Understanding Opportunity Cost

The Opportunity Cost column in the PO Exceptions dashboard helps you understand the financial impact of accepting (or not accepting) an exception.

Think of it this way: Opportunity Cost represents the money your company expects to make or save through PO collaboration.

• A high Opportunity Cost value means the decision tied to that exception could have a significant financial impact.

• A low Opportunity Cost value means the impact is smaller, and may be lower priority.

⚠️ Important: SourceDay does not prescribe which exceptions to act on. Each company should define thresholds that make sense for its market, goals, and priorities.

How Opportunity Cost makes a difference

• Prioritization: Sort exceptions by Opportunity Cost to work on the highest-impact items first.

• Context for Decisions: Use it alongside exception type (Move In, Move Out, Cancellation) to decide how to respond.

• Better Collaboration: Share data-driven reasoning with suppliers when requesting changes or cancellations.

How to Enable Opportunity Cost

You must be an Admin to set up Opportunity Cost.

1. Click the arrow next to your name (top right corner) → Account Settings.

2. From the left menu, choose PO Exceptions Settings.

3. Enter percentage amounts for Move In, Move Out, and/or Cancellation.

   • Toggle off any values you don’t want used in the calculation.

4. Click Submit.

Once enabled, the column will appear in the PO Exceptions dashboard for all users.

How Opportunity Cost is Calculated

The calculation uses:

• Extended Cost (unit price × quantity)

• Number of days changed (for Move Ins/Move Outs)

• Percentages set by your admin

Move Out Formula:  

• ((Extended_cost x move_out_opportunity_cost_percent) ÷ 365) x Days_changed
• For Example: For a move out of 20 days with an Extended Cost of 5000:
  • Opp Cost = (($5000 x 0.1) ÷ 365) x 20 = $27.40

Move In Formula:

• ((Extended_cost x move_in_opportunity_cost_percent) ÷ 365) x Days_changed
• For Example:  For a move in of 20 days with an Extended Cost of 5000:
  • Opp Cost = (($5000 x 0.1) ÷ 365) x -20 = -$27.40, but the value will show as $27.40 in the column 
• Note: Even though move-ins have a negative number of days changed, we will be taking the absolute value of days, so the calculated value is positive.

Cancellation Formula:

• Extended_cost + (Extended_cost x Cancel_opportunity_cost_percent)
• For Example:  For a cancellation with an Extended Cost of $15,000:
  • • $15,000 + ($15,000 x 0.1) = $16,500

Where to see Opportunity Cost

You can view Opportunity Cost in two places:

1. Within the PO Exceptions Dashboard

   • Look for the Opportunity Cost column in the main table.

   • Click the arrows next to the column header to sort highest to lowest and target your biggest impacts first.

2. As a Report Export

   • From the PO Exceptions dashboard, click Export → CSV.

   • Once generated, the report will appear under Performance Insights → Reports.

Best practices for buyers

• Start with the biggest numbers: Sort by Opportunity Cost to tackle the most financially impactful exceptions first.

• Combine cost with context: A high cost Move In may need urgent action, while a high cost Cancellation could mean freeing up working capital.

• Use thresholds: Work with your leadership team to decide what values (e.g., >$10k) always require review.

• Communicate with suppliers: Add a note when submitting a change or cancellation, so they understand the business reasoning.