Using TCO Instead of Price to Calculate ROI on Domestic Investment vs. Offshoring
When Total Cost of Ownership (TCO) is used instead of purchase price, automation often delivers a much stronger business case for reshoring.
In the example below, when calculated at the price/manufacturing cost level, the U.S. currently has a $2/unit disadvantage. A $1/unit automation cost savings leaves a $1/unit disadvantage. Still unfavorable. No ROI, no matter how many are produced. When calculating using TCO, the U.S. currently has only a $0.50/unit disadvantage. A $1/unit savings results in a $0.50/unit U.S. advantage. Excluding interest, a $100,000 investment would be recouped by the first 200,000 units produced. Good investment if annual quantity is 100,000 or more, or if other products can be made on the new machine.
Use the free Total Cost of Ownership Estimator to help calculate your TCO. ---
