The raw material price depends on used material, scrap material and a material handling cost. Presently the RFQ and consequentially the QAR is plagued by large variations in raw material cost in the quotations. The reason for this is primarily suppliers quoting mostly just a gross usage that varies greatly from quote to quote and depending on which version of the RFQ that is sent to the supplier options for scrap resale may or may not be included. In Thailand this in one of the things to put extra attention on, suppliers with the same process technique should have similar gross and net usage of material in the process.
The cost estimation takes the gross weight times the material price to get the value of the gross usage. The material overhead is then added and this sum is decreased by the accumulated resale scrap value resulting in the raw material cost.
The handling cost is primarily made up by the time that the supplier has his capital bound to the raw material due to Autoliv’s long payment terms. A possible fixed part of the handling cost can be added if a raw material stock area can be identified and/or material handlers for specifically the material used can be identified. In most cases an area can be identified however quantifying direct manpower solely associated with this raw material can seldom be acquired but as warehouse personell is deemed under indirect labour their costs will be added as a part of the general overhead later in the cost estimation.
Possible letter of credit or addional costs is supported in the model which can bump up the cost. If no information regarding material overhead can be attained a estimate of 2-4% depending on size of the part can be used, which is then put under the letter of credit or other additional costs.