𝗪𝗵𝗮𝘁’𝘀 𝗖𝗼𝘀𝘁 𝗕𝗲𝗻𝗲𝗳𝗶𝘁 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀?

Procurement, has an exciting role to play in Cost Benefit Analysis.

This is a systematic technique used to review and evaluate the benefits of costs of a given Project for two purposes:

(𝗮) 𝗗𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗲 𝘁𝗵𝗲 𝗳𝗲𝗮𝘀𝗶𝗯𝗶𝗹𝗶𝘁𝘆 𝗼𝗳 𝘁𝗵𝗲 𝗶𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁.

(𝗯) 𝗘𝘅𝗽𝗹𝗼𝗿𝗲 𝗮𝗹𝘁𝗲𝗿𝗻𝗮𝘁𝗶𝘃𝗲 𝗼𝗽𝘁𝗶𝗼𝗻𝘀 𝘁𝗼 𝗮𝗰𝗵𝗶𝗲𝘃𝗲 𝘁𝗵𝗲 𝘀𝗮𝗺𝗲 𝗴𝗼𝗮𝗹.

The calculation involves comparing the total expected cost of each option against the total expected benefits to determine whether the benefits outweigh the costs.

The Cost Benefit Analysis can be executed either using the following techniques detailed in the Carousel.

(𝗮) 𝗕𝗲𝗻𝗲𝗳𝗶𝘁-𝗖𝗼𝘀𝘁-𝗥𝗮𝘁𝗶𝗼(𝗕𝗖𝗥)
(𝗯) 𝗡𝗲𝘁 𝗣𝗿𝗲𝘀𝗲𝗻𝘁 𝗩𝗮𝗹𝘂𝗲(𝗡𝗣𝗩)

𝗪𝗵𝘆 𝗶𝘀 𝗶𝘁 𝗶𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁?

-Determine the feasibility of Project
-To compare different Projects
-Evaluating Opportunity Cost
-Performing Sensitivity Analysis for various real life scenarios

These techniques come handy in Capex Procurement as we evaluate different options of equipment to be procured by doing Cost Benefit Analysis of alternative equipment’s.

What techniques do you use to select the best Project or the best Capex Investment?

Do you also weigh the time value of Profits?

I can help you with comparison of costs and benefits of a Project based on my experiences.

Share your inputs in comments.😊

✳ Hey there, it’s Onkar Gill
🔺 A Supply Chain Expert!
✅ Let’s work together to take the procurement game to the next level!”
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