1.4 Quote Validation & Risk Flags

A Raw Order of Magnitude (ROM) estimate is a guess; a Validated Quote is a contractual instrument. Translating a supplier’s pricing signal into a financial commitment requires forensic attention to detail. A single data entry error—confusing "Price per 100" with "Price per 1"—can instantaneously destroy product margins. You must scrub every line item for commercial traps, logistical disconnects, and hidden liabilities before data enters the ERP or cost model.

Quote Normalization Protocols

Suppliers quote in formats that benefit them, not you. Normalize all incoming data to a single "Landed Cost" standard to enable apple-to-apple comparison.

Unit of Measure (UoM) Integrity

• The Trap: Vendors often quote small passives per 1,000 (kpcs) or per Reel, while high-value ICs are quoted per unit.
• The Fix: Convert all pricing to Price Per Unit (1 pcs).
• Math: If Quote = $15.00/C (Per Hundred) → Unit Cost = $0.15.

Incoterms & Logistics

• The Trap: "Ex Works (EXW) Shenzhen" is not the same cost as "DDP (Delivered Duty Paid) New York."
• The Fix: Calculate freight + duty + insurance.
  • Standard: FCA (Free Carrier) for international air freight.
  • Logic: Landed Cost = Unit Price + (Freight Estimate / Qty) + (Duty Rate × Unit Price).

Lead Time Definition

• The Trap: Supplier LT is usually "Factory to Ship Dock." It excludes transit, customs clearance, and receiving inspection.
• The Fix: Define "Dock Date" in your system = Supplier Ship Date + 5 Working Days (Transit/Clearance).

Pro-Tip: Always verify the currency date on quotes. A quote in JPY or EUR valid for 30 days exposes you to FX risk. Normalize to your functional currency using a conservative buffer rate (Spot + 3%).

Risk Detection Logic

Analyze the quote for operational poisons. Use the following logic to flag risks that require mitigation or Engineering intervention.

If MOQ (Minimum Order Qty) > Production Demand:

• Then Calculate "Stranded Capital".
• Formula: (MOQ – Demand) × Unit Cost = Excess Inventory Value.
• Action: If Excess > $500, request broken-pack pricing or seek alternative source.

If Term = NCNR (Non-Cancellable Non-Returnable):

• Then Flag as "Liability Exposure".
• Action: Requires specific sign-off. You own this inventory the moment the PO is cut, regardless of whether you ever build the product.

If Lifecycle = NRND (Not Recommended for New Design) or EOL:

• Then Trigger "Obsolescence Protocol".
• Action: Immediate engineering review. If no drop-in replacement exists, calculate a Lifetime Buy (LTB) quantity immediately.

If Lead Time > Project Schedule:

• Then Flag as "Critical Path Constraint".
• Action: Expedite request or search for spot-market stock (see Chapter 1.2 for risk rules).

Compliance & Traceability Check

Price is irrelevant if the part is illegal or fake.

1. Traceability: Quote must explicitly state "New & Original" with "Full Manufacturer Traceability." Any quote mentioning "Refurbished," "Pulled," or "Date Code > 2 Years" is rejected by default.
2. Environmental: Confirm RoHS (Lead-Free) and REACH compliance status.
   • Check: Does the MPN suffix match the compliancy requirement? (e.g., Part-No-G often denotes Green/RoHS).

The Validated Quote Pack

The output of this process is a clean, risk-quantified dataset ready for final negotiation or PO entry. It must contain:

• Normalized Unit Price: (Currency converted, UoM corrected).
• Total Liability: (MOQ cost + NCNR commitment).
• Validity Date: Expiration of the price offer.
• Exceptions: Explicit list of deviations from the requested specification.

Gate: Ready for RFQ?

Do not proceed to Final Award until these criteria are met.

• [ ] UoM Verified: No mixing of "per reel" vs "per piece".
• [ ] Incoterms Defined: Transfer of ownership point is clear.
• [ ] Risks Quantified: Excess inventory cost is calculated.
• [ ] Specs Matched: Quoted MPN matches BOM MPN 100% (or approved sub).

Final Checklist

Control Point	Requirement	Critical Threshold
Unit Conversion	All prices normalized to 1 unit	0 Errors
Liability Check	NCNR Terms Identified	Flagged YES/NO
Exposure Calc	MOQ Overbuy Quantified	Value in $
Date Validity	Quote Expiry	> Lead Time
Logistics	Transit Time Added	+5 Days Buffer
Compliance	RoHS/REACH Status	Confirmed
Chain of Custody	Traceability Statement	Mandatory