MalakarConsultingMethod · Stage Two
How we model it.
Once exposure is known, it has to be quantified against your own numbers. These are the equations that turn a finding into a defensible figure — each one independently checkable.
Industry Playbooks
What gets quantified, sector by sector.
A should-cost on a stamped bracket and a should-cost on a 60 MVA transformer share a method and almost nothing else. Pick an industry to see which models we run, in what order, and against which index or standard.
Should-cost — building the part from the bottom up
A quote is an opinion. A should-cost is an estimate you can defend line by line, and it changes the shape of a negotiation because you are no longer arguing about the total.
M material at current index · L loaded labour rate · t cycle time · OH machine/burden rate · SG&A supplier overhead · π reasonable margin. Each term is independently checkable, which is the entire point.
Standard clean-sheet costing practice; material indices from public commodity benchmarks, labour rates from BLS Occupational Employment and Wage Statistics.
Learning curve — what the price should do after launch
Unit cost falls predictably with cumulative volume. If your supplier’s price is flat three years into a programme, that is a finding, not a fact of life.
Cn cost of the n-th unit · r the learning rate. At an 85% curve, every doubling of cumulative volume should take ~15% out of unit cost.
Wright, T.P. (1936). “Factors Affecting the Cost of Airplanes.” Journal of the Aeronautical Sciences, 3(4), 122–128.
Safety stock — sized, not guessed
Most safety stock is set by feel and then defended forever. The statistical form ties it to the service level you actually want and the variability you actually have.
Z service-level factor (95% → 1.65, 98% → 2.05) · σD standard deviation of demand · PC performance cycle (total lead time) · T1 the time bucket σ was measured in. When lead time varies too, the two variances combine — and the combined figure is lower than adding them.
King, P.L. (2011). “Crack the Code: Understanding safety stock and mastering its equations.” APICS Magazine. Full text hosted by MIT.
Total cost of ownership — the number that should drive the award
Unit price is usually 60–80% of the real number. Freight, duty, quality escapes, inventory carrying and payment terms decide the rest, and they routinely reverse a ranking.
P unit price · F inbound freight · D landed duty · Q quality/PPM cost · I × h average inventory × carrying rate · T value of payment terms.
Ellram, L.M. (1995). “Total cost of ownership: an analysis approach for purchasing.” International Journal of Physical Distribution & Logistics Management, 25(8), 4–23.
Economic order quantity — the lot-size sanity check
D annual demand · S cost to place an order · H annual holding cost per unit. Rarely the final answer once MOQs and freight breaks are layered on — but it tells you how far the current lot size sits from rational, and why.
Harris, F.W. (1913). “How Many Parts to Make at Once.” Factory, The Magazine of Management, 10(2), 135–136 — later popularised as the Wilson formula.
Run it on your own numbers.
Every model on this page is one you can apply yourself. If you would rather we ran it, the first pass is free.