Make-Buy, Outsourcing & Network Design worked example

Supplier Network Cost at 81% share of suppliers actively managed: a worked example

What does the result look like when share of suppliers actively managed reaches 81%? The full calculation is worked below with real intermediate numbers. A supply-chain manager quantifying the overhead of a sprawling vendor base to justify rationalization.

The inputs for this scenario

  • Active suppliers in network: 40 suppliers (unchanged)
  • Annual cost to manage each supplier: 6,200 $/supplier-yr (unchanged)
  • Share of suppliers actively managed: 81 % (raised for this scenario; the documented default is 70)
  • Network platform and audit fees: 35,000 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Network cost = suppliers x cost per supplier x managed share% + platform and audit fees) to the inputs above produces each figure below.
  • At this operating point the engine returns 235,880 $ for total supplier network cost, the number this scenario is built around.
  • At this operating point the engine returns 5,897 $ / piece for supplier network cost per unit.
  • At this operating point the engine returns 200,880 $ for variable supplier network cost.
  • At this operating point the engine returns 35,000 $ for fixed supplier network cost adder.

How this compares with the baseline

  • Against the tool's baseline example, where share of suppliers actively managed sits at 70% and the headline result is 208,600 $, this scenario comes in 13.08% above the baseline at 235,880 $.
  • A figure at this level is achievable when share of suppliers actively managed is genuinely sustained, not just peaked for a shift. It applies one average management cost to every supplier, so it understates the disproportionate effort that a few high-risk or strategic suppliers actually consume.

Results at a glance

  • Total supplier network cost: 235,880 $ (headline result)
  • Supplier network cost per unit: 5,897 $ / piece
  • Variable supplier network cost: 200,880 $
  • Fixed supplier network cost adder: 35,000 $

Run it with your numbers

  • Every input above is editable in the live Supplier Network Cost calculator, which recalculates instantly and can be shared with the inputs intact.

Last reviewed 2026-05-12.