The cost management of direct materials has become very complex owing to company specific and industry specific factors. One of the main factors attributing to this has been the steep rise in raw material costs. Many companies have also witnessed engineering changes which have made cost calculations even more complex. This results in difficulties for companies to develop and maintain their supplier base.

Should Cost modeling is one of the tools used in a company's supplier development program to arrive at a "Should" cost for a part being developed. It is used to give an accurate target cost to the supplier, so that companies get the part at the best possible price.

Therefore, while a traditional costing model assumes a top-down approach, "Should Cost" modeling ensures a base-top approach which is driven by one "Should" cost for a specific material. This cost is arrived at after immense research and it opens up opportunities to understand existing inefficiencies in processes and reduction in the costs incurred thereof. This model also ensures deep collaboration with suppliers as they would receive aid from the company in reducing and maintaining costs. Yet another benefit of the "Should Cost" model is that it enables the purchasing team to prospect costs better and optimize target setting.