Make-Buy, Outsourcing & Network Design worked example
Plant Location Cost at 65% net rate after incentives and differentials: a worked example
This worked example runs the plant location cost numbers for a tougher week than the baseline: 65% net rate after incentives and differentials instead of the typical 90%. Estimates the annual operating cost of a candidate plant location from loaded labor adjusted for local incentives plus one-time site establishment cost.
The inputs for this scenario
- Annual labor hours at the candidate site: 180,000 hours/yr (held at the documented default)
- Fully loaded labor rate at location: 32 $/hr (held at the documented default)
- Net rate after incentives and differentials: 65 % (the input this scenario stresses; the baseline uses 90)
- Site setup, permitting, and utilities: 750,000 $ (held at the documented default)
Working through the calculation
- The calculation starts from the formula this tool documents: Location cost = annual hours x loaded rate x net-rate share + setup cost.
- Total plant location cost works out to 4,494,000 $ at these inputs, and this is the headline figure for the scenario.
- Plant location cost per unit works out to 24.97 $ / piece at these inputs.
- Variable plant location cost works out to 3,744,000 $ at these inputs.
- Fixed plant location cost adder works out to 750,000 $ at these inputs.
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 24.27% below the baseline at 4,494,000 $.
- Use it during site selection, capacity expansion, or relocation analysis to compare locations on a like-for-like basis. A result at this level usually justifies acting on the stressed input before touching anything else, because every other figure in the table is downstream of it.
Results at a glance
- Total plant location cost: 4,494,000 $ (headline result)
- Plant location cost per unit: 24.97 $ / piece
- Variable plant location cost: 3,744,000 $
- Fixed plant location cost adder: 750,000 $
Run it with your numbers
- To rerun this with your own numbers, open the live Plant Location Cost calculator, set net rate after incentives and differentials to your actual value, and adjust the remaining inputs to match your operation.
Last reviewed 2026-05-12.