The most common mistake purchasing departments make is to treat a unit-price comparison as a sourcing decision. Unit price is the most visible component of total cost, but often the one that makes the smallest difference. Total cost of ownership (TCO) takes into account all costs from the quotation of the part to its arrival at the point of use and the resolution of any problems. This article forms the numerical basis of our Turkey–China and Turkey–India comparisons.
TCO Items: Beyond Unit Price
| Item | How it is calculated | Nearshore (Turkey → EU) | Offshore (Far East → EU) |
|---|---|---|---|
| 1. Unit price | Quote | Reference | Usually 10–30% lower (depending on the part) |
| 2. Freight | Pallet/container cost ÷ quantity | Road; 2–6% of part value | Sea + port + inland transport; 4–10%; 15–30% by air |
| 3. Customs duty | Customs value × rate | 0% (A.TR) | Typically 1.7–4.7% (by HS code; 0% on some items) |
| 4. Customs handling and documents | Declaration fee, certificate of origin, inspection | Simple import declaration | Declaration + origin + possible physical inspection; higher |
| 5. In-transit inventory | Part value × transit days / 365 × cost of capital | 5–7 days | 35–60 days |
| 6. Safety stock | Extra stock against lead-time uncertainty × carrying cost (15–25%/year) | 2–3 weeks of stock | 6–10 weeks of stock |
| 7. Quality risk | Probability of defect × (batch value + line stoppage + re-shipping) | Low; re-supply in 1 week | Medium; re-supply in 6–8 weeks; recovery by air is expensive |
| 8. Revisions and engineering changes | Time for the new part to reach the line after a change × scrap risk of old stock | 3–5 weeks; small stock scrapped | 10–14 weeks; large stock in transit and warehouse scrapped |
| 9. Communication and management | Purchasing/quality staff hours | Same working day, 1–2-hour difference | 6–7-hour difference, delayed responses, more management hours |
| 10. Travel and audits | Number of visits × cost | 2–4-hour flight, same day; €500–1,000 | 10–12-hour flight, 3–5 days; €3,000–5,000 |
| 11. Payment terms | Advance payment × duration × cost of capital; letter-of-credit fees | Partial advance or open account | Often 30–50% advance; letter-of-credit costs |
| 12. Currency and price risk | Contract currency, freight volatility | Euro price, stable road freight | USD price, highly volatile container rates |
| 13. Supply-chain risk | Probability of disruption × impact | Road, multiple routes | Port congestion, Red Sea/Suez route, geopolitics |
| 14. Carbon footprint / CBAM | Tonne-km emissions; reporting burden | Low; road 2,000–3,000 km | High; sea 15,000+ km; CBAM reporting on some steel/aluminium products |
Worked Example: Milled Aluminium Housing
Assumptions: EN AW-6082 milled housing, 6,000 pieces per year in 12 batches; cost of capital 8%/year; inventory carrying cost 20%/year; German buyer.
| Item (€/piece) | Turkey (nearshore) | Far East (offshore) |
|---|---|---|
| Unit price | 24.00 | 19.50 |
| Freight (road / sea + inland) | 0.90 | 1.40 |
| Customs duty | 0.00 | 0.55 (2.7% assumed) |
| Customs handling and documents | 0.10 | 0.25 |
| In-transit inventory (6 days / 45 days, 8%) | 0.03 | 0.19 |
| Safety stock (2.5 weeks / 8 weeks, 20%) | 0.23 | 0.60 |
| Quality risk (1% × 1-week / 3% × 7-week recovery) | 0.25 | 1.10 |
| Revision risk (1 change per year, scrapped stock) | 0.20 | 0.75 |
| Management hours | 0.30 | 0.70 |
| Travel/audit (once a year / once every 2 years) | 0.12 | 0.35 |
| Cost of payment terms | 0.05 | 0.20 |
| TCO | 26.18 | 25.59 |
Result: the 19% unit-price difference shrinks to 2% in TCO, and currency volatility, a supply-chain disruption or a single quality problem easily reverses this difference. When the unit-price difference falls below 10%, nearshore is cheaper in most scenarios. The figures are hypothetical; the model is simple and transparent so you can calculate with your own data. For the cost elements on the Turkish side see our cost comparison article.
Which Model Wins for Which Part?
- In favour of offshore: very high-volume (100,000+), simple, design-frozen, low-value parts with low quality risk; products where no engineering changes are expected; parts dominated by material cost.
- In favour of nearshore: medium-series (100–50,000), technical, toleranced, documented parts; new products with frequent revisions; assembly parts with a high line-stoppage cost; small batches of many part numbers; projects moving from prototype to series; products requiring fast time to market.
- Mixed model: many companies source design-frozen high-volume parts offshore and the rest nearshore, and keep nearshore as the second source for critical parts.
The Invisible Cost: Flexibility
The hardest item to quantify in the TCO table is flexibility: a 30% increase in demand, a customer's urgent order, a last-minute design change. In nearshore sourcing these situations are resolved with a phone call and 3–4 weeks; offshore they mean air freight (5–8 times the cost of sea freight) or lost sales. The value of flexibility is highest in the early stages of the product life cycle and in markets with high demand volatility.
How to Run a TCO Analysis in Your Company
- Select 10–20 parts with high annual volume or critical importance.
- Fill in the 14 items above with your own data for each sourcing option; use conservative assumptions for unknowns and note the assumption.
- Derive quality and revision risk from your historical data (complaint rate, number of changes per year).
- Run a sensitivity analysis: what happens if freight rises 50%, if the exchange rate moves 10%, if a batch is rejected?
- Present the result not only as unit price but as TCO and risk profile.
To clarify the items on the Turkish side, send your parts in RFQ format; an itemised quote including freight, documents and payment terms fills the TCO table directly.
Frequently Asked Questions
How large does the unit-price difference have to be for offshore to make sense?
Usually above 20–25% for medium-series technical parts; for simple high-volume parts a smaller difference may be enough. Your own TCO calculation gives the definitive answer.
Does Turkey count as "nearshore"?
For the EU, yes: the Customs Union, 1-week road freight and the overlapping working day put Turkey in the same category as Eastern Europe. We explain the framework in our EU overview article.
Does air freight solve offshore's lead-time disadvantage?
It solves the lead time and ruins the cost: freight at 5–8 times the sea rate usually wipes out the unit-price advantage. It should remain an emergency tool.
Does dual sourcing increase TCO?
It adds a small set-up cost in the short term and reduces risk cost significantly. For critical parts, a nearshore second source is the lowest-cost insurance.
Conclusion
The right sourcing decision for CNC parts is made on total cost of ownership, not unit price; once freight, customs, inventory, quality, revision and risk items are added, nearshore sourcing from Turkey comes out equal to or lower than the Far East on medium-series technical parts, with far lower risk. If you would like real Turkish figures for your own TCO calculation, send your technical drawings via our quote form; an itemised quote including freight and documents arrives within 24 hours.
