How do you calculate an order cost for a typical UK machine builder?

Is it a valid exercise to try to audit the cost of a single purchase order as part of a machine BOM? 

In our experience it is a much more accurate process to look at the transactional costs derived from the purchase of the complete BOM for electrical components, as every order will be different in terms of line items and complexity. This needs to be averaged across the project to give more meaningful results.

The following is an example of real customer data for a project and the time factors derived from an audit of their processes:-

• £18,038 total parts cost
• 14 orders
• 7 suppliers
• 110 lines
• 197 components
• £78 delivery charges
• £20/hour (internal average rate)

If you divide the number of lines to transacted by the number of orders than we get the figure of 7.86 as an average number of lines per order. Time per operation in the supply chain can then be attached as minutes for each process and multiplied by an hourly rate that is an average across all business functions, (we have decided £20 in this case). We then end up with an average cost of £48.45 per order (excluding delivery charges) and a transactional total of £756 for the project.

A very compelling case from the introduction of vendor reduction, web based catalogues and electronic trading!

Brian Benson
Group Packaged Solutions Manager