You know the problem: pricing drawing parts is often a murky area. Many companies rely on "should costing" - a method based on the assumption of what a part "should" cost if it is manufactured efficiently. But should costing reaches its limits when it comes to drawing parts.
Table of contents
- Should costing: calculate target costs and reduce production costs
- The dilemma of should costing for drawing parts
- Our superior method: How we achieve precise and fair prices for drawing parts
- This is where we come in: FACTUREE's AI-powered best-costing approach
- Further questions about Should Costing
Should costing: calculate target costs and reduce production costs
Should Costingalso as Target cost analysis is a strategic method for determining the optimum manufacturing costs of a product or service. The aim is to calculate the actual ("true") costs - based on the most efficient materials, manufacturing technologies and product designs - realistically and in detail. Companies that Calculate target coststhus receive a sound basis on which to Reduce production costs and increase their competitiveness.
Calculate target costs for more potential
Through the Target cost calculation makes it possible to critically scrutinize supplier pricing and set target costs. The method systematically analyzes all cost factors, including:
- Material costs (e.g. with access to over 30,000 raw material prices)
- Production methods and processes (workload, machine utilization, energy consumption)
- Construction and Design for Manufacturability (DFM)
- Overheads and logistics
So you can Identify cost reduction potentialbefore decisions are made in product development or procurement.
Strategic decisions with Should Costing
The Bottom-up approach of Should Costing is based on a detailed analysis of each individual cost driver. Companies that Calculate target costsuse modern software solutions such as CostChecker or aPriorito:
- Process data from 3D CAD files
- Simulate manufacturing processes digitally
- precise and resilient Target costs to determine
This data-driven transparency helps to create targeted Negotiation strategies develop, improve supplier relationships and make strategic decisions along the entire product life cycle.
Aiming to reduce production costs
The Aim of Should Costing it is, sustainably reduce production costs - not through across-the-board savings, but through fact-based optimization. With a clear understanding of the Target costs purchasing, development and controlling teams can work together to reduce costs and increase margins - without compromising on quality or innovation.
Should costing reaches its limits with highly volatile products, rare raw materials or very inexpensive mass-produced items. The effort involved in analyzing target costs is often disproportionate to the savings potential. Conventional should costing can reach its limits, especially with drawing parts - alternative approaches are required.
For further questions about Should Costing read our FAQs at the end of the article.
The dilemma of should costing for drawing parts
Should costing promises transparency in cost calculation - but For drawing parts, the target cost analysis quickly reaches its limits. This is because drawing parts are never standard components, and there are simply no standard price catalog for you. Each of these parts is highly specialized and is manufactured individually according to exact specifications. Even the smallest deviation or a slight change in the drawing can lead directly to completely different costs. The target costs can therefore hardly be calculated in a standardized way, as numerous variable factors come into play:
- Individual production processes: Standardization is central to Should Coswig, and this is precisely the problem with drawing parts. Each component can require unique processing steps that are almost impossible to standardize. Machine changes, special clamping or special processing steps can have a massive impact on costs.
- Specific materials and tolerances: The choice of material (e.g. special alloys) and the required precision tolerances have a direct influence on the machining effort, tool wear and testing processes. A tighter tolerance often means more machining time, special tools and stricter quality controls. In Should Costing, such requirements lead to considerable deviations from the theoretical target value.
- Tool costs and set-up times: Special tools that only have to be produced for a specific part and complex set-up processes are difficult to calculate as a lump sum. These fixed costs are strongly reflected in the unit price, especially for smaller batch sizes. In the context of should costing, these one-off costs are difficult to generalize.
- Supplier know-how and capacities: The target costs depend not only on the component, but also on the manufacturer. Differences in machinery, automation and specific know-how lead to widely varying prices. For Should Costing, this means that without a deeper insight into the production reality of the respective supplier, the calculation remains inaccurate.
- Lack of transparency: Suppliers rarely provide detailed insights into their actual cost structures. This makes it extremely difficult to objectively determine the "should costs" of a complex drawing part. Without transparency, should costing is reliant on assumptions and average values - a high risk of miscalculation, especially for complex drawing parts.
In our video, Moritz König highlights precisely these points and explains why trying to determine the costs of a drawing part solely through "should costing" often leads to inaccurate estimates and therefore suboptimal purchase prices. In the worst case scenario, you pay too much or lose valuable supplier relationships because your price expectations are unrealistic.
Our superior method: How we achieve precise and fair prices for drawing parts
We know that the Market for drawing parts characterized by enormous price fluctuations is. An individual component, tailor-made for a specific application - be it for an airplane, a bicycle or an iPhone - cannot be found in any standard catalog. Even a small change in the drawing or a minor design adjustment can drastically affect the price and manufacturability.
As conventional should costing and simple instant pricing calculators reach their limits when it comes to the complexity of drawing parts, the we at FACTUREE have developed a unique, data-driven method developed. It enables us to offer our customers complex parts highest price accuracyt and at the same time Cost savings of over 20 % to achieve.
This is where we come in: FACTUREE's AI-powered best-costing approach
Our approach to calculating target costs goes far beyond traditional costing. It is based on a Comprehensive supplier knowledge and a data-driven, AI-supported system. Not only do we analyze our customers' drawings down to the smallest detail, but we have also developed a system that is able to analyze the bThe best possible price across our entire supplier network of more than 2,000 verified partners to forecast the future.
We achieve this with our specially developed AI-based software. It simulates as if it were asking every possible supplier for their best price. This is because each of our manufacturing partners can offer a different price for the same order, depending on their specific skills, machinery and current capacity utilization. This is crucial, because with Should Costing it is not enough to simply evaluate technical requirements - you also need to know the real conditions of the manufacturers.
Over the past six years, we have Over 600,000 data points per supplier collected and our Algorithms continuously refined. This foundation of knowledge enables us to, forecast reliable target costs - with a precision that conventional instant pricing solutions cannot achieve.
Thanks to this in-depth supplier knowledge and the ability to place orders optimally, we can often achieve significant savings of over 20 percent in procurement costs for our customers. You benefit from our comprehensive understanding of the market and pricing that is truly based on the individual requirements of the drawing parts and the capacities of our specialized manufacturing partners.
Ready for more precise purchase prices?
If you would also like to optimize the costs for your drawing parts and create a transparent price basis, please contact us. We will be happy to advise you without obligation and show you how our method can revolutionize your purchasing. Contact us today for a free initial consultation!
Further questions about Should Costing
Should Costing is particularly suitable for companies in cost-intensive sectors such as the automotive, electronics, mechanical engineering or consumer goods industries that work with complex products and extensive supply chains. However, it is more difficult for products or industries with prices that are heavily influenced by external factors (e.g. market volatility, rare raw materials) or very simple, low-cost mass-produced products, as the analysis effort here is often disproportionate to the savings potential. Conventional Should Costing can reach its limits, particularly with drawing parts, as these are highly specialized and many variable factors such as individual production processes, specific materials/tolerances, tool costs and a lack of supplier transparency can have a massive impact on costs.. Data-driven and AI-supported approaches based on extensive supplier knowledge are ideal here.
The Target cost analysisalso known as Should CostingShould Costing is an effective tool for systematically determining the realistic manufacturing costs of complex products. Should costing is particularly suitable for components with high material usage, demanding production processes or high development costs.
Typical areas of application for target cost analysis are
- Vehicle parts and systems, in particular battery modules for electric vehicles
- Special machines and individually manufactured machine components
- Aerospace components
- High-tech and electronic components with short life cycles
- Software development in the automotive sector and early design phases in development
The target cost analysis is less useful for:
- Simple standard components without a large number of variants
- Low-cost mass-produced products where the cost of analysis exceeds the potential savings
- Drawing parts with high individuality and low cost transparency, as the accuracy of Should Costing is limited here due to a lack of data.
Should Costing is an effective tool for making well-founded decisions in the Supplier selection and in the Price negotiation to meet. Through a precise Target cost analysis realistic target prices can be determined for complex components and products - regardless of the supplier's offer. This transparency provides purchasing departments with a strong basis for negotiation, as cost items can be discussed in a comprehensible and objective manner.
When selecting suitable suppliers, Should Costing helps to systematically evaluate offers: Who is close to the calculated target costs? Who deviates significantly - and why? In this way, excessive prices, inefficiencies or a lack of technical suitability can be identified at an early stage.
In addition, a professional Target cost analysis understanding of cost-relevant factors along the value chain and supports strategic sourcing decisions. The result: sustainable savings, improved supplier relationships and significantly higher cost security in purchasing.
When using Should Costing errors often occur that affect the accuracy of the Target cost analysis significantly. One of the most common mistakes is the use of outdated or incomplete data. Without up-to-date manufacturing technologies, material prices or labor costs, the Target cost calculation quickly become unrealistic. Overestimating standardization is also critical - many companies try to evaluate complex drawing parts with blanket calculation models, which leads to incorrect target costs.
Another common mistake is a lack of knowledge about processes and suppliers. Without a deep technical understanding of the value chain and access to supplier data, a well-founded target cost analysis is hardly possible. A lack of coordination between purchasing, technology and controlling also leads to inconsistent assumptions.
A professional Should costing process avoids these pitfalls through structured data maintenance, interdisciplinary collaboration and the use of specialized software solutions that ensure transparency and comparability.
Continuous improvement is a key success factor in the Target cost analysis. Markets, technologies and supply chains are constantly changing - what is considered efficient today may be obsolete tomorrow. A static Should costing model does not reflect this dynamic. It is therefore crucial to regularly update the calculation logic, price indices, process data and material parameters.
Systematic improvement can Target costs can be predicted more precisely and market changes can be recognized at an early stage. In addition, potential savings can be identified again and again - for example through new production technologies, alternative suppliers or design optimizations. Feedback from real procurement projects should also be continuously incorporated into the models in order to further increase accuracy.
A learning Should costing process increases competitiveness in the long term and strengthens the negotiating position in purchasing. Those who continuously optimize avoid systematic deviations and ensure that the Target cost analysis remains a resilient, strategic tool.
Uncertainties in the Cost calculation often arise due to incomplete information, unclear specifications or a lack of process knowledge. In order to reduce these, a structured Should Costing-approach. This is based on reliable parameters such as production steps, material parameters and real machine data. The more detailed the analysis, the less reliance there is on estimates.
In addition, access to sound historical data and benchmarks helps to objectify assumptions. Digital tools and AI-supported software make it possible to analyze large amounts of data and systematically integrate empirical values. Collaboration with technical experts and suppliers can also help to validate assumptions.
Another lever is the continuous verification of target costs with real market prices - for example, by comparing offers or feedback from tenders. In this way, the Target cost analysis The result is gradually more robust, more comprehensible and thus a reliable cost planning tool.
Modern software solutions play a central role in the Target cost calculation. They make it possible to precisely model complex production processes and systematically integrate current market and supplier data. Automated calculations reduce input errors and make different scenarios quickly comparable.
AI-supported tools go even further: they analyze historical data, recognize patterns and simulate realistic Target costs based on individual drawing features. These functions not only speed up the Should Costing-process, but also increase its accuracy. Such systems are particularly valuable in global supply chains, as they can dynamically map currency, wage and material fluctuations.
The software also promotes collaboration between engineering, purchasing and controlling, as everyone involved has access to the same database. The result is a transparent, comprehensible and objective Target cost analysiswhich supports well-founded purchasing decisions and makes potential savings visible.
The automated Target cost analysis offers significant advantages over manual calculation methods in terms of efficiency, accuracy and scalability. While manual methods are time-consuming, error-prone and often subjective, an automated Should costing system data-based, standardized and reproducible.
One major advantage is speed: automated processes allow hundreds of drawing parts to be calculated in a short space of time. At the same time, the use of live data from supplier networks, machine parks or marketplaces makes it possible to realistically determine the Target costs.
In addition, automatic comparisons of production variants, materials or suppliers reveal specific savings potential. The consistent database also improves internal communication between departments.
Last but not least, automated Should Costing The system improves the negotiating position in purchasing and creates transparency regarding cost drivers - an important basis for strategic cost management and long-term competitiveness.
