Non-delivery costs in TP/VS

[Former Member]

What is the logic behind maintaining Non-Delivery Costs in TP/VS Cost Profile? How should you calculate the amount of non-delivery cost? If we do not maintain Non-delivery cost, what are the implications and how it impacts the TPVS planning during optimiser run?

[Former Member · Accepted solution]

Hi Sunil,

Non-delivery costs specifies the costs fixed for the vendor as the penalty for the non-delivery of goods. This can be equated to loss of sale that would happen if not sold or delivered on time.

For eg, in some scenarios, if there are sample orders to be executed, if those are not supplied on time, it leads to further cancellation of actual order etc.,

These costs are not a real value, but a theoretical value taken into consideration by the Optimizer. You maintain the penalty costs per day, whereas the Optimizer calculates the penalty costs per time unit (seconds) (i.e. it does not round up to full days).

The more important it is that a delivery takes place, the higher the costs you maintain here must be fixed in order to avoid non-delivery.

These costs should be higher than the costs that arise through the transportation of the ordered goods. Otherwise the Optimizer decides that non-delivery is cheaper than delivery and does not generate a shipment. The costs that arise through transportation comprise earliness or delay costs, fixed costs, and the dimension costs (time, stop-offs, distance, quantity) of all means of transport.

Regards

R. Senthil Mareeswaran.

[Former Member · Accepted solution]

Hi Sireesh / Senthil,

Thanks

Senthil,

You have given 3 versions of the non-delivery cost :

1)amount of penalty for vendor for non-delivery.

2)amount of loss of sale if not delivered in time.

3)should be higher than transportation costs

For the 1st and 2nd versions, how do you calculate the penalty for vendor and the amount of loss of sale? If these can be calculated by the system, how? And if yes, will the non-delivery cost be equal to that? If no, what is their relevance?

Regardsu2026..Sunil

[Former Member · Accepted solution]

Sunil,

Your aim is to supply goods to customer/DC. Now say you have maintain a transportation cost RS. 25 per unit. and non delivery cost Rs. 15, delay penalty Rs. 5 and max delay is 1 day. So, system will calculate the cost of transportation and cost of not delivering goods. Then it does not create any shipment, because transportation incure more cost (systems aims to minimize total cost).

" how do you calculate the penalty "? .. generally you keep very high value as non delivery cost, so that system creates shipment to minimize cost (yes always greater than Transportation cost).. Say Rs. 999999. nothing wrong with that, your aim is to deliver goods to destination location.

Thanks,

Satyajit

[Former Member]

Closing this question as no to-the -point answers coming in for long time.

[Former Member]

Hi,

As the name suggests the non deleivery costs are the costs you incur incase the goods are not delivered.The more important it is that a delivery takes place, the higher the costs you maintain here must be fixed in order to avoid non-delivery.

The logic for maintaining them is if they are not maintained or less than the transportation costs then the optimiser concludes non delivery is cheaper then delivery and does not generate shipments.

They are generally maintained as high as possible.

Regards,

Sireesh