Input page for Total Cost of Ownership Estimator™

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General Information

 

  Real case Experimenting

*Which of the sources you are analyzing is currently a source and thus your data is based on experience not conjecture: (check one or both)

*Is or would the work being analyzed be produced:

  In-house (in your own facility), or outsourced (sourced from a supplier)
  In-house (in your own facility), or outsourced (sourced from a supplier)

 

 

No.Input data factorU.S.OffshoreCommonExplanation
1  Country determines freight rates.
2 For in-house production insert standard cost or Cost of Goods Sold.
3   
4  Product Category determines duty rate. The programmed duty rates for parts is 4% and for tools is 8%. If your products' duty rate is different from one of these: still select a product category, insert your duty rate in the cell in the next row.
5  For selecting a duty rate other than the default values. This # would then override the default rates.
6   
7 Offshored will typically weigh more. Export packaging is more complex and has to meet standards of the countries of destination and origin. Must deal with longer and more varied conditions.
8  
9 The balance for offshored is assumed to be air freighted.
10  Time until product is obsoleted or significantly revised.
11 Estimated time from first purchase until until last purchase.
12 Offshored will typically cost more. Export packaging is more complex and has to meet standards of the countries of destination and origin.
13 Often Asian suppliers are paid prior to shipment.
14  
15  Probably Cost of Capital. Only enter a value if the product is paid for prior to shipment.
16  Most articles suggest 25%.
17 Typically, offshored shipments are larger and must be locally warehoused.
18  Locally warehoused product must be placed and picked before delivery to the factory floor.
19 Offshored is typically longer due to shipping time and less frequent shipments.
20 Warranty costs are probably recorded as a % of sales $, not of part price.
21   
22 Opportunity cost despite emergency air freight. These costs are perhaps kept as a % of sales $.
23 Extremely difficult to collect from Chinese vendors. See 8/1/07 Financial Times article by Patti Waldmeir: "Made in China, but sued in America."
24 1. Trade in counterfeit and pirated goods equals $800B/yr, 5 - 7% of world trade per IACC. 80% of counterfeiting comes from China. The Economist March 4, 2010.
2. "The U.S. government said Friday that the level of theft of copyrights and patents in China "remains unacceptable" and kept Beijing on a "priority watch list" for intellectual property protection. An annual report by the U.S. Trade Representative's office (USTR) said that China's enforcement regime "remains largely ineffective and non-deterrent" and that U.S. copyright industries ranging from software and movies to publishing to footwear "report severe losses due to piracy in China." " Source: IW Connecting Manufacturing Leaders April 30, 2010.
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27 1. "co-location synergies...are more pronounced the more R&D intensive the supply chain." "much of the knowledge underlying emerging technologies is tacit in nature...co-location synergies are critical." Rationales and Mechanisms for Revitalizing U.S. Manufacturing R&D Strategies. Gregory Tassey, NIST
2. "Global sourcing mitigates disadvantages but does not create advantages. Moreover, global sourcing is normally a second-best solution compared to a cluster." Source:The Adam Smith Address:Location, Clusters, and the New Microeconomics of Competition Prof Michael Porter, HBS Jan 1998 http://www.econ.nyu.edu/dept/courses/niemira/980107.pdf
3. "exporting manufacturing has a negative impact on the country's industrial commons, which represents the collective capability to sustain innovation." Professors Gary Pisano and Willy Shih Harvard Business School http://hbswk.hbs.edu/item/6664.html
28 Audits, partnering, negotiations, etc.
29 For example for 2 weeks in China: air $1,500, 13 nights hotel at $200, 13 days meals and misc @ $100
30 For example for 2 weeks in China, weekly: $1,500 salary, $500 fringes.
31 Time and expense to visit several suppliers and then audit 1 or more to select one.
32  
33 Prototype typically sourced locally to facilitate partnering. Prototype cost will be higher if production will be offshored, since U.S. shop will charge more if it will not get production.
34 Long pipeline and loss of clustering effect makes fast reaction more difficult, driving the company towards commoditization.
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