The readings for Chapter 8 discuss the concept of Total Cost Sourcing (uploaded file) as a general concept to ensure that in the hurry and frenzy to reduce costs of the supply chain they do not forget to include all potential costs in the calculations. The “Total” in Total Cost Sourcing requires you to consider all types of costs, direct, indirect as reflected in the statement:
“With globalization came the importance of total landed cost calculation, which included tariffs and duties as well. Moreover, dramatically different lead times between domestic and off-shore sources have made it necessary to consider such things as transit times and the resulting extra safety stocks required.
These other factors become critical in making sourcing decisions, as they can impact a company’s agility-the speed and reliability of product introductions, the ability to ramp up and down with demand fluctuations, and the amount of markdowns and write-offs when it is time to retire the product.”
Regardless, given these considerations, it is important to be aware of and calculate the total costs of sourcing.
POST:
Given the reading from Table 8.1 in the Chapter on page 236 (uploaded file), select a company that you are familiar with. Explain how the three main costs of calculating the total supply chain costs, often called Total Cost of Ownership (TCO) apply to that firm. Be sure to note an example for each of the three costs that apply to the company. (Please: Use a specific company that you can name NOT an industry or some general category or type of firm.)
