In my December column, I discussed how total cost of ownership (TCO) can reveal the hidden costs of offshoring and determine the real profit and loss impact of reshoring and offshoring. Now, we will continue our in-depth look at the Reshoring Initiative’s Total Cost of Ownership Estimator—its benefits, who should use it, and why.
Placing a real value on shipping, time to market, travel, intellectual property risk, increased inventory, and struggles with communication and quality issues can tip the scales in favor of producing at home. Total cost analysis can identify more than two dozen hidden relevant costs, each of which represents up to 2 percent of a product’s final total cost. Savings from lowering or eliminating these costs can offset some or even all of a 15 to 30 percent advantage in purchase price enjoyed by products made in low-labor-cost countries.