2-7.3 Possible Results

The should-cost analysis determines the major cost drivers (e.g., unit volume can be a cost driver when increasing the unit volume produces lower costs because fewer setups are needed). The results of the analysis may lead to:

• Exploring alternative ways of making products.
• Engineers choosing the most cost-effective processes and considering how individual part features might be modified to optimize manufacturing costs.
• Reducing products’ costs and cycle times.
• Suppliers unbundling cost elements of the purchase so cost reductions can be worked on together.
• A benchmark for whether a supplier quotation/offer is reasonable.

The should-cost analysis does not guarantee that costs will be reduced. Once completed, the analysis allows the Postal Service to work with suppliers to lower costs, when possible. Should-cost analysis is relevant when like cost components are compared (e.g., comparing apples to apples). The final Postal Service specifications or terms and conditions may not allow for exact comparisons from the should-cost analysis. There may also be fluctuations in prices for components resulting from external or internal factors that will have to be accounted for when comparing costs.