Local is always more expensive? When the DACH supplier actually wins at total cost level

The unit price rarely lies, but it only tells part of the story. An opinion piece on which cost items come into play in long-distance sourcing from Asia, when the DACH supplier wins anyway, and how to compare the two cleanly.

The myth of the cheap long-distance purchase

There is a sentence that is treated like a law of nature in many purchasing departments: local is always more expensive. Anyone who has parts manufactured in Germany, Austria or Switzerland supposedly pays a premium for the location that no managing director would willingly accept. The Asian supplier comes out ahead in the quotation comparison, so the matter is settled. That is the thinking.

An example from practice illustrates why this logic stands on shaky ground. The Einkäufer-Akademie describes the case of a ball bearing: from China, a unit price of 20 euros is offered, while the same part costs 49 euros net in Germany. At first glance, a price advantage of 29 euros per unit. The source works through this example and concludes that these 29 euros must by no means be reported as a saving, otherwise this would create a spurious calculation. After a complete total cost analysis, the ball bearing from Germany could well be cheaper, despite the higher acquisition price.

That is the heart of the matter. The thesis of this article is: the statement that local is always more expensive is exactly correct at the level at which it is usually checked, namely at unit price level. At the level of total costs across the entire procurement cycle, it is frequently not. There are constellations in which the DACH supplier, on a total cost basis, sits clearly below the Asian competitor. And there are constellations in which long-distance sourcing is the right choice despite all the additional costs. Anyone who fails to make this distinction wastes money in both directions.

In the following, I will cover which cost items arise in import purchasing beyond the unit price, why the method of comparison matters more than the result of any single bidding round, which counterargument carries the most weight against my thesis, and what a well-founded assessment for your own supplier decision can look like.

What total costs in import purchasing actually contain

Before discussing specific items, it is worth looking at the instrument itself. Total Cost of Ownership, often translated into German as Gesamtbetriebskosten, denotes the sum of all costs incurred over the entire life cycle of a product or service. The term became popular in the 1980s in the context of IT procurement. Bill Kirwin, Research Director at Gartner, is frequently named as its originator, credited with developing the concept in 1987 to evaluate the total cost of operating PCs. The idea of thinking beyond the purchase price, however, is considerably older. As early as 1927 and 1928, Borsodi and Harriman mentioned this aspect in connection with purchasing and supplier selection.

For purchasing, the distinction between acquisition price and total costs is central. The acquisition price covers the purchase price plus procurement overheads such as transport and insurance. The TCO analysis goes beyond this and includes quality costs, inventory costs, risk costs and process costs, which often remain invisible in classic price negotiations. Anyone who conducts quotation comparisons on the acquisition price alone is, by this logic, comparing apples with oranges.

For the structure of a total cost analysis, a categorisation has proven itself that is used, among others, by Fraunhofer IML. It distinguishes four blocks: direct operating costs, indirect operating costs, decommissioning and disposal, and productivity costs, meaning downtime, process disruption and quality defects. Transferred to supplier procurement, this means that alongside the part price, the route to the part, the safeguarding of quality and the consequences of supply disruptions all belong in the calculation.

Specifically for import purchasing outside the EU, the Einkäufer-Akademie has published a checklist summarising the relevant items. The fact is that this list applies even when individual items turn out to be small in a given case. It serves here as a framework for the further discussion:

• Product and material price
• Logistics costs including packaging, transport, interim storage and handling
• Transport insurance premiums
• Costs for documentation and customs formalities
• Customs duty and import fees
• Costs for additional quality inspections
• Costs for agents, service providers or representatives on site
• Letter of credit costs and currency fluctuations
• Incoming goods inspection
• Defects and returns
• Additional costs for elevated scrap and return rates
• Before the order: country and supplier utility analyses, supplier visits, first article inspection and release, on-site quality inspection, contract management
• After the order: warehousing costs for larger quantities, capital binding costs, packaging disposal, production of scrap, consequential damage from defects, disposal of missing parts and shortage costs

The author of this list drily concludes that a classic import purchase outside the EU done off the cuff is a commercial feat of horsemanship. This is not a rejection of imports, but a statement about the effort the comparison demands. That is exactly the point.

Four cost drivers that eat up the unit price advantage

The checklist is long, but not every item is equally important in every procurement case. In my assessment, the divergence between unit price and total costs concentrates on four areas. They are examined individually below, separated into what the sources document and what my professional assessment is.

Logistics, customs and documentation

In international sourcing, sea freight, port charges, inland transport and insurance quickly add up, according to the standard description of the problem. Added to this are customs formalities and documentation, which appear as their own items in the checklist. With a DACH supplier, customs clearance, import fees and the maritime leg of the transport chain fall away entirely, and transport time shrinks from weeks to days.

The fact is that these items are variable and fluctuate with freight rates, exchange rates and changes in customs. That is precisely what makes them awkward for planning. A unit price advantage calculated at the point of order entry may have been eroded by the time of delivery through changed logistics and currency parameters. With a local supplier, this risk does not exist in the same form.

Quality assurance and inspection effort

The checklist lists both costs for additional quality inspections and incoming goods inspection, and also the items arising before the order: first article inspection and release, on-site quality inspection, supplier visits. The structural difference is obvious, although the sources describe it more implicitly. The further the manufacturing process is from your own plant, the more inspection and travel effort shifts into the procurement process, and the more expensive every single clarification that must take place in person becomes.

My assessment is that this block is the most frequently underestimated in quotation comparisons, because it cannot be read from the suppliers' quotation documents. It arises in-house, at sample approval, at goods receipt, on trips. Anyone who does not record these hours is again comparing only the unit price.

Inventory and capital binding

The items warehousing costs for larger quantities and capital binding costs in the checklist point to a pattern of behaviour that emerges with long procurement lead times. When replenishment takes weeks, the incentive to order larger quantities at once increases. This ties up capital, requires storage space and raises the risk that parts become superfluous if the design changes or demand weakens. With a supplier in the region, batch sizes can be aligned more closely with actual demand.

The same separation applies here. The items themselves are documented as categories; their individual magnitude is company-dependent and cannot be quantified without concrete data. Anyone who wants to produce a clean TCO calculation must therefore derive these values from their own warehouse and financial figures, not from a formula.

Reaction times and the consequences of missing parts

The fourth block belongs to the productivity costs in the sense of the Fraunhofer categorisation: downtime, process disruption, quality defects. The checklist names consequential damage from defects, disposal of missing parts and shortage costs. When a part is missing, the damage differs primarily not by where the part came from, but by how long it takes for a replacement to be available. With a shortfall from a regional supplier, a courier can solve the problem. With a part from overseas, the lead time doubles, and the downtime or reordering costs grow with every day of waiting.

The fact is that this cost category exists and is not rated as minor in any of the sources. A hypothesis that can be derived from the logic of the checklist: the relative disadvantage of long-distance sourcing grows with the part's critical importance to your own production. For a wear part held in stock, the item barely registers; for a production part on the critical path, it can wipe out the entire price advantage and more. This hypothesis cannot be quantified with the available sources, but it follows necessarily from the structure of the cost blocks.

Two worked examples and what they really show

The sources provide two concrete case constructions that are excellently suited to illustrating how the additional costs take effect. The first is the ball bearing already mentioned: 20 euros in China against 49 euros net in Germany. The nominal price advantage is 29 euros, around 59 percent of the German acquisition price. The source argues that this advantage can be eaten up by the lower logistics and handling costs of imports as well as by the guaranteed quality of the German source, and that after a complete TCO analysis, sourcing from Germany can be cheaper.

The second example comes from Line Up: a component costs 4.20 euros from the local supplier and 2.80 euros from the Chinese manufacturer. The decision seemed obvious, until the bill for sea freight, customs duties, quality inspection and warehousing landed on the table. The numerical spread here is narrower, the nominal advantage being 1.40 euros per unit, roughly one third of the local price.

These two examples make clear what the outcome depends on. They are documented case constructions, not statistics about the market, and they deliberately contain no applied percentages for freight, customs or inspection effort. That is precisely the message: there is no universally valid surcharge table with which the Asian unit price can be converted into a comparable total cost figure. The surcharge depends on batch size, part weight, inspection effort, binding situation and the consequential costs of your own company. Anyone who uses a flat rate is repeating the error that the TCO method is actually meant to fix, only in the opposite direction.

It is also interesting that the sources argue in the same direction for both examples, even though the figures differ greatly. For a ball bearing with a 29 euro difference per unit and for a sheet metal part with a 1.40 euro difference per unit, the advice is identical: capture the additional items first, then decide. The size of the nominal price advantage therefore says nothing about whether it will survive the additional costs. A large unit price gap can be cancelled out by high part weight and elaborate inspection; a small gap can be saved by minimal logistics costs. The individual case decides.

The strongest counterargument: the price advantage is real and underestimated

An opinion piece that only reaffirms its own position will not convince anyone who runs quotation comparisons every day. The strongest counterargument to the thesis is: the unit price differences are real, they are large, and they scale with volume. For anyone sourcing standard parts with simple tolerances at high volumes, logistics and inspection costs per unit fall so far that the relative surcharge of local sourcing comes to nothing. In addition, the fixed costs of imports, that is utility analyses, first article approvals and supplier visits, are diluted across a large total purchase volume to the point where they barely register per unit.

There is a second, subtler counterargument. The TCO analysis itself costs time and money. The checklist explicitly names the item TCO analysis costs. Anyone who sets up a complete total cost calculation for every procurement decision consumes capacity that is then missing elsewhere. For C-parts and low-volume items, the analysis effort can exceed the potential benefit of the better decision. Pragmatic buyers therefore deliberately order such parts on the basis of unit price, and that is not negligence but a trade-off.

I take both arguments seriously, and they narrow the thesis without refuting it. My assessment: the counterargument holds when volumes are high, the parts are standardised, and the consequential costs of disruption are low. In precisely this constellation, Asian sourcing is probably ahead even on total costs, and an elaborate TCO calculation would be wasted effort. The thesis of this article does not claim that Asia is always more expensive, but that local is not always more expensive. Both statements can be true at the same time, because the scope of decision depends on the part type.

A note on the honesty of the calculation also belongs here. In the cited examples, the German comparison prices are net quotation prices. Whether a price advantage actually exists after deducting all checklist items can only be established with your own, company-specific figures. Anyone arguing without these figures, in whichever direction, is practising belief-based procurement.

Assessment: when the DACH supplier has the edge

From the structure of the cost blocks, a working hypothesis can be derived about the conditions under which local or regional sourcing is competitive on total costs. It is marked as an assessment, but supported by the checklist logic of the sources. The constellations in which the DACH supplier wins are more frequent in practice than the sentence that local is always more expensive suggests:

• Small to medium batch sizes, where transport, customs and inspection costs per unit cannot be diluted
• Parts with tight tolerances or elevated inspection effort, where first article approval and incoming goods inspection generate considerable effort of their own
• Design-active parts with a high rate of change, where large stock quantities carry the risk of obsolescence
• Items on the critical path of production, where shortage costs and consequential damage rise quickly
• Procurement cases with unstable currency and freight situations, where planning certainty itself has a value

Conversely, long-distance sourcing remains a rational option when high standard volumes meet simple parts, the consequential costs are manageable, and the internal inspection processes are established. The decisive shift lies elsewhere: not in the question of Asia or DACH, but in the question of whether the decision is made on unit price or on total costs. A purchasing function that systematically calculates with TCO will be able to classify both camps correctly. A purchasing function that only compares unit prices will systematically overlook the cases where the local supplier is cheaper on total costs, and equally the cases where importing is right despite all the additional costs.

There is also an organisational component. Anyone looking for DACH suppliers quickly runs into the problem that the quotation landscape is fragmented and initial qualification creates effort, precisely the items listed in the checklist before the order. Platforms such as Amplifa address exactly this interface by giving purchasers access to vetted manufacturing suppliers by process and category. This lowers part of the search and lead costs for the local variant and makes the total cost comparison fairer, because both options can start with comparable qualification effort.

The purchaser is still seen far too often as the one who only squeezes the price. Wrong. We want to optimise and reduce Total Cost of Ownership. And for that there are many other levers and adjusting screws besides the price.

This quote captures the core. The question is not whether the price is reduced, but whether total costs fall. A purchasing function that masters the levers beyond the unit price can, with a nominally more expensive offer, still have made the economically better decision.

A calculation framework for your own decision

From the sources and the discussion so far, a pragmatic approach can be derived that does not need to quantify every item to the last digit, but eliminates the main sources of error:

1. Capture the unit prices of the candidates, without treating them as the decision.
2. Add all procurement overheads: logistics, packaging, insurance, customs duty, documentation, where applicable letter of credit and currency risk.
3. Include the costs arising before the order: utility analyses, visits, first article inspection and release, on-site quality inspection, contract management. These items mainly concern initial qualification and amortise across the purchase volume.
4. Estimate the costs arising after the order: warehousing costs for the required quantities, capital binding, scrap and return costs, consequential damage from defects and shortage costs.
5. Assess the productivity costs of a supply disruption: how expensive is one week of delay for this part, and how likely is it on the respective sourcing route.
6. Run both options through the same framework, including the local supplier. It has disadvantages on some items, for example in material or wage levels, which would otherwise remain invisible.
7. Present the result as a range, not as a precise landing, because several items rest on estimates.

For the first step, the findability of suitable candidates on both sides, the effort can be reduced organisationally. Anyone searching specifically for manufacturing processes and categories in the DACH region can use the search function for vetted suppliers instead of relying on their own research. For structured tenders across both sourcing routes, a uniform enquiry format helps, one that also asks for the ancillary cost items.

Discussion prompt: which cost items does your company still calculate by gut feeling

To close, a question that every purchasing manager should honestly put to themselves once: which of the items from the checklist actually appear as numbers in your quotation comparisons today, and which are silently assumed to be known? My experience from conversations with purchasers and suppliers is that the gap between the two groups is larger than the debate about Asia or local suggests. And here explicitly comes the uncomfortable follow-up question: if a local supplier demands a higher unit price but demonstrably delivers lower total costs, does your organisation tolerate that decision? Or does it become a problem in internal reporting, because the reported saving does not match expectations?

As long as the internal measurement of purchasing success hangs on unit price savings, every rational total cost decision will work against the incentive structure. The method is available, the categories are described, the checklists exist. What is missing in many companies is not calculation skill, but the organisational permission to place an order with a more expensive offer and record it as a success. That is worth more discussion in your own department than the question of whether Asia is generally cheaper. Because the answer, as so often, is: it depends. And the task of purchasing is to find out exactly on what.

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Anthony Filipiak

CEO & Co-Founder at Amplifa

Anthony leads Amplifa as CEO and co-founder.

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