Should-Cost Analysis for Procurement Decision Making Training Course

Course overview

Procurement teams are routinely asked to judge whether a supplier’s quoted price is reasonable, negotiate reductions that can be defended, and distinguish a genuine cost increase from margin expansion. Without a structured should-cost model, buyers often rely on historical prices, supplier assertions, or broad market indices that do not explain the economics of a specific part, service, or package. This course equips participants to build evidence-based cost positions for sourcing, negotiation, supplier development, and make-or-buy decisions.

Participants learn to decompose supplier prices into material, labour, conversion, tooling, logistics, overhead, depreciation, and profit components. They build clean-sheet should-cost models using cost-driver trees, bills of materials, process routing, cycle-time estimates, capacity assumptions, commodity indices, and currency or inflation adjustments. The course also covers total cost of ownership, cost breakdown analysis, supplier quotation challenge, sensitivity testing, and variance analysis between quoted, target, and actual costs.

Delivery combines instructor-led modelling demonstrations with spreadsheet workshops and procurement cases drawn from direct materials, fabricated components, and outsourced services. Participants work through incomplete supplier data, test assumptions, document a negotiation position, and present their findings to a mock sourcing review panel. Each participant leaves with a reusable should-cost model template, a cost-driver assumption log, and an action plan for applying the method to a live category or sourcing event.

The course is designed for procurement professionals who already manage quotations, supplier bids, contracts, or category spend and need stronger analytical depth. It is particularly valuable where pricing is technically complex, supplier transparency is limited, or savings claims require finance-ready evidence.

Course objectives

By the end of this course, participants will be able to:

• Build a clean-sheet should-cost model for a purchased component, service, or package
• Decompose supplier quotations into material, labour, conversion, overhead, logistics, and profit elements
• Construct cost-driver trees using bills of materials, process routing, cycle times, and capacity assumptions
• Validate material-cost assumptions with commodity indices, yield factors, and currency adjustments
• Calculate total cost of ownership including quality, inventory, transport, duty, and lifecycle costs
• Perform sensitivity analysis on volume, material price, labour rate, utilisation, and supplier-margin assumptions
• Prepare a supplier cost-breakdown challenge pack with evidence, questions, and negotiation levers
• Present a documented should-cost recommendation for sourcing approval or supplier negotiation

Benefits of attending

Target competencies

Who should attend

• Category Managers — who need defensible target prices and negotiation positions for strategic spend
• Strategic Sourcing Managers — who evaluate competitive bids and lead complex supplier negotiations
• Procurement Managers — who must validate savings opportunities and approve sourcing recommendations
• Senior Buyers — who analyse supplier quotations for direct materials, components, or outsourced services
• Cost Engineers — who translate technical specifications and process assumptions into purchase-cost models
• Supplier Development Managers — who work with suppliers to identify cost-reduction and productivity opportunities

Requirements and prerequisites

Participants should have practical experience in procurement, sourcing, purchasing, category management, or supplier commercial discussions. They should be comfortable reading supplier quotations, using basic spreadsheet formulas, and working with concepts such as unit price, volume, lead time, Incoterms, and total cost of ownership. Familiarity with bills of materials, manufacturing processes, or service cost structures is helpful but not essential. Participants need not be accountants, engineers, or data analysts, and no prior experience with formal clean-sheet costing, Power BI, SAP Ariba, or specialised cost-estimating software is required.

Training methodology

The five-day programme uses short instructor-led explanations followed by spreadsheet-based modelling labs. Participants analyse supplier quotations, bills of materials, routing data, commodity movements, and logistics assumptions to build and test cost models. Cases progress from individual cost-element calculations to team-based sourcing decisions, with groups defending their assumptions against a simulated supplier and internal review panel. Daily feedback focuses on model logic, data quality, and commercial usability. The final session converts each participant’s model into a practical application plan for a current category, tender, or supplier negotiation.

Course outline

Day 1: Should-Cost Foundations and Cost Architecture

• Should-cost versus market-price and historical-price approaches
• Clean-sheet costing principles and model scope definition
• Supplier price decomposition into cost-element categories
• Cost-driver trees for products, components, and services
• Fixed, variable, semi-variable, and step-cost behaviour
• Data sources for quotations, specifications, and supplier cost breakdowns
• Assumption registers and model-audit trails

Workshop: Participants deconstruct a supplier quotation and produce a cost-element map with an initial assumption log.

Day 2: Material, Labour, and Process Cost Modelling

• Bill-of-material analysis and material yield calculations
• Commodity index selection and material-price escalation methods
• Foreign-exchange conversion and currency-risk assumptions
• Labour-content estimation using cycle time and labour rates
• Process routing for machining, fabrication, assembly, and packaging
• Capacity utilisation, throughput, and production-volume effects
• Tooling, scrap, rework, and quality-loss cost calculations

Workshop: Participants build a clean-sheet component model from a bill of materials, routing sheet, and market-data pack.

Day 3: Overhead, Margin, and Total Cost of Ownership

• Manufacturing overhead allocation and absorption-rate logic
• Depreciation, maintenance, and capital-equipment cost treatment
• Supplier SG&A, risk contingency, and profit-margin analysis
• Activity-based costing compared with conventional overhead allocation
• Logistics, duty, insurance, inventory, and payment-term costs
• Quality, warranty, service-level, and lifecycle cost factors
• Total cost of ownership model design for supplier comparisons

Workshop: Teams compare two supplier offers and produce a total-cost-of-ownership recommendation with stated commercial trade-offs.

Day 4: Quotation Challenge and Negotiation Analytics

• Supplier cost-breakdown request design and data-validation questions
• Quoted-versus-should-cost variance analysis
• Price-volume, mix, productivity, and inflation bridge analysis
• Sensitivity analysis using volume, yield, labour, and margin variables
• Scenario modelling for alternate sourcing and make-or-buy decisions
• Negotiation lever identification from cost-driver evidence
• Savings baselines, cost avoidance, and benefits-tracking rules

Workshop: Participants create a supplier challenge pack containing variance charts, negotiation questions, and a target-price range.

Day 5: Decision Governance and Workplace Application

• Model-quality checks and assumption-governance controls
• Cross-functional review with finance, engineering, operations, and legal
• Presenting should-cost findings to sourcing approval boards
• Managing incomplete supplier data and confidence ranges
• Ethical handling of supplier information and confidentiality boundaries
• Should-cost model reuse across categories and contract renewals
• Ninety-day implementation planning for a live procurement opportunity

Workshop: Participants present a completed should-cost recommendation and produce a 90-day application plan for a live category or supplier decision.

Tools & standards covered

Microsoft Excel, Microsoft Power BI, SAP Ariba, ISO 20400

A typical training day

Live online deliveries follow the same structure in the East Africa Time zone, with shorter screen blocks and longer breaks.

What the fee includes

How you can take this course

Certification

Participants who complete the full five days receive the Skillset Development Certificate of Completion, stating the course title, course code, dates and delivery format — suitable for professional-development records and employer reimbursement.

Frequently asked questions