{"id":18,"date":"2026-04-08T09:30:00","date_gmt":"2026-04-08T13:30:00","guid":{"rendered":"https:\/\/www.nestorsoftware.com\/should-cost-the-most-undervalued-tool-in-procurement\/"},"modified":"2026-04-08T09:30:00","modified_gmt":"2026-04-08T13:30:00","slug":"should-cost-the-most-undervalued-tool-in-procurement","status":"publish","type":"post","link":"https:\/\/www.nestorsoftware.com\/?p=18","title":{"rendered":"Should-cost: the most undervalued tool in procurement"},"content":{"rendered":"<p>There&#8217;s a quiet asymmetry in most supplier negotiations: the supplier knows what their cost is, and the buyer knows what their budget is. Those two numbers have no necessary relationship to each other.<\/p>\n<p>Should-cost modeling closes that gap.<\/p>\n<h2>What a should-cost model actually contains<\/h2>\n<p>At its simplest: a bottom-up estimate of what a part or service ought to cost, built from:<\/p>\n<ul>\n<li><strong>Material<\/strong>: raw input cost \u00d7 yield assumption<\/li>\n<li><strong>Labor<\/strong>: cycle time \u00d7 labor rate \u00d7 overhead multiplier<\/li>\n<li><strong>Overhead<\/strong>: fixed cost allocation per unit<\/li>\n<li><strong>Logistics &amp; duty<\/strong>: where Incoterms become real money<\/li>\n<li><strong>Margin<\/strong>: a defensible profit for the supplier<\/li>\n<\/ul>\n<p>None of these are precise. All of them are defensible. That&#8217;s the point.<\/p>\n<h2>The shift it creates<\/h2>\n<p>Without a should-cost model, the negotiation is: <em>buyer asks for a lower price; supplier explains why their price is justified<\/em>. With one, it inverts: <em>buyer presents a target cost; supplier explains where the model is wrong<\/em>.<\/p>\n<p>That second conversation is fundamentally different. Either the supplier proves the model wrong \u2014 which gives you new information you didn&#8217;t have \u2014 or the supplier closes the gap. Both outcomes beat the first conversation.<\/p>\n<h2>Where it doesn&#8217;t work<\/h2>\n<p>Should-cost is weakest where labor is the dominant cost (consulting, creative services) and the labor itself is heterogeneous. In those categories, scope clarity and rate benchmarking do more work than a cost model.<\/p>\n<p>For physical goods, custom manufactured parts, and most direct-spend categories, it remains the single highest-leverage analytical tool you can build.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Buyers who walk into a negotiation knowing what the part should cost negotiate a different conversation than buyers asking &#8216;is this price fair?&#8217;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-18","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=\/wp\/v2\/posts\/18","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18"}],"version-history":[{"count":0,"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=\/wp\/v2\/posts\/18\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nestorsoftware.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}