Should Costs App Purpose

Once your implementation of Makersite is complete, the Should Costs app allows you to spot opportunities for potential cost optimization. It is especially useful for Eco-designers as part of the wider Makersite solution.

Prerequisites

Your product's BOM must be imported
Your product must have a Product Category assigned
For optimal results, product data in Makersite should be enriched with either private or public costing information. This can be achieved with either Supplier import or Transaction import (then it's your private data), or the Makersite Enrichment tool (which uses public data and requires Product Category to be assigned). Still, even without this data, Makersite can use its AI predictive costing model.

Using Should Costs App

From the home page, go to Makersite Apps > Business > Should Costs. Select the Product to open in the app.

The Should Cost app opens on the Sankey diagram representing the cost breakdown of your product. You can review it to find the main cost drivers in a manufactured product, or analyze the cost of a particular part in more depth (right-click on a product/process > Drill in).

The app also has Choropleth, Heatmap and Grid views available. The Choropleth and Heatmap are useful for quickly visualizing your global supply chain, to see how diversified it is or whether it is over exposed to one particular region.

The Grid view shows a break down of the costs for each component in the Product, such as Material Costs, Manufacturing Costs, Should Cost Range and Purchase Price.

Customizing Should Cost Model

From the Grid View, select Click to customize model. This is a temporary option to re-calculate your model after customizing certain parameters, but this calculation is not persisted. If you want to make permanent changes, you need to do it in the Process.

You have the following options in the pop-up window:

Parameter	Description
Purchased?	Is this component purchased or manufactured?
Size	Size of the company making the item based on the yearly revenue
Country	Country where the item is manufactured
Sector	Manufacturing sector
Automation	Level of automation of the manufacturing line
Material cost share	Share of the Should Cost assigned as the Material Cost
Apply recursively?	Should this change be applied recursively?

Analyzing Should Cost Data

One important thing to keep in mind is the data priority which looks as follows:

Real purchase price from supplier/transaction import
Prices from Makersite data enrichment tool
Prices calculated by Makersite AI model based on Product Category and Process used.

Column	Description
Material Cost	Calculated cost of the material based on the sum of the should cost or purchase price (if available) of the input components. Inbound logistics is accounted for at every level.
Manufacturing Cost	Calculated cost of product manufacturing depending on defined parameters (material cost %) in the cost model.
Total Cost	The calculated total cost of a product as the sum of the material cost, the manufacturing cost, and overhead cost.
Should Cost	Total cost plus a margin based on the manufacturing sector (based on Product Category) applied to the model. Higher level items take Should Cost as input for their Material Cost if no Purchase Price is available.
Should Cost Range	Based on the price bandwidth for the different materials, the bandwidth for the range is calculated.
Purchase Price	Purchase price coming from the available transaction data. Overrides the Should Cost as input for the higher-level item's Material Cost.
Potential Saving	Comparison between the Should Cost and the Purchase Price. This is where you can see the biggest potential for savings.

What's Next?

Having analyzed the cost breakdown of your product, you can use the potential savings when choosing your suppliers or negotiating a price.