2-7 Conduct Should-Cost Analysis

Should-cost analysis reveals the cost at which a supplier should furnish an item or service to the Postal Service, given reasonable economy and efficiency of operations. It should not be confused with the cost analysis of a proposal. Should-cost analysis focuses on continuously improving processes and practices to meet or exceed supply chain requirements. The should-cost analysis breaks down the component costs of a purchase, which give insight into the ideal cost target. The analysis also helps define purchase costs, leads to further refinement of the TCO, and helps ensure that the purchase will be conducted with sufficient information.

The following areas are applicable to conducting a should-cost analysis: