How do you calculate dual-site production cost?

Multiply annual units by the per-unit premium and the exposed share, then add duplicate fixed cost. With 200,000 units/yr, a $1.80/unit premium, 100% exposure, and $320,000 of duplicate tooling, the total is $680,000 per year.

What is the per-unit dual-site premium in this example?

Dividing the $680,000 total by 200,000 annual units gives $3.40 per piece. Of that, $1.80 is the variable premium and the remaining $1.60 is the fixed tooling spread over the volume.

Why split variable and fixed cost?

The $360,000 variable cost scales with how much volume runs through the second site, while the $320,000 fixed adder is paid the moment you stand up a second line. Separating them shows which lever moves your cost most.

Is dual-sourcing worth the premium?

It depends on the cost of a single-site outage. If a one-week shutdown of your sole plant costs more than the $680,000 annual penalty, dual-sourcing pays for itself purely as insurance.

How can I lower the dual-site premium?

Reduce exposed share by keeping the second site as a low-volume qualified backup, share tooling across part families, or consolidate overhead. Dropping exposure from 100% to 50% would cut variable cost to $180,000.

Single-site vs dual-site: which is cheaper?

Single-site is almost always cheaper on paper because it avoids the $320,000 duplicate fixed cost and the per-unit premium. Dual-site wins only when supply continuity risk is high enough to justify the spend.

Make-Buy, Outsourcing & Network Design calculator

Dual-Site Production Cost Calculator

Dual-site production cost is the extra money you spend to build the same part number in two plants instead of one. Supply chain and operations leaders use it during make-buy and dual-sourcing decisions, where a second source buys resilience but adds a per-unit premium and a second set of tooling and overhead. The metric matters because the resilience benefit is intuitive but the cost is usually hidden in fragmented budgets. Putting both the variable premium and the duplicate fixed cost in one number lets you weigh the annual penalty against the risk it removes.

What this calculator does

Estimates the annual cost penalty of running the same product across two plants from lost scale economies and duplicated tooling and overhead.
Use it when evaluating whether the supply resilience of a second source justifies the efficiency loss of splitting production.
It computes the annual cost penalty of producing a part in two sites by adding a per-unit premium on the exposed volume to the duplicate tooling and fixed overhead.

Formula used

Dual-site cost = annual units x per-unit premium x exposed share + duplicate fixed cost
Premium per unit = dual-site cost / annual units

Inputs explained

Total annual units split across two sites:
Per-unit cost premium of running two sites:
Volume exposed to the dual-site premium:
Duplicate tooling and fixed overhead:

How to use the result

Use it when evaluating a second source, qualifying a backup plant, or deciding whether to consolidate two lines back into one.
It treats the per-unit premium as constant; in reality the premium often shrinks as the second site climbs its learning curve and absorbs more volume.

Current U.S. benchmarks

Sourcing currencies as of 2026-07-02 (Federal Reserve H.10): 6.7886 CNY and 17.4524 MXN per USD. Landed-cost comparisons move with these daily rates.
U.S. iron and steel imports ran $2.1B in May 2026 (Census International Trade). The U.S. ran a trade deficit of $0.4B in the category that month. Import volumes are the pressure gauge behind tariff and reshoring decisions.

Common questions

How do you calculate dual-site production cost? Multiply annual units by the per-unit premium and the exposed share, then add duplicate fixed cost. With 200,000 units/yr, a $1.80/unit premium, 100% exposure, and $320,000 of duplicate tooling, the total is $680,000 per year.
What is the per-unit dual-site premium in this example? Dividing the $680,000 total by 200,000 annual units gives $3.40 per piece. Of that, $1.80 is the variable premium and the remaining $1.60 is the fixed tooling spread over the volume.
Why split variable and fixed cost? The $360,000 variable cost scales with how much volume runs through the second site, while the $320,000 fixed adder is paid the moment you stand up a second line. Separating them shows which lever moves your cost most.
Is dual-sourcing worth the premium? It depends on the cost of a single-site outage. If a one-week shutdown of your sole plant costs more than the $680,000 annual penalty, dual-sourcing pays for itself purely as insurance.
How can I lower the dual-site premium? Reduce exposed share by keeping the second site as a low-volume qualified backup, share tooling across part families, or consolidate overhead. Dropping exposure from 100% to 50% would cut variable cost to $180,000.

Last reviewed 2026-05-12.