Industries · Toolkit
Sourcing, trade and supply risk
What companies buy, where they make it and what can go wrong: spend analysis and should-cost, safety stock and the cost of holding it, landed cost worked end to end, tariffs and rules of origin with real current examples, the maths of nearshoring and "China plus one", and how to price supply risk in a case.
Key takeaways
- For most companies that make or sell goods, bought-in materials and services are the largest cost.
- Stock on a shelf is cash that is not earning anything. Each unit held costs a share of its value every year.
- The price on the supplier's invoice is only the start.
- A tariff is a tax on imports, paid by the importer at the border.
- Moving production is an investment. It pays when the yearly saving in landed cost and risk covers the one-off cost of moving within a sensible time, and it should still pay if tariffs change.
- Find where a company spends its money, build a should-cost for a part and judge single against dual sourcing with numbers
- Size safety stock for a service level and show how lead time and the bullwhip effect drive inventory
- Work landed cost end to end, including the customs value rule, duty, financing and currency
- Explain tariffs, trade agreements and rules of origin, and read a real tariff line
- Do the maths of moving production: cost per unit, one-off cost, payback, lead time and tariff risk
- Price supply risk as probability times impact and choose between buffers, second sources and hedges
Lessons
Procurement and sourcing: where the money goes
Spend analysis, should-cost, supplier power and single against dual sourcing, each with numbers you can recompute.
Inventory and the cost of holding it
What holding stock really costs, how to size safety stock for a service level, why lead time matters so much, and the bullwhip effect in numbers.
Landed cost, worked end to end
From the supplier's price to the cost on the shelf: freight, insurance, the customs value rule, duty, clearance, financing and currency, with a real EU tariff line.
Tariffs, trade agreements and rules of origin
How tariffs work, why most-favoured-nation rates are the default, how trade agreements and rules of origin change the rate, and what changed in 2025 and 2026 in the US, EU, India, ASEAN and the Gulf.
Nearshoring, friend-shoring and "China plus one"
What each term means, what the trade data show, real moves in India, Vietnam, Mexico and the Gulf, and the maths of moving production: cost per unit, one-off cost, payback, lead time and tariff risk.
Supplier concentration and resilience
How to measure dependence on one supplier or country, price risk as probability times impact, and choose between buffers, second sources, contracts and hedges, with rare earths as the real example.
Using this in a case
What to ask, what to calculate and what to say when a case involves buying, making or moving goods, with a full mini case on whether a furniture maker in Malaysia should open a plant in Mexico.
Worked cases in this module
- Should-cost of a moulded plastic part
- Should the appliance maker add a second compressor supplier?
- Safety stock for a spare part in Dubai
- Cotton T-shirts from India to Hamburg
- Chinese or Korean fabric for a Vietnamese factory?
- Stay in China, move to Vietnam or move to Mexico?
- Protecting an e-bike maker from a magnet cut-off
- Should a Malaysian furniture maker build a plant in Mexico?
Look it up
Key terms