ABSTRACT
Cost modelling is a tool by which all of the elements of cost are identified for the provision of any goods or services. The broad benefit of being able to identify all of the elements that make up a suppliers quotation is that each element can be compared with what you feel that element should actually cost the supplier. This can then be used in the negotiation process to endeavour to lower the overall price. The theory behind open book costing (OBC) is that both the customers and the suppliers collaborate to examine supply costs and search for methods to reduce them through joint initiatives, such as shared transport or combining packaging or delivery points. Tear-Down Analysis is a method of cost reduction by a detailed examination of competitor's costs. It is used for analysing products materials, functions, features, design, manufacturing processes, assembly time and costs.
