Should-cost
What a part ought to cost, rebuilt from its material, process, machine time, labour, overhead and margin rather than read off a supplier's quote.
Also called: Should-cost analysis, Cleansheet costing, Bottom-up costing
A should-cost is an estimate you build yourself. You start from the drawing, not from the price. How much material goes into the part, and at what price per kilo. Which process makes it, on which machine, for how many seconds. What an hour of that machine costs in the supplier’s country. Then scrap, setup, overhead, logistics and a reasonable margin on top.
The result is a number you can put next to the quote. If a stamped bracket is quoted at €1.84 and your model lands at €1.35, you now have a conversation about 49 cents, line by line, instead of a request for “a better price”.
What it is not
It is not a target price pulled from last year’s invoice minus 3%. It is also not a guess of what the supplier would accept. A good should-cost can come out higher than the quote. That happens, and it is useful too: it tells you the supplier is either very efficient or about to come back with an increase.
Where it breaks
Should-costs are only as good as their inputs. Cycle times and machine rates are where most of the error hides. A model that assumes a 400 t press when the part runs on an 800 t one will be off by a third before anyone notices. That is why cost engineers keep a library of rates per region and process, and why the drawing matters more than the spreadsheet.
The other limit is time. Building one by hand takes a cost engineer somewhere between half a day and a week per part. Most companies can afford to do it for their top 50 references, not their 5,000. Parsio builds them from the drawings directly, so the long tail gets one too.