Cost under stated assumptions
Should Costing estimates what a manufactured or purchased item could cost under a defined set of technical and economic assumptions. It is a model, not an automatically correct market price.
Useful models expose how materials, processes, cycle times, resource rates, batch sizes and other assumptions lead to the result. That makes differences discussable.
Detail and estimation have different roles
A detailed bottom-up model builds a cost structure from materials and manufacturing steps. A parametric estimate uses relationships between product characteristics and known cost behaviour. The right level of detail depends on the decision and the information available.
When design information is incomplete, preserve the uncertainty. A precise-looking number can still depend on rough process or rate assumptions.
Keep the assumptions visible
- Product: specification, tolerances, material and quantities.
- Process: routing, cycle time, yield and scrap.
- Resources: machine and personnel requirements, energy and consumables.
- Economic context: geography, rates, utilisation, batch size and reference date.
- Boundary: overhead, tooling, logistics and supplier margin treatment.
From a result to a better conversation
A difference between an offer and a model is a starting point for investigation. It may reflect a different production process, commercial terms, capacity utilisation or an assumption that needs correction.
Use the model to locate the difference. Then distinguish evidence, assumption and judgement before drawing a sourcing conclusion.
From should cost to multi-year impact
A one-time estimate needs further work before becoming a plan. Carry changing volumes, supplier prices, sourcing transitions, cost-down timing and investments through the relevant years.
The planning bridge explains this next step.