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Old 05-04-2012, 02:33 AM
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Smile Costs Associated with New Vendor

Hi Sean! I can appreciate the amount of time you have already spent researching a formula, so that you have tangible $$ amount to share with your CFO. Throughout the years, I have spent many nights at the office researching various topics.

While, I do not know of a specific formula to determine the cost of changing suppliers, I can share with you that there are many other considerations which should be evaluated (some of which are specific to the commodity or indirect services provided by the supplier).

The only information provided for this scenario: Your company has a long-time supplier whose price structure is higher than a new supplier that your company (or CFO?) would like to engage.

Therefore, my recommendation would be to determine the "risks" involved in changing suppliers for the specific commodity/service. Sometimes, the risks associated with change are not worth the cost savings.

I hope this is of some assistance to you, and I wish you success in presenting your business case to the CFO.
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