1.3 ROM Costing & Spend Stratification
Engineering velocity often outpaces supply chain visibility. Waiting two weeks for formal quotes to estimate a BOM cost paralyzes decision-making. The Rough Order of Magnitude (ROM) process uses immediate market data to generate a "Directional Cost." The objective is not penny-perfect precision; it is rapid stratification. You must identify the 20% of components driving 80% of the cost and risk (Pareto Principle) to deploy limited sourcing resources effectively.
The "Fast Pass" Data Method
Do not manually quote line items. Use API integrations or Bulk CSV upload tools provided by major catalog distributors (DigiKey, Mouser, Arrow) or aggregators (Octopart, FindChips) to ingest pricing data in minutes.
Process Workflow:
- Clean the BOM: Ensure Mfr Part Number (MPN) and Quantity Per Board are valid.
- Batch Search: Push the BOM to the aggregator API or CSV tool.
- Filter Selection: Select the lowest price available at the Target Production Volume (e.g., price break at 1,000 units).
- Normalize:
- Currency: Convert all lines to the base reporting currency (USD/EUR) using today's spot rate.
- MOQ/MPQ: Round demand up to the nearest Minimum Order Quantity (MOQ) or Pack Quantity.
Pro-Tip: Always pull the "Lead Time" and "Lifecycle Status" data fields during the cost pull. A $0.10 part becomes a $10.00 problem if it has a 52-week lead time.
ABC Stratification Logic
Not all parts require the same negotiation effort. Use the ROM data to segment the BOM into actionable tiers.
If Item falls in Top 80% of Total Spend OR is Single-Source:
- Then Define as Class A.
- Action: Mandatory deep-dive RFQ. Negotiate direct with Manufacturer or Tier 1 Distributor. Target contract pricing.
If Item is in next 15% of Spend:
- Then Define as Class B.
- Action: competitive bid via Franchised Distributors. Acceptance of published column pricing is permissible if volume is low.
If Item is in bottom 5% of Spend (Standard Passives/Hardware):
- Then Define as Class C.
- Action: Auto-replenishment or Vendor Managed Inventory (VMI). Do not waste human hours negotiating these.
ROM Cost Sheet Structure
The output of this process is a living document. It must contain specific metadata to be actionable.
Field | Function | Criticality |
MPN | Manufacturer Part Number | Identity |
Est. Unit Cost | Normalized price at volume | High |
Ext. Cost | Unit Cost × Qty × Annual Vol | High |
Class | A / B / C | High |
Lead Time | Max lead time in weeks | Critical |
Stock Status | Available / Allocation / None | Med |
Lifecycle | Active / NRND / Obsolete | Critical |
Source Date | Date of data pull (Data Stale > 30 days) | Low |
Immediate Red Flags
Analyze the ROM output for these specific failure modes immediately.
- Absurd MOQs: If the MOQ > 50% of annual demand, the part is financially toxic. Flag for Engineering redesign or search for a generic alternative.
- Allocation/Stockouts: If Global Inventory = 0, the ROM price is theoretical. Mark as "High Risk - Unsourceable".
- Obsolescence: Any part marked NRND (Not Recommended for New Design) or EOL (End of Life) is a strict No-Go for new products.
- Price Delta: If the market price is > 30% higher than the target price (should-cost), trigger a design review.
Guardrails & Confidence
A ROM is an estimate, not a contract. You must tag the estimate with a Confidence Level to manage stakeholder expectations.
- Confidence High (±10%): Pricing based on recent POs or formal distributor quotes.
- Confidence Med (±25%): Pricing based on Catalog/API data (DigiKey/Mouser).
- Confidence Low (±50%): Pricing based on historical averages or parametric estimates (no exact match).
Final Checklist
Control Point | Requirement | Critical Threshold |
Pareto Analysis | Identify Class A Items | Top 20 lines identified |
Data Freshness | Timestamp on pricing | < 30 Days |
Coverage | % of BOM with pricing | > 95% |
Lifecycle Check | EOL/NRND Scrub | 0 Obsolete Parts |
Lead Time | Max LT Identification | Flag > 26 Weeks |
Currency | Normalization | Single Base Currency |