Supply Chain & Procurement worked example

Supplier Payment Terms Impact at 92% fraction of terms change realized: a worked example

What does the result look like when fraction of terms change realized reaches 92%? The full calculation is worked below with real intermediate numbers. Use it when supplier payment terms impact in supply chain and procurement is being put through a supply chain and procurement weighted-cost review.

The inputs for this scenario

  • Annual spend with the supplier: 100 units (unchanged)
  • Cost of capital per dollar-year: 45 $ / unit (unchanged)
  • Fraction of terms change realized: 92 % (raised for this scenario; the documented default is 80)
  • One-time transition cost: 250 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Weighted cost = quantity × rate × capture factor + fixed adjustment) to the inputs above produces each figure below.
  • At this operating point the engine returns 4,390 $ for total supplier payment terms impact cost, the number this scenario is built around.
  • At this operating point the engine returns 43.9 $ / piece for supplier payment terms impact cost per unit.
  • At this operating point the engine returns 4,140 $ for variable supplier payment terms impact cost.
  • At this operating point the engine returns 250 $ for fixed supplier payment terms impact adder.

How this compares with the baseline

  • Against the tool's baseline example, where fraction of terms change realized sits at 80% and the headline result is 3,850 $, this scenario comes in 14.03% above the baseline at 4,390 $.
  • A figure at this level is achievable when fraction of terms change realized is genuinely sustained, not just peaked for a shift. It is a working-capital approximation, not a full NPV — it ignores the price increase suppliers often bake in for longer terms and the effect on supplier financial health, both of which can erase the paper gain.

Results at a glance

  • Total supplier payment terms impact cost: 4,390 $ (headline result)
  • Supplier payment terms impact cost per unit: 43.9 $ / piece
  • Variable supplier payment terms impact cost: 4,140 $
  • Fixed supplier payment terms impact adder: 250 $

Run it with your numbers

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

Last reviewed 2026-05-12.