Garland Chow

ABSTRACT

The total landed cost (TLandC) concept has long been recommended as an approach to evaluate off-shore as opposed to domestic suppliers.  Young et al (2010) found that firms frequently evaluate direct product, transportation and customs costs but seldom consider inventory related, risk and due diligence costs and factors. Young’s findings are confirmed in a survey of selected firms across multiple business sectors.  Available TLandC models are surveyed.  Based on input from industry, a TLandC template is developed to guide practitioners in their evaluation of alternative sourcing origins.  The features of this template include:

• Recognition of impact of the relationship with supplier candidates on TLandC costs and considerations.
• Quantification methods for inventory related supply chain costs, quality related costs and other factors.
• Methods for inclusion of environmental and corporate social responsibility factors. 
• Data sources for continuous monitoring of TLandC.
• Methods for evaluating qualitative factors rigorously using score card approaches
• Merging of score cards and quantitative components.

The paper recognizes that no single TLandC model can be applied to any specific firm and argues for a template that supports a holistic evaluation process and guides a commodity sourcing team in its deliberations.  The paper ends with limitations to the proposed template and research directions for improving the usefulness of the approach.