Cost Modeling: A Foundation Purchasing Skill

At the heart of best practice in purchasing is a set of skills. One of the most important is the one that enables managers to understand what determines cost.

In a recent survey of leading purchasing organizations sponsored by Strategy & Business, cost modeling was ranked among a list of 17 purchasing skills as one of the most critical. More significantly, the difference between the importance ranking and the self-assessed level of skill — the development gap — was among the largest as well. (See Exhibit I.)

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