.1 Framework developmentThe above l

.1 Framework development
The above literature shows the complexity associated with understanding the issues of outsourcing to China. In order to investigate the costs in a comprehensive and consistent manner, we developed a cost framework based on the literature and input from practitioners. The development of the framework is described in detail in Song et al. (2007). Here we summarise the main points.
Several authors were instrumental in informing the design of our framework. Smytka and Clemens (1993) divided the total costs into two categories: external costs and internal costs. The external costs included: price; discount terms; ordering costs; transportation; supplier visits; tooling and technical support. The internal costs include: inventory cost, delivery expediting cost, line down cost and non-conformance cost. Carr and Ittner (1992) defined costs in terms of the costs of purchasing, the costs of holding inventory, the costs of poor quality and the costs of delivery failure. Ellram (1993) divided the costs into categories of pre-transaction, transaction, and post-transaction.
Using the cost structures identified by the above authors and further input from Degraeve et al. (2005), Monckza and Trecha (1988), Grant (1999), Pongpanich (2000) and Min et al. (1994) we developed an initial framework, which we then validated with practitioners.
Practitioner input came from interviews with senior industrial managers from seven manufacturing companies and a consultant, all of whom had experience of global sourcing, not only from China, but also from other countries including Lithuania, Singapore, Korea, etc. The interviews resulted in a number of costs additional to those found in the literature.
Based on the inputs from both academic literature and practitioner interviews, a framework of TAC of global sourcing from China was developed (Table I). In this framework, the cost items are classified into set up costs and ongoing costs. The set up costs (Category 1) occur at the beginning stage of global sourcing projects. These are the one-off costs involved in identifying and selecting suppliers, and in setting up the supply relationship in terms of both technical capability and commercial relationships. Ongoing costs (Categories 2-8) are the costs incurred repetitively during the China sourcing process. These were categorised into costs related directly to the price charged, e.g. taxes, duty, currency conversion etc; administrative costs involved in dealing with an overseas supplier; logistics costs to cover all the transport, warehousing, expediting etc; inventory costs to cover extra stock related costs; quality costs, due to lower quality levels, rework etc; supplier management costs covering items such as ongoing technical support, performance review, contract renegotiation etc; and other costs, such as costs of dealing with inferior infrastructure, costs of special regulations, IP costs and costs of dealing with counterfeiting.
The framework was used to structure the costs mentioned in the academic literature. In addition, costs not covered in the literature but found during the preliminary interviews, such as staff’s time cost during the supplier selection stage, the loss from payment term changes, costs of dealing with counterfeit products, costs of expatriating staff overseas, extra costs of the forecasting/ordering process, extra costs of the payment/billing process, extra costs of receiving products, staff’s time cost of performance review and, meeting and renegotiation with the supplier and so forth were also inserted into the corresponding categories in the framework.
This framework formed the basis for our empirical work.