Finance Principals from a Purchasing Viewpoint

As a result of this training, attendees will have a heightened professional level of evaluating supplier financial status and conducting cost analysis. The 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


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)
? Direct costs
? Indirect costs
? Fixed costs
? Variable costs
? Semi-variable costs
? Relevant vs. Irrelevant costs
? Life cycle costs
? Opportunity cost
? Activity based costing
.