Cost model generator

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The cost model generator is a wizard-based tool that calculates and generates cost model values for stockout costs, holding costs, and purchase order line costs based on your organization's specific parameters.

Overview

The cost model generator helps you establish accurate cost values by guiding you through a questionnaire for each cost field type. The generator uses industry standards and your organization's expense data to calculate appropriate cost values for your inventory locations.

You can access the cost model generator from Administration > Cost model > Cost model generator.

Important: When you run the generator, the new values overwrite existing values in the cost model. Plan to run the generator just before an end-of-month (EOM) refresh so that all items are recalculated and the new values are automatically applied.

Prerequisites

Before using the cost model generator, ensure that the standard cost model definition is configured for all cost model fields:

  • Stockout costs must be based on Business Impact, Availability, Likelihood, and moving code.
  • Holding costs percentage must use a formula with calculated Value1 and Value2, as well as unit price and order quantity.
  • Purchase order line costs must be configured to accept generated values that are manually added to the purchase order line cost domain element table (DET).

Cost model generator components

The cost model generator consists of three main components that you can manage independently or together:

Stockout costs
Generates stockout cost values based on industry selection and risk scale. You can choose from predefined industry standards or provide custom starting values. Stockout costs require the location currency and an exchange rate to USD if the location does not use USD.
Holding costs percentage
Calculates holding costs per location based on your organization's expenses for managing stock items. The calculation uses detailed expense information that you provide through the questionnaire.
Purchase order line costs
Calculates purchase order line costs based on your organization's purchasing expenses. The calculation uses detailed expense information that you provide through the questionnaire. The generated values must be manually added to the related DET for assigning purchase order costs.

Location-specific costs

All costs generated by the cost model generator must be applied to a specific location. This ensures that cost values accurately reflect the operational expenses and risk factors for each inventory location.

Questionnaire accuracy

The holding costs and purchase order line costs calculations are based on the expense information you provide in the questionnaire. Answer all questions as accurately as possible to achieve the best results.

Note: Some questions impact both purchasing and holding costs. If you change a value that affects both cost types, the field values in the other cost type are updated, but the system does not automatically recalculate using the new values. You must manually recalculate if needed.

Wizard workflow

The cost model generator uses a three-step wizard:

  1. Field selection: Select the location and cost fields to generate.
  2. Questionnaire: Complete the questionnaire with your organization's specific information.
  3. Cost review: Review the generated cost values before applying them to the cost model.

Best practices

  • Run the cost model generator just before an EOM refresh to ensure that all items are recalculated with the new cost values.
  • Provide accurate expense data in the questionnaire to generate realistic cost values.
  • Review the generated values carefully before applying them, as they will overwrite existing cost model values.
  • For purchase order line costs, remember to manually add the generated values to the purchase order line cost DET and run the calculation over all items.
  • If your location uses a currency other than USD, ensure you have the correct exchange rate before generating stockout costs.