Reduce Product Costs Using The Should Costing Method

“Should Costing provides the basis for continuous cost reduction and waste elimination. Should Costing also provides the ability to formulate the best economies of scale from a cost view point, which can be used to leverage a ‘best price’ in the negotiation process.”
– Geometric Limited

Should Costing is a systematic process that enables cost reduction from the conceptualization stage through the product life-cycle.  Maintaining competitiveness within the aerospace industry is highly dependent on an organization’s ability to reduce product costs and delivery cycle times. However, the industry as a whole continues to face challenges in managing product costs from the inception stage through the very long life-cycle of its products.

Aerospace organizations produce complex products that source between 50-70% of their components from suppliers. To eliminate significant costs prior to production, organizations must first identify the major cost drivers of components that are designed, manufactured and procured.  Identifying these cost drivers can aid in supplier selection, effective negotiation and advanced segmentation.

I sat down with Ken Sutphin, Head of Mechanical Engineering Practices at Geometric Ltd., to explore the benefits that their customers have seen in adopting the Should Costing method.  According to Ken, clients that have utilized Geometric’s proprietary productivity tools for Should Costing have enabled:

• An improved ability to launch new products at target costs.
• Processes with integrated tools that are almost 2X faster than conventional process with better repeatability and accuracy.
• Complete recognition and understanding of component cost drivers.
• The proliferation of Should Costing in design stage for early optimization.
• VAVE savings opportunities through design optimization, simplifications, and improvements in manufacturability.
• Cost discussions, based on facts and reason, transfer pricing power from the supplier to the purchaser.
• Offshore scalability for supporting global manufacturing centers.

Should costing can be a meticulous process.  It involves “analyzing the engineering models to understand the raw material required, defining the manufacturing processes required to deliver the required form features, and calculating the total costs through the use of rate data related to material costs and processing costs.”  Explains Ken Sutphin.

The infographic below illustrates some of the major factors influencing should costing as well as the estimation process.

For more information on reducing costs and driving efficiency in aerospace manufacturing, join Geometric Limited and Generis Group at the American Aerospace & Defense Summit 2015 taking place in Arizona this December!