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Table 1. Worksheet for Calculating Total Cost of Ownership* Cost Factor


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ONLINE RESOURCE


To use the free total cost of ownership estimator, visit www.reshorenow.org.


Even if the overseas diecaster


would accept lower orders, Wiegers said his company would run the risk of shortages because lead times are so long. Hubbardton Forge is looking for


ways to reduce tooling costs at U.S. sources, which are still 50% higher than for Chinese suppliers. “We’re trying to get creative with


that—maybe getting multiple parts in the die. Or maybe we could have the dies made overseas,” Wiegers said.


Innovation Costs One of the variables in Moser’s


TCO estimator includes the impact a source has on innovation and product diff erentiation or mass customiza- tion. According to his calculation formula, impact on innovation can be determined by multiplying the unit price by the innovation risk percent- age, which casting customers must determine country-by-country or supplier-by-supplier. Moser suggested setting risk costs consistently, assign- ing higher costs for high risk items and developing countries. T e impact on innovation entails


intellectual property theft among other things. As a global company with global customers, Navistar Inc. sources components all around the world. It’s found that keeping engineering and manufacturing tied close together aids product development. “If we want something designed


overseas, and [our manufacturing knowledge] is overseas, what is our reaction time?” said Houman Kasha- nipour, president of Navistar Inc.’s Pure Power Technologies business. “I may decide to do some castings [in-house] because I want to control the technology and the strategic decision is about total cost and not just piece cost.” Long lead times impact innovation,


CoGS (Cost of Goods Sold) FOB price Packaging Duty Fees (% of price) Fees (fl at) Routine surface freight, excluding local Routine air freight, excluding local 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 Travel (start-up) Travel (audit/maintain) Pick/place into local inventory Purchasing cost, excluding travel Total Other Hard Costs Cumulative Total Risk Emergency air freight Rework/quality Product liability non-recovery risk Intellectual property 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 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 5-YEAR FORECAST *The full interactive worksheet is available at www.reshorenow.org.


Mar/Apr 2012 | METAL CASTING DESIGN & PURCHASING | 35


U.S.


Offshore


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