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Tool Cost Decision while Costing

Created by : Satish Yadav, Purchase Manager, Leading Automotive Co.  | 09 15 2010 06:34:59 +0000
Industry : Auto AncillaryFunctional Area : Product Development(Operations)
Keywords : startegic decision during component costing/sourcing
Activity:  211 views;  last activity : 12 14 2010 18:36:25 +0000

In automotive industries if we go through the component cost break ups,we will find that tool cost is very major part of total component cost due to the customization of components.So buyer have two options with him one is ask to supplier to develop the tool &  amortize the cost.Other option is to develop the toll and give the supplier for production.In your opinion which one is best and why?

  
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Amortize the Tool Cost Vs Develop the Tool & provide to supplier fro production.
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I agree with you.... this will cut cost and help in better production...  
By Surabhi Sinha, Project Manager, Ispat Inds  09 15 2010 08:59:25 +0000
 
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Although i always prefer to amortize the cost but find good reason to choose other one also.If a company engages in such a business where stockout cost is very high then other option is better because in such case we can switch the business to other supplier in case of any problem with existing supplier with ready tool withour any production loss which is not possible in other case.
By Satish Yadav, Purchase Manager, Leading Automotive Co.  09 16 2010 06:10:45 +0000
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if with minor change in the existing tools we can manage then no need to amortize otherwise it should be.
By Kuldeep Tanwar, Sr Manager - Engineering & Development, Lakshmi Precision Screws Limited  | 12 14 2010 18:36:24 +0000
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Tool cost playing important role in product cost because there is huge changes in tools technology day by day & we will reduce cost of the product using new technologies.
By Sarjerao Nathaji Arage, Manager (Technical), Caspro metal Industries Pvt. ltd.  | 09 16 2010 04:29:54 +0000
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As a buyer i alwyas prefer to amortize the tool cost because of its cost effective & hassle free activities.
By Satish Yadav, Purchase Manager, Leading Automotive Co.  | 09 15 2010 06:34:59 +0000
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I'm totally in support with this option of developing tool (inhouse) and providing to the vendor, this way is very cost effective and at last we have our assets back in our circle, hence we are increasing our tool stock which is anyways a better option for any future requirement.

 
By Santosh A. Jadhav, Sr. Officer Sales  | 09 16 2010 07:33:51 +0000
Argue for "Amortize the Tool Cost"
Argue for "Develop the Tool & provide to supplier fro production."
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yes i agree with your view but i would like to add that sometime good input doesn't give the good output if the timing is not adequate.So to add value to supply chain one must ensure the procurement of quality material in right quantity at right time.
As a autocomponent buyer i would like to invite latest ideas from all subject experts for component cost management
Although i always prefer to amortize the cost but find good reason to choose other one also.If a company engages in such a business where stockout cost is very high then other option is better because in such case we can switch the business to other...
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