In the past, there was a trend for companies to purchase modules or systems, specifically as a way of reducing the complexity of their own procurement. This frequently resulted in the loss of technological or commercial transparency, particularly for parts with a high share of service or development costs, or those bought as a complete system but having clearly definable components.
Unbundling of prices addresses this challenge and generates transparency with regard to the price structure of a module or system. It does so by breaking down the total price of a product or service into the relevant price elements for individual components or process steps. The price transparency gained in this way can then be used for determining target prices.
After breaking down modules or systems into smaller components or process steps, target costs for the individual part-products can be identified in one of two ways, either by submitting an inquiry to potential suppliers for the individual component, or by determining target costs using cost analyses based on specific cost drivers (for example, cost-regression analysis or cost-based price modeling).
The resulting price transparency for individual components can be exploited in different ways. It can be used in renegotiations with the system supplier; or the buying company may stipulate the use of parts by lower-cost suppliers. Alternatively, the company may be able to abandon system procurement altogether and buy components instead.