What you’ll learn
- Why should-costing exists: so the buyer knows as much as the seller
- The six groups of cost levers every programme uses
- The seven layers of a should-cost, and how to build a cleansheet (a cost model built from scratch) in seven steps
- Linear Performance Pricing, how to run the negotiation, and where AI is changing things
What you’ll produce
By the end of this module you’ll have a seven-layer should-cost for a real part. Free templates:
From the module
Why should-cost: one number isn't enough
With every part you buy, the supplier knows far more than you do. They know what they pay for material, their cycle times, their scrap rate, how busy their factory is and their margin. You know one number: the quote. Negotiating like that is guesswork. Push too little and you overpay for years. Push too hard without the facts and you force a good supplier into a loss, then inherit their quality problems. Should-costing evens things up. You rebuild the part's cost from physics and published market rates: what the material must weigh, what the machine must cost per hour, and what a fair margin looks like. Then you go into the negotiation knowing roughly what the supplier knows. The conversation changes straight away, from "give us 5%" (random, and resisted) to "your quote suggests your press shop is only 55% busy. Is that right?" (specific, and something they can answer). The first is haggling; the second is a question about facts.
Short narrated video in this module
Continue reading in Module 9, or read the related guide: 36 Cost Levers.