A manufacturer of industrial gearboxes and motion control products explains why manufacturers are comparing the wrong number.
CHESAPEAKE, Va.—In a May release, Sumitomo Drive Technologies challenged how North American manufacturers evaluate sourcing decisions. The power transmission and control products manufacturer said it is making a data-driven case that unit price—the industry’s dominant procurement metric—fails to capture the true cost of offshore sourcing.
Offshore sourcing often looks like a cost advantage—right up until it isn’t. A delayed shipment can stall production for weeks. Inventory buffers meant to protect against long lead times tie up working capital. And when disruption hits, manufacturers are left managing risk far beyond what was captured in the original quote.
A packaged product staged in a warehouse rack. (Photo courtesy Sumitomo Drive Technologies)
According to Sumitomo Drive Technologies, these are not edge cases. Instead, they are operating realities for procurement and supply chain teams across North American manufacturing. The issue is not that companies misunderstand cost, it is that the most common sourcing metric, unit price, does not capture it.
“The disconnect shows up when sourcing decisions move from spreadsheets to the shop floor,” the company said in the release. “Offshore pricing may appear competitive at the quote stage, but the true cost structure emerges over time—through extended lead times, production downtime, and the carrying cost of excess inventory.”
Total cost of ownership (TCO) is intended to account for these factors. In practice, however, many sourcing decisions still rely on simplified price comparisons that exclude them. The result is a gap between expected cost and actual performance, the company said.
“The conversation in our industry has been focused on unit cost,” said Tony Barlett, vice president and chief operating officer of Sumitomo Machinery Corporation of America, in a prepared statement. “But unit cost is only one part of the equation. When you account for what a six-week offshore lead time actually costs a manufacturer in downtime and excess inventory, domestic sourcing becomes far more competitive than most procurement teams realize.”
Industry data reinforces how widespread this gap has become. According to the Reshoring Initiative’s 2025 Annual Survey, only 5 percent of original equipment manufacturers apply total cost of ownership when making sourcing decisions. At the same time, 40 percent report a willingness to pay more to reduce lead times—an indication that buyers already recognize the value of speed and proximity, even if their sourcing models do not fully account for it.
The scale of the opportunity is significant. The Reshoring Initiative estimates that a broad shift to TCO-based sourcing decisions could reshore as much as $200 billion in U.S. manufacturing—driven not by policy changes, but by more accurate decision-making.
When a critical component arrives weeks behind schedule, the impact extends well beyond procurement. Production timelines shift, customer commitments are strained, and the cost advantage of offshore sourcing erodes quickly under real operating conditions.
According to the release, manufacturers that prioritize proximity, responsiveness, and supply chain visibility are better positioned to manage these risks. Domestic production—closer to engineering teams and end markets—offers greater control over outcomes, helping companies reduce exposure while maintaining performance.
Sumitomo Drive Technologies, a brand of Sumitomo Machinery Corporation of America, is a manufacturer of industrial gearboxes, industrial electric motors, motion control products, and a variety of components, parts, and accessories.
“Sumitomo Drive Technologies works alongside North American manufacturers to support this shift, providing domestic manufacturing capacity, engineering expertise, and responsive service designed to improve supply chain reliability,” the company said.