Assessing the Operational Cost of Offshore Sourcing Strategies Available to Purchase

This paper reports on an empirical study to construct an objective and quantifiable method to assess the cost of sourcing from low wage, foreign suppliers. The work details development of a Total Acquisition Cost Model (TACM) that can be used to quantify the supply system costs associated with such sourcing strategies. In so doing, we explore the sourcing policies of a number of European and North American retailers operating in consumer goods sectors. A detailed case study demonstrates the potential inflexibility cost of offshore as opposed to onshore procurement. The research reveals how an understanding of these various metrics can be used to customize an operations strategy; reflecting the contingencies of the particular trading environment