How Lytica Can Take Should-Cost Analysis to the Next Level

In today’s competitive market, should-cost analysis is a vital tool for organizations looking to optimize procurement and secure cost savings. By breaking down a product’s components and processes, should-cost analysis helps businesses understand the true cost of manufacturing, beyond what’s simply stated in supplier quotes. These deeper insights not only uncover potential cost-savings opportunities but also arms procurement teams with the data needed to negotiate more effectively to ensure you’re paying a fair price. In an increasingly complex electronic components supply chain environment, the ability to identify costs with precision has become a key competitive advantage, helping companies stay agile in their sourcing decisions. 

As the complexities of electronic components supply chains continue to grow, traditional methods of accessing information for should-cost analysis often fall short. Lytica’s SupplyLens™ Pro Platform enhances this process by delivering realistic, data-driven pricing insights. With its powerful analytics, procurement teams and value engineers can validate costs, assess alternative manufacturer part numbers (MPNs), and gain deeper marketing intelligence insights. With Lytica, organizations can make smarter, data-driven design and sourcing decisions that keep them ahead of the curve in an ever-evolving marketplace.

The Limits of Traditional Should-Cost Analysis

Should-cost analysis is quickly becoming more complex. In the past, the more nuanced and time-consuming elements often limited how deeply organizations could use it or even discouraged them from adopting it all together. Let’s break down a few of the major hurdles procurement teams have faced, and why they so frequently slowed should-cost analysis adoption.

Lack of Accurate Data

All should-cost analysis depends on accurate data regarding production costs, materials, labor, and overhead. Unfortunately, with traditional should-cost analysis many organizations struggled to obtain precise or up-to-date data from suppliers or internal sources. Naturally, this led to inaccuracies that ultimately produced flawed results. Should-cost can’t be a guessing game.

Time-Consuming Manual Processes

A traditional should-cost approach is often extremely labor-intensive, requiring significant manual effort. Procurement teams must gather a wide array of data, perform detailed cost breakdowns, and analyze production methodologies—all of which can take a long time. Without automation, these processes can become bottlenecks, slowing down decision-making and potentially leading to outdated cost estimates by the time they’re finalized. And that’s if you’re only dealing with one static supplier or product, which will rarely be the case! 

Limited Market Insight

Are you accounting for broader market trends or external factors like fluctuations in raw material prices, supply chain disruptions, or geopolitical changes?  These factors can significantly influence costs, but aren’t always derisked in a traditional should-cost solution. Without up-to-date market intelligence, procurement teams miss critical shifts in the cost environment, leading to overly simplistic cost estimates or unmitigated risks that fail to reflect the true value of “should cost” in a dynamic market.

Supplier Resistance

Frustrating as it is, suppliers can be reluctant to share detailed cost structures or internal financial information: key components of any should-cost analysis. This resistance hinders your ability to create a fully accurate and reliable estimate. They may also inflate their costs to offer savings in negotiations, which can undermine the effectiveness of the analysis if procurement teams can’t verify the accuracy of the data they receive.

Difficulty in Accounting for Non-Quantifiable Factors

Should-cost analysis traditionally focuses on tangible, quantifiable factors like materials, labor, and overhead. However, there are other intangible, difficult-to-quantify factors that influence cost, such as supplier reliability, quality control, or the long-term strategic value of a relationship. These elements can be difficult to incorporate into a traditional should-cost model but are crucial for making informed procurement decisions.

How Lytica Enhances Should-Cost Analysis

This is where Lytica’s Platform demonstrates its true differentiator value!

By using automation to gather proprietary, up-to-date information, the SupplyLens™ Pro Platform immediately simplifies the should-cost equation, freeing you from concerns of inaccuracy or unwanted stress over time-consuming manual data-gathering. But it doesn’t stop there.

Rather than just providing you with mountains of raw data, the platform lets you compare the prices of individual components between suppliers and against current market trends, so you have the level of analytical insight that can guide you into the best decision for your business. This also helps your enterprise avoid pricing inconsistencies or missing information that you might encounter when manually trying to negotiate with a supplier for this level of transparency. As a result, you can make decisions more efficiently, with a deeper understanding of the many factors at play, and with a greater confidence than you might otherwise.

Finally and arguably the most important, Lytica’s platform is highly-scalable across the board. As we mentioned previously, it’s rare that a company will restrict its should-cost analysis to a single supplier or a single component. Even those with up-and-coming portfolios are likely to be juggling a few use cases they need to act upon. However, Lytica’s platform is designed to grow alongside your portfolio, all while maintaining the same simplicity and efficient automation no matter how many components, suppliers, or projects you’re dealing with. This means, you don’t need to restrict your business’ growth or pick-and-choose which analyses take precedence at a given time. Your success lies in your ability to expand, and to do so while achieving and maintaining the savings that allow you to build upon what came before, without worrying that something within your organization might buckle.

Validate Your Costs with Lytica

At its core, Lytica’s platform is built to transform your procurement strategies with richer actionable data, more effectively and swiftly gathered. Thanks to these solutions, the complexities of should-cost analysis no longer have to be a headache for you. Rather, while our tools do the work, you gain the rewards. 

As the market grows ever-more competitive, your analyses must continue to get sharper and sharper. That’s how you get the prices you deserve. That’s how you get the success you crave. You deserve the best, not shoulda-coulda-woulda.

Visit Lytica.com to gain further insights into your supply chain data and reach out today to schedule a demo.