Make-Buy, Outsourcing & Network Design worked example
Plant Location Cost at 99% net rate after incentives and differentials: a worked example
What does the result look like when net rate after incentives and differentials reaches 99%? The full calculation is worked below with real intermediate numbers. Use it when ranking competing geographies for a new plant or expansion against each other on a cost basis.
The inputs for this scenario
- Annual labor hours at the candidate site: 180,000 hours/yr (unchanged)
- Fully loaded labor rate at location: 32 $/hr (unchanged)
- Net rate after incentives and differentials: 99 % (raised for this scenario; the documented default is 90)
- Site setup, permitting, and utilities: 750,000 $ (unchanged)
Working through the calculation
- Applying the documented formula (Location cost = annual hours x loaded rate x net-rate share + setup cost) to the inputs above produces each figure below.
- At this operating point the engine returns 6,452,400 $ for total plant location cost, the number this scenario is built around.
- At this operating point the engine returns 35.85 $ / piece for plant location cost per unit.
- At this operating point the engine returns 5,702,400 $ for variable plant location cost.
- At this operating point the engine returns 750,000 $ for fixed plant location cost adder.
How this compares with the baseline
- Against the tool's baseline example, where net rate after incentives and differentials sits at 90% and the headline result is 5,934,000 $, this scenario comes in 8.74% above the baseline at 6,452,400 $.
- A figure at this level is achievable when net rate after incentives and differentials is genuinely sustained, not just peaked for a shift. It models labor and setup only — it excludes freight, tax, and supply-chain proximity, which often decide the final site choice.
Results at a glance
- Total plant location cost: 6,452,400 $ (headline result)
- Plant location cost per unit: 35.85 $ / piece
- Variable plant location cost: 5,702,400 $
- Fixed plant location cost adder: 750,000 $
Run it with your numbers
- Every input above is editable in the live Plant Location Cost calculator, which recalculates instantly and can be shared with the inputs intact.
Last reviewed 2026-05-12.