Instructions for Using the TCO Estimator

  1. Identify the “low hanging fruit,” the parts that will be most competitively manufactured in the U.S.

a. See pages 47 and 48 of the ppt presentation or

b. Scan the Reshoring Library to find successful reshorings of parts similar to your parts, companies similar to your companies.

c. It will be easier to justify keeping parts here than bringing them back.

d. It will be much easier to justify reshoring parts that are to be used or sold domestically than parts that will be used or sold offshore.

e. Identify appropriate parts

  1. Use the TCO (Total Cost of Ownership) Estimator to determine the data you need for each identified part. See the User Inputs Table on the User Inputs tab page.
  1. Obtain the needed data for U.S. and offshored production. The Estimator assumes China is the offshore source. You can modify the freight costs in the Fixed Factors Used in China Calculations table on the User Inputs tab page to adapt to another country.
  1. Input of data:
  2. The User Inputs Table on the User Inputs tab page contains my best estimates of a typical example.
  3. Replace my estimates with actual data wherever possible. Most essential is the hard data towards the top of the table, e.g. price, weight, number of shipments/year, etc. and at the bottom the forecast factors re expected changes in wage rates and currency. Ideally, work with management to obtain accurate data so the output will have more credibility with them.
  4. Do not input any data into the red cells, which are inactive. Any input data in these cells will not be used in calculating TCO.
  5. If the parts are currently offshored at the company’s own facility, use the “transfer price” instead of the “unit price.” Be sure the “transfer price” is high enough to provide the company its targeted return on capital at the offshore facility.
  6. For the more subjective factors:

1)gather what data you can based on experience.

2)use the background information in the Explanation column to help estimate other factors.

  1. Calculating the TCO:As you fill in the Inputs, the calculations on the Output page will update. The output takes 6 forms:
  1. cost of each Cost Factor
  2. cost of each category of costs
  3. cumulative cost for cost factors
  4. Grand Total cost
  5. Chart of Present and Forecast Price and TCO for the present and for the next 5 years
  6. Chart of Cumulative Cost by Category. This chart displays how much of the TCO is hard, e.g. price and freight vs. soft or estimated, e.g. Intellectual Property risk.
  1. To be even more competitive: When the TCO Estimator closes some, but not all, of the cost gap, seek other ways to reduce costs to close the balance.
  1. For help: Call or email for help with the Estimator: Harry Moser, Founder, Reshoring Initiative, , 847-726-2975.
  1. Promote: When you have success, please inform me so I can promote your success and change the industry mindset re the competitiveness of U.S. manufacturing.

HCM 1/10/11