Product Calculation, Cost Split Up/CSU

A detailed product calculus has two main purposes:

1.                             Powerful input to price negotiations.

2.                             Base for cost reduction work as understanding of cost structure, evaluation of proposals and to establish effect of implemented changes.

Many companies do not have detailed product calculi available for their own products and even less for their purchased products.

If it shall be used as a negotiation preparation one need to build a cost understanding by making an own cost estimation. Some large companies have specialists employed to calculate purchased material but in most cases the purchaser has to do this on his/her own. It is not that hard if one has a structured process and understand that the most important thing is not to get it perfectly right but to dare to make an own estimation as base for the discussion.

When the calculus is a basis for the common cost reduction effort it is expected from the supplier. Even then the team often has to engage in making and understanding it as it often is not available in the details needed for a structured work.

Regardless of who and why the making of a product calculus follows the same process:

Calculation process