Loss from obsolescence in all the survey companies was regarded as zero. In case companies, loss from obsolescence occurred in one case company and entailed a big loss (23.8 per cent of ongoing cost). Due to the large increasing inventory in most cases of China sourcing, the loss from obsolescence may become significant once it occurs. Neglecting this cost may cause the underestimation of the total cost.
The quality failure costs (including rejection, rework, staff’s time cost of handling quality problems, warranty, loss of sale, etc) represented a higher percentage of ongoing cost for the survey companies (3.4 per cent) than the case companies (1.3 per cent). Again there was large variability, showing that some companies encountered bigger quality issues than others. When the quality of products sourced globally is inferior, overlooking the quality costs will give rise to the underestimation of the total cost.
The average of per cent of engineering time for technical support of case companies was higher than that of survey responding companies (1.9 per cent vs 0.8 per cent). Many of the survey companies neglected this cost when it occurred. This may also cause the underestimation of the total cost.
The cost of culture and language difference and the effect of “made in China” on customers were generally low. All the 18 survey responding companies estimated these costs as zero. While in some case companies, costs were incurred, they averaged less than 1 per cent, with a maximum of 2.9 per cent in company D.
The cost of dealing with inferior infrastructure was relatively insignificant. It did not occur in any of the case companies because they were sourcing from relatively well- developed regions in China where the infrastructure is satisfactory. Where this cost did occur, in two of the survey companies, it represented 0.7 per cent and 0.8 per cnt of the ongoing cost, respectively.
The cost of dealing with special regulations or even corruption from local government did not occur in any of the case companies while they were mentioned by one survey company (0.7 per cent). Three case companies experienced some small costs from cultural and language differences, but these were not mentioned by any of the survey companies. This shows most of the companies did not incur significant costs of dealing with the local government. All the other costs were very small.