Reshoring & Tariff Strategy worked example

Sourcing Total Cost of Ownership at 75% cost burden factor: a worked example

Push cost burden factor up to 75% and the picture changes. This example computes every intermediate figure at that operating point. Procurement compares two suppliers with similar quotes but different quality, inventory, and oversight burdens to find the real low-cost option.

The inputs for this scenario

  • Annual purchase volume: 60,000 units/yr (unchanged)
  • Hidden cost per unit: 1.8 $/unit (unchanged)
  • Cost burden factor: 75 % (raised for this scenario; the documented default is 65)
  • Annual supplier management cost: 30,000 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Total cost of ownership ($) = annual volume x hidden cost per unit x burden factor% + supplier management cost) to the inputs above produces each figure below.
  • At this operating point the engine returns 111,000 $ for total sourcing total cost of ownership cost, the number this scenario is built around.
  • At this operating point the engine returns 1.85 $ / piece for sourcing total cost of ownership cost per unit.
  • At this operating point the engine returns 81,000 $ for variable sourcing total cost of ownership cost.
  • At this operating point the engine returns 30,000 $ for fixed sourcing total cost of ownership adder.

How this compares with the baseline

  • Against the tool's baseline example, where cost burden factor sits at 65% and the headline result is 100,200 $, this scenario comes in 10.78% above the baseline at 111,000 $.
  • It computes the annual total cost of ownership and the per-unit cost adder by combining volume-driven hidden costs (scaled by a burden factor) with fixed supplier management overhead. The value of this scenario is the size of the gap it exposes: that gap, priced out over a year, is the budget you can justify spending to close it.

Results at a glance

  • Total sourcing total cost of ownership cost: 111,000 $ (headline result)
  • Sourcing total cost of ownership cost per unit: 1.85 $ / piece
  • Variable sourcing total cost of ownership cost: 81,000 $
  • Fixed sourcing total cost of ownership adder: 30,000 $

Run it with your numbers

  • Every input above is editable in the live Sourcing Total Cost of Ownership calculator, which recalculates instantly and can be shared with the inputs intact.

Last reviewed 2026-05-12.