At one of our client the cost of material procured from vendor is determined after the material is utilized in production and the wastage percentage is determined.
e.g. a recyclable material is procured from vendor with the commitment that the allowed rejection is 3%. Suppose the consignment cost is 100 $ / kg. After the recycling process, if the materials rejection is within 3% than the vendor is paid in full however if the rejection exceeds than the allowed percentage suppose 5 % than the vendor will be paid 98$ after deducting 2$ for extra 2% rejection.
Can anybody elaborate how to incorporate this in our purchasing/production cycle?