[FIGURE 1] SAMPLE TOTAL COST OF OWNERSHIP (TCO) ESTIMATOR (IN U.S. DOLLARS)
Cost factor
CoGS (Cost of goods sold)
FOB price
Packaging
Duty
Fees: percentage of price
Fees: flat
Routine surface freight, excluding local
U.S.
Offshore
Calculation formula
$100.00
$1.00
$0.00
$0.00
$0.00
$0.00
$70.00
$1.40
$2.80
$0.50
$0.10
$0.29
Routine airfreight, excluding local
$0.00
$0.00
unit price x packaging cost
duty x price
fee x price
fee
routinely planned for surface freight x (unit weight +
packaging weight) x surface freight rate
(1- routinely planned for surface freight) x (unit weight + packaging
weight) x air freight rate
Freight insurance at 0.5% on imported product
Total CoGS
Other Hard Costs
Carrying cost for in-transit offshored product if paid
before shipment
Carrying cost for inventory on-site
Prototype cost
End-of-life inventory
$0.00
$101.00
$0.35
$75.44
$0.00
$0.47
shipment time in years x interest rate x price
$0.82
$0.03
$2.41
$2.57
$0.12
$5.83
Travel: startup
Travel: audit/maintain
$0.02
$0.08
$0.17
$1.57
Pick/place into local inventory
$0.00
$2.00
Purchasing cost, excluding travel
Total Other Hard Costs
Cumulative Total
Risk
Emergency airfreight
Rework/quality
Product liability nonrecovery risk
Intellectual property (IP) risk
Opportunity cost: lost orders, slow response, lost customers
Economic stability of the supplier
Political stability of the country
Total Risk
Cumulative Total
Strategic
Impact on innovation of distance from manufacturing to
research and development (R&D)
Impact on product differentiation / mass customization
Total Strategic
Cumulative Total
Green
Production
Shipping
Local warehouse
Travel
Disposal of obsolete inventory
Total Green
GRAND TOTAL
Five-Year Forecast
Annual impact of wage inflation and currency appreciation
on price of product
$0.00
0.60%
$2.00
$5.37
$106.37
$3.00
$15.72
$91.16
prototype cost / annual units / product life
1/12 x unit price x (delivery time + average inventory) x annual
quantity / annual quantity / product life
startup cost / annual units / vendor life
annual number of trips x (per trip cost of travel time +
expense) / annual units
(1- of inventory delivered JIT) x U.S. unit price x pick and
place cost as of U.S. unit price
U.S. unit price x purchase cost
$0.00
$1.00
$0.10
$0.10
$0.50
$0.10
$0.10
$1.90
$108.27
$0.37
$2.10
$0.42
$1.40
$1.05
$0.35
$0.35
$6.04
$97.20
air freighted x (unit weight + unit package weight) x airfreight rate
unit price x quality cost
unit price x liability risk cost
unit price x IP risk cost
unit price x opportunity risk cost
unit price x supplier economic instability risk
unit price x country political instability risk
$0.35
unit price x innovation risk cost
$0.00
$0.00
$108.27
$0.35
$0.70
$97.90
unit price x commoditization risk cost
$0.00
$108.27
$0.00
$97.90
4.50%
0.3 x (wage inflation + currency appreciation %)
