This measure calculates personnel cost per $1,000 purchases for planning, ordering, and executing the physical delivery of materials and services from suppliers to the points of need and use. Personnel cost refers to employee salaries/wages, bonuses, benefits, etc. This measure is part of a set of Cost Effectiveness measures that help companies understand all cost expenditures related to the process "order materials and services."
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Personnel cost to perform the process "order materials and services" / (Value of all materials and services purchased * .001)
Personnel cost is the cost associated with personnel compensation and fringe benefits of employees (i.e., those classified as FTEs which includes both full-time and salaried/hourly employees) contributing to each respective process. Personnel cost should include all of the following costs.
Employee Compensation: Includes salaries and wages, bonuses, overtime and benefits.
Fringe: Includes contributions made towards the employees' government retirement fund, workers compensation, insurance plans, savings plans, pension funds/retirement plans, and stock purchase plans. This should also include special allowances, such as relocation expenses and car allowances.
Cost effectiveness measures are those in which two related variables, one of which is the cost and one of which is the related outcome related to the expenditure are used to determine a particular metric value.