COST BREAKDOWNS

CBD (Cost Breakdown) can be applied to any single component, but the more complex and complicated the component is, the more important it is to have all CBD, even if it is more difficult to collect them initially.

An example of big volume but ‘simple’ cost structure is this: Imagine that you are a steel purchaser. You could agree on a price formula with the cost and impact of each of the different sub materials and process parameters (energy) but because the topic is very concrete, this CBD is not even needed. Both parties have those ‘formulas’ and impacts clearly in mind during the negotiations.

Here is a different example: A material group with complex cost structure. Imagine that you are purchaser for design parts with a lot of different variants with low quantities/volume per variant but relatively high total volume. Even if the cost structure of the components is easy, due to the high amount of variants both parties cannot keep in mind the details of all of them. To have the material group under control you would need to agree on CBD as a basis for the prices.

And one last example: A complicated cost structure. Now you are purchaser for a highly sophisticated component with lots of subcomponents and production processes, each of them with different technologies and cost structures. Due to the high amount of processes, both parties cannot keep in mind the details of the cost of all of them. To have the material group under control you would also need to agree here on CBD as a basis for the prices.