The Offshoring Decision Total Cost

Ferreira and Prokopets (2009) suggest that companies should evaluate the impact of offshoring on the following key elements of total cost  

Supplier price should link to costs from direct materials, direct labor, indirect labor, management, overhead, capital amortization, local taxes, manufacturing costs, and local regulatory compliance costs. 

Terms costs are affected by net payment terms and any volume discounts. 

Delivery costs include in-country transportation, ocean/air freight, destination transport, and packaging. 

Inventory and warehousing include in-plant inventories, in-plant handling, plant warehouse costs, supply chain inventories, and supply chain warehousing costs. 

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