Industries
Manufacturing choices where a cheap quote is not the verdict
A plant lives by lead time, yield and the suppliers it cannot easily replace. The decisions that matter most, which supplier, which site, make or buy, are taken once and then repaid with every shipment that follows.
Landed cost, not unit price
A unit price is where the comparison begins. Landed cost adds freight, duty, packaging, the inventory that longer lead times force you to carry, and the cost of quality: inspection, scrap, rework and the occasional line stoppage. A quote that is 12 percent cheaper at the dock can be the more expensive part by the time it reaches the line.
Qualification belongs in the cost as well. In sectors such as automotive and medical devices, a new source can require months of samples, first article inspection and customer approval before a single production part ships. That time is part of the option, and a comparison that leaves it out flatters the newcomer.
Evidence a supplier can show
A factory tour shows housekeeping and goodwill. What it cannot show is whether the process holds tolerance across thousands of parts. Process capability studies, defect rates in parts per million, on-time delivery history and a sample run on your own drawings are what settle the question.
The common mistake is treating a second source as pure insurance. Dual sourcing protects against a single failure, but it splits volume, weakens your buying position with both suppliers and doubles the quality work. It earns its cost when the part would stop the line and the main supplier depends on one plant or one region.
A sourcing choice in the room
The Decision lists the real paths: stay with the incumbent, qualify a second source, move the part to a new supplier, or redesign it. The Champion for the cheaper quote makes its case on price. The Challenger presses on qualification time and on what happens to the line if the first shipments fail inspection.
Gray Wolf prices concentration, such as a supplier whose only plant ships through one port. Craftsman asks whether your quality team can support a second source this year. Historian brings precedent from comparable switches. The Verdict states the landed cost each option rests on and the yield or lead time figure that would change it.
Holding the reason after the switch
Sourcing decisions are revisited when something goes wrong, often by people who were not in the original meeting. A Decision Passport keeps the quotes, the qualification plan, the evidence status of each claim and the Human Decision with its conditions. When a supplier misses a quarter, the team can see what was assumed and test the choice again with Challenge the Verdict.
A cheaper quote for a machined part
A plant buys 200,000 housings a year at $4.20 from a domestic supplier. An overseas supplier quotes $3.70, a saving of $100,000 a year. Freight and duty add $0.31 a unit, or $62,000. The longer lead time means holding about six more weeks of stock, roughly 23,000 units worth $85,000, which at a 20 percent carrying rate costs $17,000 a year. Qualification is estimated at $40,000, paid once. The engine works the result: about $21,000 saved each year, so the first year ends roughly $19,000 behind and the qualification pays back in just under two years. The Verdict calls the switch worthwhile only if the sample run matches the incumbent's defect rate, because a single quality escape would erase several years of that saving.
Questions
- How should a plant compare a domestic and an overseas quote?
- On landed cost over a full year, including freight, duty, extra inventory, qualification and the cost of quality. Put lead time and defect history on the same scorecard as price.
- When is dual sourcing worth the cost?
- When the part would stop the line and the current supplier depends on one plant or region. For parts with many qualified alternatives, a single source under a good contract is often cheaper.
- Can the room choose a site for a new plant?
- The room can compare candidate sites on the criteria you weight and the evidence you and Scout gather. Engineering studies, permits and incentive negotiations stay with specialists, and the Human Decision stays with your leadership.
Further reading
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