Price Level (Main Criterion "Price") 

Use

This section describes how scores are calculated by the system for the automatic subcriterion Price Level.

Activities

To determine a vendor's price level, the system compares the vendor's effective price with the market price for the material.

  1. The system first checks whether the buyer has maintained a market price for the material or the material group.
  2. If not, the system calculates the market price which is equal to the average of the effective prices for all vendors supplying this material. Prices from purchase orders and prices for subcontracting are dealt with separately.
  3. The system then applies the effective price for the vendor from the conditions.
  4. The vendor's effective price is then compared with the market price and the percentage variance determined.
  5. The system then assigns a score to the variance in accordance with the settings made in Customizing.
  6. This score is valid for the material, that is, at info record level. Since the score the vendor receives for a subcriterion is based not on an individual material, but on the total of all the materials he supplies, the following steps are necessary:
  7. The system repeats the comparison between effective price and market price for each of the vendor's materials.
  8. The system calculates an average from the sum of the scores determined. This average represents the vendor's score for the subcriterion Price Level.

Special Case: Only One Vendor

In the following two situations, you have only one vendor who provides you with a specific material (so you therefore have only one price):

In this case, you have freely decided that you want to procure a material from one particular vendor only (because the latter provides excellent quality, for example).

In this case, you are forced to obtain the material from a certain vendor, because the latter has a monopoly of the market (that is to say, you have no other choice).

So that you can determine whether sole or single sourcing puts you at a disadvantage or whether the vendor deserves a particularly good score for above-average performance, maintain the Single/sole vendor indicator in Customizing.

If you set this indicator, the vendor's effective price is regarded as the market price when the system calculates the score for the criterion Price Level. Consequently, the market price and the effective price are identical. Because there is a variance of zero percent, the vendor receives a good score

If you do not set the indicator, the single/sole-sourcing situation is not taken into account. The system does not determine a score for the price level based on this material

Before you can calculate the price level, the market price has to be maintained in the system.
To do this, choose Master data ® Conditions ® Prices ® Market price from the Purchasing menu.