be included in the analysis.
When you are looking to establish a new standard cost, PPA allows you to choose what you would like your starting point to be as well as which values you would like to compare. In addition, you can set tolerance ranges that will allow you to filter the results and concentrate on outliers.
Other options are available to filter on information such as specific item ranges and locations as well as many other criteria.
Once the snapshot has been generated on the workbench, details are ready for review and analysis.
Included in the analysis are several cost related data points to assist in establishing a new standard cost. These data points are included regardless of whether they are chosen specifically for comparison. It is also possible to drill to the Inventory Master File or the Inventory Activity Query directly from the Workbench.
The Revised Standard Cost column can be directly edited to enter a specific value. When you have settled on a Standard Cost value to use you can update this value for items that you have flagged as ready. Once the posting is complete, your target cost is now available for use.
