Cost-transparent sourcing in China applying total cost of ownership

Asia, eminently China, is gaining in importance regarding manufacturing especially for high- volume, low-cost production. The request from industry in Switzerland to comprehend all costs related to global sourcing projects concerning China leads to the approach of total cost of ownership (TCO). In this paper, first a literature review regarding existing concepts with special focus on industry incentives, benefits, barriers and methods of structuring cost objects is conducted. Thereafter, an enhancement of the TCO approach is presented in order to achieve a holistic and transparent cost evaluation that takes supply chain risks into account. Concluding, methods for quantification of cost objects are discussed and evaluated critically.