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Pro-D Supply Management (Procurement) Track
Module 4
Applications in Cost Modeling (CM)

Module Summary

The definition of Cost Modeling is: “a technique used by purchasers to better understand the logic behind a supplier’s pricing, especially as it pertains materials, direct labor and overhead expenses. It is typically used to support pricing, and lead to a better understanding of the process that culminates in a make or buy decision.”


In this course, we focus on four key areas,

  1. Cost Modeling Elements (including types, behaviors and decisions,

  2. Should Cost (an internal assessment before going into the negotiation) vs. Target Cost (knowing both price and profit up front and backing into the cost),

  3. TCO-Total Cost of Ownership models (knowing the Pre-Acquisition, Main-Acquisition and Post-Acquisition costs), and

  4. Rolling out best-in-class practices to your supplier(s).


Also included in the course is an understanding of budgeting as a pre-cursor to good Cost Modeling and being able to differentiate between cost Avoidance, cost Reduction and cost Containment.


To round out this course, you will have the opportunity to complete a 50-question quiz to test your knowledge and apply what you learned. Successfully pass this module and the other 5 modules to earn your Certificate of Achievement from Missouri State University.


Benefits of Attending

Upon completion of the Applications In Cost Modeling course, the participant will:

  • understand the four-fold purpose of a budget which is to get pre-approved funding, set standards, monitor and most importantly, control

  • compare and contrast the various types of budgets including Zero-Based, Line-Item, Capital and Flexible

  • differentiate between a cost Avoidance (part of the increase), Reduction (the cost goes down) or Containment (you don’t spend more than the previous period)

  • understand how Cost Modeling relates to Value Analysis and Value Engineering

  • describe the five principles of Cost Modeling

  • review both the costs of quality as well as the costs associated with inventory

  • define a Spend Analysis and engage in a five-step model

  • define Total Cost of Ownership-TCO and its three categories of Pre-Acquisition (getting ready to make the buy), Main-Acquisition (making the buy) and Post-Acquisition (after the product or service is shipped or received)

  • review the factors that make up the Cost Driver Framework

  • differentiate between cost Types vs. Behaviors vs. Decisions

  • compare and contrast principles of Direct, Fixed, Variable and Mixed costs

  • review and apply both Life-Cycle and Activity Based costing

  • define Should Cost including a mathematical calculation

  • define Target Cost including the three types: Price, Cost, Value

  • review and apply three Overhead Allocation formulas

  • compare and contrast key supplier Profitability ratios

  • understand how to roll out these great techniques to your supplier including the use of Reverse Marketing and the Customer/Supplier Symposium.

Self-Paced Learning

You will be provided with access to the BMTG e-Learning Academy which will guide you through Module 1: Fundamentals of Supplier Relationship Management.

To ensure a smooth learning experience, each  Module is presented as a comprehensive "Course Book" within the user-friendly BMTG e-Learning Academy.


The Course Book is divided into four chapters, providing you with in-depth study materials and practical insights.


Here's what you can expect in each Course Book:

  • Chapter 1: Learning Objectives: Three downloadable PDFs serves as your study materials offering detailed information on the course topic comprising of a set of learning objectives that you can refer to it at your own pace, allowing you to absorb the content effectively.

  • Chapter 2: PowerPoint Slide Deck with Audio: As an additional learning resource, the PowerPoint Slide Deck is accompanied by audio narration to guide you through the study materials. This audio-led approach ensures a dynamic learning experience.

  • Chapter 3: Review Points: A summary PDF of the key learning outcomes to be studied prior to attempting your online assessment.

  • Chapter 4: 50 Question Multiple Choice Assessment: To assess your understanding of the course content, each Course Book includes a 50-question multiple choice assessment. The passing score for the assessment is 65%, thereby ensuring you have grasped the core concepts effectively. You will be able to take and retake the assessment until you pass.


How to Apply

Enroll in the Pro-D Supply Management (Procurement) Track directly on the BMTG e-learning Academy for only US$399 + VAT and gain automatic access to the course. Start enhancing your procurement skills today!

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