Should Costing - Why and How to Perform

Understanding the drivers of raw materials and manufacturing costs is imperative to unlocking cost savings opportunities. Limited visibility into these cost drivers — and the overall production process — often results in incorrect component pricing, weakening your bargaining position with suppliers and making it all the more difficult to find avenues to cut costs.

Should-cost analysis is a powerful cost estimation tool that equips and empowers your procurement team to furnish viable evidence to suppliers as part of negotiation efforts, helping you achieve a final cost estimate that is closer to your target price. New product development is the key driver of business sustenance. Once a product is launched in to the market, it has its own rivals to kill it. However, it will only sustain based on the cost and technological impact that differentiates itself from the rest. In order to establish a targeted cost for the product, cost management is quite essential and has to be initiated from the design stage in the product life cycle to achieve the target cost. Cost management denotes actions driven by the top management to satisfy (meet) customer’s requirements on reducing and controlling cost in the early stages of design. Hence Should-Cost analysis is essential for profitable new product development.