WASHINGTON, Nov. 14, 2011 /PRNewswire-USNewswire/ -- Global management consulting firm A.T. Kearney recently explained the benefits of a should-cost review in managing and reducing the costs of today's military weapons programs in an op-ed published in Defense News, the weekly defense industry trade publication for top leaders and decision makers in the U.S. and around the world.
In "How to Run a Should-Cost Review," A.T. Kearney partners Bob Willen and Randy Garber note that the U.S. Department of Defense is experiencing unprecedented cost pressures as demands to reduce government spending rise, making the affordability of weapon programs and services a hot topic. Should-cost review (SCR) has become the tool of choice to improve affordability. Studies show that SCR, when implemented systematically, can reduce total systems costs by 5 percent to 15 percent and subsystems costs by up to 40 percent.
To read more on SCRs, please see the original A.T. Kearney white paper, Should-Cost Review: A Pragmatic Approach to Affordability.
An SCR seeks to discover what a system should cost by rigorously examining all available information, including suppliers, unit costs, program longevity and other factors. As legacy systems tend to have cost models that may no longer make economic sense, an SCR can help correct for any unjustified expenses. Such an analysis, when done with sufficient rigor, offers the visibility to make more accurate decisions in managing programs and reducing costs, Willen and Garber wrote. An SCR offers several key advantages over traditional cost estimation practices by:
- Providing an understanding of both cost-to-produce and over-specification cost-reduction opportunities.
- Delivering the cost details to support fact-based negotiations.
- Setting the foundation for implementable cost reductions.
- Limiting future design changes (through reusable designs).
- Assessing the true impact effects of program decisions and trade-offs.
The authors recognize that an SCR is neither a simple nor an easy exercise to perform, but it can serve as a valuable affordability tool. With the right results-oriented approach and a realistic action plan that can be (and actually is) executed, SCR is a useful tool for lowering DoD program costs without eroding supplier profitability.
About A.T. Kearney
A.T. Kearney is a global management consulting firm that uses strategic insight, tailored solutions and a collaborative working style to help clients achieve sustainable results. Since 1926, we have been trusted advisors on CEO-agenda issues to the world's leading corporations across all major industries. A.T. Kearney's offices are located in major business centers in 38 countries. For more information, please visit www.atkearney.com.
SOURCE A.T. Kearney