One of the elements comprising a company's total supply-chain management costs. These costs consist of the following:

1. Materials (Commodity) Management and Planning: All costs associated with supplier sourcing, contract negotiation and qualification, and the preparation, placement, and tracking of a purchase order. We recognize that these functions may be organizationally dispersed and/or decentralized, but ask you to group all related costs for purposes of this study. Also, this category includes all costs related to buyer/planners.

2. Supplier Quality Engineering: The costs associated with the determination, development/certification, and monitoring of suppliers' capabilities to fully satisfy the applicable quality and regulatory requirements.

3. Inbound Freight and Duties: Freight costs associated with the movement of material from a vendor to the buyer and the associated administrative tasks. Duties are those fees and taxes levied by government for moving purchased material across international borders. Customs broker fees should also be considered in this category.

4. Receiving and Material Storage: All costs associated with taking possession of material. This does not include inspection. Note that inventory-carrying costs are covered in a subsequent worksheet.

5. Incoming Inspection: All costs associated with the inspection and testing of received materials to verify compliance with specifications.

6. Material Process and Component Engineering: Those tasks required to document and communicate component specifications, as well as reviews to improve the manufacturability of the purchased item.

7. Tooling: Those costs associated with the design, development, and depreciation of the tooling required to produce a purchased item. A tooling cost would be incurred by a company if they actually paid for equipment and/or maintenance for a contract manufacturer that makes their product. Sometimes, there aren't enough incentive for a contract manufacturer to upgrade plant equipment to a level of quality that a company requires, so the company will pay for the upgrades and maintenance to ensure high quality. May not be common in some industries such as the Chemicals.