This post is inspired by an e-letter written by Jim Womack of the Lean Enterprise Institute, on the subject of sourcing from overseas, or moving production off-shore. It’s a balanced discussion, with both pros and cons, and although it is not recent, it is worth a read. There’s no formal title, but I’ve been calling it Doing Lean Math.
The idea is not new, but it’s very well presented in this letter: what is important is the total cost of procurement, and not only the piece part and freight costs. Additional costs like engineering and management support, cost of carrying additional inventory, and currency/country risks are usually ignored, and can lead to disappointing outcomes.
What’s missing is a tool to help with the analysis. I’ve put together an Excel spreadsheet to get you started, and you can download it (free) from here. If you make any improvements, then please share your advances! Enjoy.