Should-cost analysis estimates what a product or service ought to cost under stated material, labor, process, overhead and market assumptions. Buyers use it to prepare negotiations and test quotations.
How the control works
Build the model from the actual design, route, volume and region. Show ranges where inputs are uncertain and separate fact from assumption.
| Area | What the record should show |
|---|---|
| Control | Build the model from the actual design, route, volume and region. Show ranges where inputs are uncertain and separate fact from assumption. |
| Evidence | Keep input sources, date, calculation, sensitivity, exclusions and the supplier explanation for material gaps. |
| Tradeoff | A should-cost model is a negotiation view, not proof of the supplier’s actual cost. Poor assumptions create false precision. |
Evidence buyers should retain
Keep input sources, date, calculation, sensitivity, exclusions and the supplier explanation for material gaps.
Where the term is misused
A should-cost model is a negotiation view, not proof of the supplier’s actual cost. Poor assumptions create false precision.
Related definitions: supplier qualification, strategic sourcing, landed cost.
