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Why Haven’t I Heard of Should Cost Analysis?

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According to the University of Arizona, Tucson, cost analysis is also called cost/benefit analysis, cost effectiveness, as well as other terms, depending on who is writing about it. It is no wonder some question, "Why haven’t I ever heard of should cost analysis?" Probably the number one reason someone is not familiar with this analysis is because too few companies avail themselves of the tool. Should cost analysis is a teacher and revealer of unseen things.

Basically, it is a system for determining the true cost of a product, program, service, or even quality control management. Used to assess or compare products, processes, or decisions, a sound should cost analysis is vital to sound decisions. It generally starts with pricing out a bill of materials, then adds an approximation of labor and profit. 

Cost analysis can provide budgets or estimates of what the product should cost. This in turn, should motivate a company to examine its manufacturing process more deeply and help it discover attrition costs and hidden or unanticipated costs.  

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It can also lead to design improvements, materials changes, and process variations. An examination of the activities that drive costs may reveal opportunities for process improvement through training. After all, labor is one of the key costs in the PCB industry.

The main cost in the industry is materials. Through close relationships with vendors, it is possible to negotiate savings on costs; and, according to Strategy & Business magazine, a strong balanced relationship with suppliers can drive improvements for both parties.

In an environment of ever-increasing competition, this is an exercise that should not be overlooked. Understanding costs is as vital as quality.

Further Reading

How Electronic Components Are Priced

This post originally appeared on the DigiSource Blog