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You can include the impact of their payment terms via a total cost formula. The supplier can choose the payment term via a question in the event, the options for that question can be mapped to different impact values...say .95, .98, 1.0, 1.03, 1.05 and the impact included in the total cost. Then you can optimize to minimize cost.
Thanks David - that's a great start. As a follow on, could you answer these addtional questions?
- To take account of working capital impact in any sourcing event, it will be necessary to always use the total cost RFP. Correct?
- Am I correct in thinking we can set up the baseline payment terms in each item (expressed in days) and then use a formula based on the numeric value for payment terms selected by a participating supplier in the event?
- Is it possible to separate the working capital impact from the year on year savings impact?
Thanks in advance for your additonal input!