Worked examples / Suppliers and materials

Switch to a cheaper supplier

A cheaper part. Here "how much is cut" is the share of sales you expect to be hurt by defects and returns.

The saving holds, narrowly

The saving holds by $42,120, with 76.6% of it taken up by costs.

The saving, on paper$180,000over 3 years

What it costs$137,880counted over the same years

On paper it is worth $180,000 over 3 years.
What it costs comes to $137,880: every $1 of saving costs $0.77.

Put in your own numbers

This is a worked example with illustrative figures, not data about any real person or company. Change any of them in the calculator and the answer changes with them.

How this answer was worked out

One-time cost	$15,000
Earnings lost because of it	$79,380
Side costs	$36,000
Cost of having to undo it, by its chance	$7,500
What it costs in all	$137,880
Cost per $1 of saving	$137,880 / $180,000 = $0.77
Result at the end	$42,120

Every formula is written out on the formulas page.

What the calculator asks you

The expected saving each year
The one-time cost of making the change
What the thing being changed was earning
How much of it is affected, and how much of that was truly spare
Which parts of the business rely on it
The chance of having to undo it

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How this answer was worked out

What the calculator asks you

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