We work with our clients to optimize their global footprint according to Total Cost of Ownership (TCO) principles, taking into account the type of products sourced or manufactured, the type of services provided, the location of the customer and supply base, as well as the complexity of the supply chain.

Based on our work with clients, who source components, sub-assemblies, and entire products globally, we were one of the first consulting firms to identify the trend towards bringing back production to the United States and Europe from lower-wage-cost locations.

While emerging economies, particularly in Asia, have a labor cost advantage compared to the United States and Europe, a closer looks suggests that products sourced from these countries may not necessarily provide the lowest TCO for the buyer.  TCO analyzes the entire cost a company incurs when purchasing and using a particular manufactured part.  TCO is defined as the product price plus any costs, which are jointly incurred by the supplier and the buyer, and internal costs incurred by the buyer.  The TCO of a manufactured part therefore also includes the non-price TCO components such as freight and packaging, inspection labor caused by the part in the purchaser’s organization, inventory carrying costs, missed customer deliveries due to shipment delays, and travel costs to visit and manage the supplier.

The article outlining our insights in this area has been requested and downloaded regularly since 2010.

Download the article here.