(LEI: Cambridge, MA) -- Before offshoring work to low-wage countries, senior managers should use “lean math” to calculate the true total cost of relocating, according to management expert James P. Womack, Ph.D., founder and chairman of the Lean Enterprise Institute (LEI). 

Companies usually compare piece-price costs for a product or service with corresponding costs in a low-wage country, then add in the cost of slow freight, usually boat, when deciding whether or not to outsource, explains Womack. “This is mass production math and it is no longer realistic,” he says. 

Senior managers should perform a more accurate analysis of total costs, which Womack calls “lean math” because it's based on contemporary lean management thinking. A lean math cost analysis includes:

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