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Tag Archives: TCO

fork-in-the-road-what-now

I can’t get that hit rock song by the Clash, “Should I Stay or Should I Go” out of my head.

“Should I Stay Or Should I Go” by the Clash
Darling, you gotta let me know
Should I stay or should I go?
If you say that you are mine
I’ll be here ‘till the end of time
But you gotta let me know
Should I stay or should I go?

I’ve been talking to companies that are now making decisions about keeping their manufacturing and supply base in China or bringing manufacturing back to the US. They are asking the question, “Should I stay or should I go?” and that triggers the song playing in my brain…over and over and over. I wake up hearing it and it plays in my head all day long.
In the 1990s and 2000s, companies went to China out of fear of being left behind, not necessarily because they had made an informed decision based on data about the Total Cost of Ownership (TCO). Now it seems they are coming back for fear of being left behind again.
Total Cost of Ownership is an all-encompassing estimate that helps business people determine direct, indirect and consequential costs of one decision versus another. The idea was developed in the 1980s and applied to the costs of implementing software over its entire lifecycle. But when using TCO in a manufacturing or sourcing decision to stay in China versus moving back to the US, there are many more components to monetize and compare.
For example, you may find additional factors that must be considered beyond simple labor costs, import and logistics costs, such as supply base considerations, automation opportunities, supply chain latency, cost of travel, IP theft, quality and so on.
There are also costs associated with leaving China such as buying out employment contracts, obtaining permits to shut down operations, and the tools and dies left behind. The legal ramifications of these things can add up quickly. There is a lot to consider and trying to monetize all of the hard and soft benefits can be very challenging.
Nonetheless, it is important to consider all costs for a true comparison before you decide, “Should I Stay of Should I Go?’

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