In all the case companies and survey respondent companies, price represented the highest percentage of the total ongoing costs. But the percentages varied greatly, in the case companies from 27.3-88.3 per cent and in the survey respondent companies from 45.2-97.9 per cent. This result will be further analysed in the next section.
In the case companies, loss from payment term changes ranged from 20.5-2.3 per cent of the ongoing cost. Apart from Company A, most of the case companies’ suppliers in China provided much shorter payment term than European suppliers, which resulted in an extra cost of capital interest. On the other hand, the cost was measured by none of the survey responding companies.
The effect of currency fluctuations was small in the case companies, ranging from a cost reduction of 1.8 per cent to a cost increase of 0.2 per cent. In the survey companies it ranged from a cost reduction of 4.3 per cent to a cost increase of 10.2 per cent. The larger values and high variability indicate the potential risk of sourcing from China. The recent significant decline in the value of the pound (second half 2008) will have exacerbated the situation.
The increase in the cost of the forecasting and ordering process only occurred in one case company (F) and one survey company (Company 3). Although the forecasting and ordering process became more complicated when sourcing from China and required more time, the frequency of ordering was much lower, as a larger amount was ordered each time. Hence, the overall work content remained similar to that before sourcing from China.
The costs of the billing process and bank charges for currency transfer were very small for both case companies and survey.
The cost of transportation and insurance varied from 0- 15.8 per cent of the total ongoing cost in case companies, depending on whether the shipment term is FOB (free on board) or CIF (carriage, insurance and freight). In the survey respondent companies, this cost varied from 0-10.9 per cent of the total ongoing cost.
The average of per cent of the expediting cost of case companies was lower than that of the survey respondent companies. It was partly because in one survey respondent company No. 12, the per cent of expediting cost was high (18.1 per cent). The average is less interesting than the high variability from company to company. This illustrates the risk involved in overseas sourcing that can significantly impact costs. If expediting is required, then it is likely to be costly.
Although costs due to losses owing to late deliveries and costs due to early delivery did not occur in any of the case companies, and were generally low in the survey companies, there were two cases, Companies 2 and 12, where logistics problems caused substantial extra costs. This is yet another indication of the risks of China sourcing.
There is a large difference in the percentage of “inspection cost” between the case studies and the survey. This difference