Which item is NOT one of the six steps to find the total procurement price?

Which item is NOT one of the six steps to find the total procurement price?

• A. Traditional basic input costs
• B. Direct transaction costs
• C. Supplier relational costs
• D. Inventory costs

Answer: (D)

The step framework for calculating total procurement price focuses on costs directly tied to acquiring goods: the basic input cost (the item’s price itself), the costs of carrying out the purchasing process (ordering, processing, receiving, transportation, inspection), and the costs related to the supplier relationship (vendor management, compliance, coordination). These are all things that happen around the act of procurement itself. Inventory costs, by contrast, pertain to holding and maintaining stock after purchase—storage, capital tied up, insurance, obsolescence risk, and carrying costs. These are inventory management concerns and are usually considered separately from the procurement price calculation. They belong more to carrying costs or total cost of ownership rather than a step in determining the total procurement price. So inventory costs do not fit as one of the six steps to find the total procurement price.

The step framework for calculating total procurement price focuses on costs directly tied to acquiring goods: the basic input cost (the item’s price itself), the costs of carrying out the purchasing process (ordering, processing, receiving, transportation, inspection), and the costs related to the supplier relationship (vendor management, compliance, coordination). These are all things that happen around the act of procurement itself.

Inventory costs, by contrast, pertain to holding and maintaining stock after purchase—storage, capital tied up, insurance, obsolescence risk, and carrying costs. These are inventory management concerns and are usually considered separately from the procurement price calculation. They belong more to carrying costs or total cost of ownership rather than a step in determining the total procurement price. So inventory costs do not fit as one of the six steps to find the total procurement price.