Publication Date
Authored by
Muhammad Sohaib Chaudhry, Kun-Zhe Lee
Topic(s) Covered:
  • Transportation

As more and more multinational companies are exploring low-cost countries to purchase commodities from, it has become critical for companies to calculate the total landed cost before making a purchasing decision. This capstone project establishes a model for the sourcing team of GE Gas Power to capture costs such as materials, labor, energy, transportation, even custom duty and tariffs for each country to optimize the total landed cost. Sensitivity analysis is also conducted on a sample part provided by GE to evaluate how changes in various cost factors impact the best-cost country ranking. A comparison is also made between the outcome of the model and the purchasing decision made by GE in the past. As a result, our recommended best-cost country based on the model matches with some of GE’s existing sourcing countries. Our model also suggests some countries that GE never purchased from, which resulted in total landed cost difference of up to 17% compared with purchasing the sample commodity from current countries. This list would help GE further explore those countries with some examinations of qualitative measurement and standards before making the final purchasing decision.

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