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Material cost and pricing

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Superhero (Customer)
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Hello All, 

I am currently looking for a way in IFS to quickly understand the impact of material cost changes, and pricing actions that should take place. 

Currently, we change our material pricing quarterly. There is significant interdependence between our material cost and the pricing of our product. It seems that within IFS, we are looking in the rear view mirror, as we do not know the impact of the changes to material cost until we have made them. At times we are finding that our cost to manufacture the product exceeds the price we are selling to our customers for.  

I’ve reviewed a few areas in IFS, but I have not found a module that allows you to evaluate the cost impact of a material price change. Any guidance would be greatly appreciated!

Best answer by ShawnBerk

We only do our costing updates annually, but I think the same process we use could be applicable for you.

We have a separate cost set, cost set 7 that is setup for loading in new estimated costs based on the Last Purchase Price or new Estimate or whatever criteria you use for setting new costs.  We then set this cost set to calculate nightly as changes are made during the costing review process.  We then use a combination of extracts for the large dataset and the Part Cost Variance overview for targeted reviews that allow us to see the effect of changes to labor rates, material cost updates, overhead, or the combination of all three.

There isn’t a module per se to do this as a direct function, but can be accomplished with a bit of planning and prescribed process to execute the update and then someone to review the data as a comparison.

In your case, you would need to baseline your minimum margin you want to maintain in addition and do a comparison to your current price to see whether you need to also implement a price increase to maintain the margin.  Certainly you would want a flag on your report if your margin is running negative.

 

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Superhero (Customer)
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  • ShawnBerk
  • Superhero (Customer)
  • 1482 replies
  • Answer
  • April 13, 2021

We only do our costing updates annually, but I think the same process we use could be applicable for you.

We have a separate cost set, cost set 7 that is setup for loading in new estimated costs based on the Last Purchase Price or new Estimate or whatever criteria you use for setting new costs.  We then set this cost set to calculate nightly as changes are made during the costing review process.  We then use a combination of extracts for the large dataset and the Part Cost Variance overview for targeted reviews that allow us to see the effect of changes to labor rates, material cost updates, overhead, or the combination of all three.

There isn’t a module per se to do this as a direct function, but can be accomplished with a bit of planning and prescribed process to execute the update and then someone to review the data as a comparison.

In your case, you would need to baseline your minimum margin you want to maintain in addition and do a comparison to your current price to see whether you need to also implement a price increase to maintain the margin.  Certainly you would want a flag on your report if your margin is running negative.

 

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    Adam Polese
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C
Superhero (Customer)
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  • cjohnson
  • Author
  • Superhero (Customer)
  • 223 replies
  • April 13, 2021

Thank you for the suggestion @ShawnBerk we are going to try that in our test environment. As you stated, I believe it will work.  

M
Hero (Employee)
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  • majose
  • Hero (Employee)
  • 289 replies
  • April 14, 2021

Hi,

When you have explored the possibilities in Costing, you may also want to look at Planned Purchase Cost in Costing. Normally this is calculated in Cost Set 5. When you calculate planned purchase cost in this cost set, system will use purchase pricing logic, similar to when you enter a purchase order line for a part no.

When you calculate the planned purchase cost in Costing system will use:

  • the standard lot size as order qty
  • the effectivity date as price date. This gives a good flexibility of using future price lists from suppliers

Your purchased parts in cost set 5 will by default be connected to Cost Template P-140 (Purchase Cost Template)

with the Cost Buckets:

140 Planned Purchase Price

160 Purchase Additional Cost Amount

170 Purchase Charge on Supplier for Part

Good Luck!

-Mats

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