How do I create a component?

In WTP, you can build cost models in different ways depending on how your product is made. If a product consists of several components, you can decide whether to model it as a single product or as multiple components that are combined later.

Step 1: Understand your product structure

First, determine how the product is produced:

• Scenario A: All components are produced by the same supplier
  → The supplier manufactures all parts in-house, within the same industry.
  In this case, you can model the product as a single cost model with all materials and processes included directly.

• Scenario B: Components are produced in different industries
  → The supplier buys components or semi-finished products from other suppliers.
  In this case, it is best to create separate cost models per component.

If your situation matches Scenario B, follow the steps below to create separate component cost models.

Step 2: Create a cost model for each component

When you create a cost model for a component, follow the same process as for any other cost model:

1. Select the country and Industry Cost Profile that best matches where the component is manufactured.

2. Add all commodities that go into the component, with their estimated weights.

3. WTP calculates the component cost model based on the information you entered, including all relevant cost drivers and overhead for that industry.

Repeat this for every separate component that is purchased or produced elsewhere.

Step 3: Combine components into a full product model

Once all component models are ready:

1. Create a new cost model for the final product.

2. Instead of selecting Add Commodity, choose Add Component.

3. Select the relevant component models you created earlier.

You can also mix components and commodities:

• If your supplier buys some components, add them as components.

• If your supplier manufactures parts in/house, add the required commodities directly.

This allows you to represent your supplier’s real production situation accurately.

Step 4: Understand the difference between components and in-house production

When you create a cost model for a purchased component, WTP applies the overhead costs and cost drivers of the component’s industry.
Those costs are already included in the purchase price paid by your supplier.

When you add commodities directly (for the components your supplier makes themselves), the overhead of your supplier’s own industry applies.
This distinction ensures that the cost structure accurately reflects whether a component is manufactured in-house or purchased externally.