Landed-cost math: moving one product to a new factory

Moving a product is a one-time cost against a recurring saving. Do the arithmetic before the steel moves.

Filed under Partner factories and landed cost

The short answer: a move pays when the recurring saving per part, times the parts you will actually buy, beats the one-time cost of moving. Everything else is detail, but the detail is where most moves go wrong.

The recurring side

Compare landed cost per part, line by line, at the current factory and at the candidate partner factory: unit price, packaging, freight, duty, inspection and expected yield. Use the same volume and the same incoterms for both, or the comparison is not a comparison.

The one-time side

Transfer or rebuild of the tool. Re-sampling and first article inspection. Safety stock to cover the gap. Engineering time. Any re-approval your customer or a test lab requires. Write each as a quote or a clearly labeled estimate.

The break-even question

Divide the one-time cost by the saving per part. That is the number of parts the move must survive to pay for itself. If the product's remaining life is shorter than that, the move is a cost, not a saving.

Packaging is part of the math

Cartons, pallets and parts per carton change freight per part more than most buyers expect. Re-check the pack when the factory changes.

What Jack checks first

Whether the tool is worth moving at all, whether the candidate factory already runs parts like this one, and whether the saving survives a realistic yield number. Duty assumptions should come from a customs broker. This is general guidance, not legal or customs advice.

Straight answers

How do I know if moving a product to a new factory will pay?

Divide the one-time cost of the move by the landed-cost saving per part. If you will buy more parts than that over the product life, the move can pay; if not, it is a cost.

What one-time costs come with a factory move?

Tool transfer or rebuild, re-sampling and first article inspection, safety stock, engineering time and any customer or lab re-approval.

How this note was made: researched and drafted with AI assistance, checked against the sources listed below and edited at JCH Design & Manufacturing.