Cost Modeling/Should Cost Analysis
Obtaining visibility of costs across the value chain as a strategy to make informed and optimal supplier, pricing, risks and budget related decisions.
Cost modeling empowers an organization to make strategic decisions based on accurate insights. An advanced cost modeling tool promises precision and high-quality decisions as it takes into consideration all the key cost components such as material costs, labor costs, facility and maintenance costs, production costs, and profit margin to manufacture a product or service. It accounts for differences in process, utilization, capacity, geographical location, and all the other factors related to manufacturing or production. Cost modeling enables decision makers to make strategic choices driven by data and insights.
Should-cost analysis is leveraged as a cost estimation strategy to obtain visibility into the true cost of materials and services required to produce a product or deliver a service. The benefits of should-cost analysis are numerous, but so are the challenges to creating a reliable and accurate analysis to be leveraged as a tool to accurately estimate the real price of the product or service you are buying. Our clients have found that should-cost analysis has made them better equipped in price negotiations with suppliers. For certain clients, should-costs analysis (also known as cleansheet costing, price breakdown analysis, or open book costing) has led to buyer-supplier cost-modelling collaborations where cost structures have evolved and transformed to pave the way to higher mutual profitability. For other clients this has been a necessary analysis to lay the foundation for budget forecasting and planning, as well as managing the risks of price volatility.
At SpendEdge we have specialized in cost-modeling services for the past 16 years and have delivered value to our clients across industries. Our team of cost-modeling experts combines industry knowledge and sector expertise, along with geo-specific knowledge on regulations, taxes, tariffs, and rebates. All this complex and in-depth knowledge is applied to each client requirement depending on the needs and available information we acquire as a result of our assessment.
COST MODELING AND SHOULD-COST ANALYSIS
Typical Coverage Areas and Key Questions Answered
Typical Coverage Areas
- Identification of cost elements
- Assessment of the impact of each cost driver on overall cost
- Supply market pricing data collection
- Quantitative cost modeling
- Scenario based cost modeling
- Recommendations on lowest cost mix
- Negotiation levers adopted by suppliers to ensure low cost raw material sourcing
- Cost movement forecasts for all cost elements (for the next 6/12 months)
- TCO analysis
Key Questions Answered
- What are the key cost elements?
- Which cost elements are the drivers of cost?
- How do we achieve lowest cost mix?
- What is the Total Cost of Ownership and what are the best negotiation levers?
Fortune 500 Global Pharmaceutical Company Develops Commodity Procurement Strategy to Ensure Cost Containment
SpendEdge’s Cost Analysis Strategies Helps Gourmet Food Store Improve Business Efficiency By 20%
Cost Modeling Helps a Leading Molten Salt Tank Manufacturer Identify Potential Cost-Saving Opportunities
Should Cost Modelling: Building Relationships and Driving Profitability
Featured Press Release:
Procurement Market Analysis and Identification of Cost Categories of Molten Salt Tanks Through Cost Modeling
The Present and Future of Should Cost Analysis
Featured Press Release:
Building Cost-Effective Temporary Staffing Services by Leveraging Cost Modeling Techniques
Supply Market Analysis
Enabling companies to achieve procurement maturity, enhanced savings and reduced risks through supply market intelligence.