Proposal line items represent the customer deliverables or products and services which your company will provide to the customer requesting a proposal. Deliverables which relate to products or materials - also called "hardware" - need material cost estimates. There are two basic types of material or hardware deliverables in your proposal:

• Simple products sold from stock perhaps as spare parts where a cost estimate for the part listed in to proposal line item is enough,
• Complex products which are made up of multiple component parts or a "bill of material", where the cost estimate comes from the sum of the individual cost estimates from each indentured bill of material components.

Depending on whether a proposal line item, or indentured bill of material component, is manufactured in-house or purchased from a supplier the different ways you can estimate the cost for each part include:

• Selecting a catalog price or standard cost for that part number
• Summing up the planned hours for each cell or work-center in a manufactured or maintained part's routing or task list, and estimating the cost for the part based on the hours per unit x labor rates for each cell or work-center producing or repairing that part
• Averaging the confirmed hours for each cell or work-center from production or work order history, with costs based on average hours x labor rates for each work-center, potentially adjusted by Learning Curves
• Making a discrete estimate of the hours involved by cell or work-center (and thus by labor rate) to produce, repair or install that part. This can be done in the estimate (as a one off) or as a master task list in the Product/Service master data (COSTS & PRICES tab)
• Looking at purchasing history to derive the most recent best-fit historical supplier contract or purchase order for that part based on validity/delivery/placement date and pricing quantity or lot-size
• Looking at supplier quotations and the option to generate new RFPs to request new quotations to feed into your estimate. Also you can directly input a support quotation response or rough order of magnitude cost estimate for a part
• Entering a manual cost estimate such as a Cost & Price Analysis (CAPA).

Each of these methods of costing a single part in your proposal line item or in its bill of material equates to a different estimating source, with its own confidence score. More accurate sources have a higher confidence score.

A bill of material or "BOM" for short is an indentured part configuration describing how a complex assembly is built-up from a list of sub-component parts, which each carry their own cost estimate. BOM's are typically created in your Product Life-cycle Management or PLM system, though bids and estimates for end items you have not produced or designed before may not (yet) be defined in your PLM toolset. In this case you can either:

• Import the closest-fitting standard BOM from your PLM toolset and modify it to create a proposal-specific bill of material, or
• Import the closest-fitting standard BOM from your PLM toolset and enter a "similar-to" factor to adjust the final costs by a factor which represents the relative complexity and cost differential of your standard vs. new deliverable, or
• Upload a proposal-specific bill of material from Excel, or
• Create a one-off proposal-specific bill of material directly in this application.

Whichever method you use above, each part is costed individually using one of the estimating sources listed above.

In some cases bills of material will exist in your PLM toolset for parts which are now purchased, perhaps because they were initially built in-house and are now purchased, or because you always intended to purchase them but wanted to control the design. In either case the standard or PLM-based bill of material does not need to be imported below the purchased part level because cost estimates will be derived for the purchased assembly as a single complete unit.

Material costs derived from summing up the costs for each bill of material component form a part of your estimate in the same way labor, travel and other direct costs feed into your estimate. Material costs are typically burdened with overhead and G&A rates appropriate for the material's cost element or valuation class defined in SAP.

In-house manufactured material costs are actually classified as "labor" costs because their costs are derived from the labor rates for the cells or work-centers producing that part. Purchased deliverables or sub-components of an in-house manufactured part are classified as material costs. Costs are always split in your cost model based on each individual BOM component.

Click here for information on how to create a material cost estimate.