If you were a buyer for an Automobile Company which manufactures Cars and you had a supplier who gives you a quote for tires, how could you determine that the price quoted is fair and reasonable?
✅️𝗗𝗼 𝗮 𝗧𝗼𝘁𝗮𝗹 𝗖𝗼𝘀𝘁 𝗼𝗳 𝗢𝘄𝗻𝗲𝗿𝘀𝗵𝗶𝗽 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀.
The total cost of ownership includes the purchase price of items, and other costs expected to be incurred during the life of the product.
For the tires it could include the purchase price, the transportation costs, the safety stock costs, the ordering and administration costs, the duty and insurance costs and the quality costs.
The total cost of ownership should be compared with multiple suppliers total costs of ownership to determine if it is fair and reasonable.
✅️𝗗𝗼 𝗮 𝗽𝗿𝗶𝗰𝗲 𝗮𝗻𝗮𝗹𝘆𝘀𝗶𝘀 𝗯𝘆 𝗰𝗼𝗺𝗽𝗲𝘁𝗶𝘁𝗶𝘃𝗲𝗹𝘆 𝗯𝗶𝗱𝗱𝗶𝗻𝗴 𝘁𝗵𝗲 𝘁𝗶𝗿𝗲𝘀 𝘁𝗼 𝘀𝗲𝘃𝗲𝗿𝗮𝗹 𝘀𝘂𝗽𝗽𝗹𝗶𝗲𝗿𝘀.
Comparing the quotation prices received from multiples supplier is a way to determine if the price is fair and reasonable
✅️𝗗𝗼 𝗮 𝗰𝗼𝘀𝘁 𝗮𝗻𝗮𝗹𝘆𝘀𝗶𝘀 𝗯𝘆 𝗮𝗻𝗮𝗹𝘆𝗶𝘇𝗶𝗻𝗴 𝗲𝗮𝗰𝗵 𝗶𝗻𝗱𝗶𝘃𝗶𝗱𝘂𝗮𝗹 𝗰𝗼𝘀𝘁 𝗲𝗹𝗲𝗺𝗲𝗻𝘁 𝘁𝗵𝗮𝘁 𝗺𝗮𝗸𝗲𝘀 𝘂𝗽 𝘁𝗵𝗲 𝗳𝗶𝗻𝗮𝗹 𝗽𝗿𝗶𝗰𝗲.
If the price is comparable to the cost analysis you know the price is fair and reasonable.
Price analysis looks purely at the unit price from a vendor.
Price analysis has following basic components:
▶️Analysis of any existing price history
▶️Comparing price to internal projections
▶️Comparing competitive bids from multiple vendors
▶️Using existing catalog or government prices for an item.
▶️Benchmarking with Index
As with price analysis, once a rate has been determined, then a negotiation may be necessary to ensure the best price outcome.
𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝗬𝗼𝘂𝗿 𝗦𝘂𝗽𝗽𝗹𝗶𝗲𝗿’𝘀 𝗖𝗼𝘀𝘁 𝗦𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲 𝗲𝗾𝘂𝗶𝗽𝘀 𝘆𝗼𝘂 𝘄𝗶𝘁𝗵 𝘁𝗵𝗲 𝘁𝗼𝗼𝗹 𝘁𝗼 𝗡𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗲 𝗲𝗳𝗳𝗲𝗰𝘁𝗶𝘃𝗲𝗹𝘆 𝘄𝗶𝘁𝗵 𝘁𝗵𝗲 𝘃𝗲𝗻𝗱𝗼𝗿.
There seems to be a variety of definite other, least frequent price analytical techniques in addition to the regular mentioned here.
However, these are somewhat commonly used since they can only be employed in specific situations.
What other Price Analysis Technique did I miss?
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