Understanding the True Cost of Sourcing
Bill McBeath and Colin Kessinger - April 23, 2004

Introduction

In today's twenty-first century, global outsourced business world, the traditional and somewhat simplistic approaches used to measure cost for sourcing decisions of direct materials fall short. Procurement history is laden with penny-wise, pound-foolish decisions where the low cost supplier ultimately costs tens or hundreds of millions in lost revenue, lost market share, expedite fees, or write-offs. This goes beyond total landed cost calculations and strategic sourcing metrics. Firms that fail to evolve their method of calculating total cost will find themselves with an increasingly uncompetitive and profit-eating total cost structure...